Weekly Digest Of IBC Cases: 29th July To 4th August 2024

Stakeholders Can't Impose Penalties, Claim Dues From Corporate Debtor After Approval Of Resolution Plan: Delhi High Court

Case Title: OCL Iron and Steel Limited vs Union of India

Citation: 2024 LiveLaw (Del) 862

Case No.: W.P.(C) 8316/2024 & CM APPLS. 34076/2024, 38159/2024

The Delhi High Court single bench of Justice Sanjeev Narula held once a resolution plan is accepted, the stakeholders cannot impose penalties or claim dues from the Corporate Debtor based on past liabilities.

NCLAT

Section 10 Shouldn't Be Exploited And Abused By Corporate Debtor, Application After SARFAESI Proceedings Invalid: NCLAT Principle Bench

Case Title: M/s Agroha Paper Industries Private Limited vs Bank of Maharashtra

Case Number: Company Appeal (AT) (Insolvency) No. 1342 of 2023

The National Company Law Appellate Tribunal Principal Bench New Delhi of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) held that the protective provisions of Section 10 of the IBC should not be exploited or abused by the Corporate Debtor to gain an unfair advantage.

The bench noted that the SARFAESI proceedings initiated by the bank begun well before the filing of the Section 10 application by the Corporate Debtor. Thus, it noted that the application under Section 10 was a tactical maneuver rather than a genuine effort for insolvency resolution.

NCLT

Computation Of Limitation Must Be From Date Of E-Filing Of Appeal: NCLAT Principle Bench

Case Title: Innovators Cleantech Pvt. Ltd. Vs Pasari Multi Projects Pvt. Ltd.

Case Number: Interlocutory Application Nos. 1622 & 1623 of 2024

The National Company Law Appellate Tribunal, Principal Bench, New Delhi of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) has held that the computation of limitation for NCLAT purposes must be from the date of e-filing the appeal.

NCLT Orders Liquidation Of Future Retail

The National Company Law Tribunal (NCLT) Mumbai bench ordered the liquidation of Future Retail Limited (FRL) marking the end of the company's long-standing presence in India's retail market.

The decision was made by a bench comprising Judicial Member Kuldip Kumar Kareer and Technical Member Anil Raj Chellan who held that the corporate insolvency resolution process (CIRP) exceeded its maximum permissible period without any resolution plan being approved by the Committee of Creditors (CoC). The order was passed on an application for liquidation filed by Vijaykumar Iyer the resolution professional appointed in July 2022 when the CIRP for FRL commenced.

No Provision In IBC To Send Resolution Plan Back To CoC For Reconsideration: NCLT New Delhi

Case Title: Punjab National Bank Vs Saraya Industries Ltd

Case Number: IA 6058/2023 IN Company Petition No. (IB) – 2628/(ND)/2019

The National Company Law Tribunal New Delhi bench of Mahendra Khandelwal (Judicial Member) and Rahul Bhatnagar (Technical Member) has held that there is no provision in IBC allowing the Adjudicating Authority to send the resolution plan back to the Committee of Creditors (CoC) for reconsideration at the CoC's request.

Further, the bench held that once a resolution plan is submitted to the Adjudicating Authority, its jurisdiction is very limited concerning the approval or rejection of the plan.

Insufficiently Stamped Agreement Between Parties , Not A Ground To Dismiss CIRP Applications :NCLT Mumbai

Case Title: In the matter of Q West Infrastructure Private Limited vs Starwort Engineers Private Limited

Case Number: CP(IB)No. 229/MB/2024

The National Company Law Tribunal, Mumbai bench of Prabhat Kumar (Technical Member) and Justice V.G Bisht (Judicial Member) has held that deficiencies in document stamping, as per the Stamp Act, cannot be used as a reason to dismiss an application under Section 7 of the Insolvency and Bankruptcy Code.

Exchange Of Debit Notes And Pending MSME Reference Indicate Plausible Pre-Existing Dispute: NCLT New Delhi

Case Title: Mayfair Biotech Pvt. Ltd Vs Good Value Chemicals Pvt. Ltd

Case Number: C.P (IB)/215(ND)2020

The National Company Law Tribunal, New Delhi bench of Mahendra Khandelwal (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member) has held that the exchange of debit notes and the pending MSME reference indicate a plausible pre-existing dispute.

Therefore, the bench held that if the Corporate Debtor raises a plausible contention about a pre-existing dispute, which is not just a moonshine or feeble legal argument, it would suffice for the Adjudicating Authority to reject the application filed under Section 9 of the IBC.

Liquidation Is Last Resort, Broader Public Interest In Resolving Corporate Insolvency Should Be Taken Into Account: NCLT Kolkata

Case Title: UCO Bank vs Nandini Impex Pvt Ltd.

Case Number: IA No. 795/(KB)/2024 in C.P. No. 1377/KB/2020

The National Company Law Tribunal Kolkata bench of Bidisha Banerjee (Judicial Member) and Balraj Joshi (Technical Member) has held that the liquidation of a corporate debtor should be a measure of last resort. It held that the Insolvency and Bankruptcy Code (IBC) acknowledges a broader public interest in resolving corporate insolvencies with its primary objective extending beyond the mere recovery of outstanding debts.

The bench held that the corporate debtor lacks substantial tangible assets that could generate significant recovery for creditors. Consequently, it held that proceeding with liquidation could undermine the IBC's core objective of maximizing asset value.

Interest Not Mentioned In Invoices Or Civil Court Decree, Can't Add To Reach Threshold Limit: NCLT

Case Title: Mr. Pardeep Kumar Vs M/S. Welldone Exim Private Limited

Case Number: RCP 2(ND)/2024 (Old Case No. IB-548(ND)/2023)

The National Company Law Tribunal New Delhi bench of Bachu Venkat Balaram Das (Judicial Member) and Atul Chaturvedi (Technical Member) has held that claim for interest is not arising out of supplies of goods or services and do not form part of the Operational Debt in terms of Section 5(21) of the Insolvency and Bankruptcy Code, 2016.

Therefore, the bench held that the interest awarded by the civil court could not be combined with the principal amount to meet the threshold limit of Rs. 1 Crore.

NCLT Kolkata Imposes ₹1 Lakh Penalty On Indian Bank For Misguided Insolvency Petition Against Personal Guarantor Already Undergoing Insolvency Proceedings

Case Title: Indian Bank Vs Mr. Manish Kumar

Case Number: Company Petition (IB) No. 340/KB/2022 And I.A. (IB) No. 316/KB/2024

The National Company Law Tribunal Kolkata bench of Bidisha Banerjee (Judicial Member) and D. Arvind (Technical Member) has imposed a ₹1 lakh penalty on Indian Bank for filing insolvency proceedings against a Personal Guarantor who was already undergoing insolvency proceedings initiated by the same bank.

Third Parties And Multiple Representations Excluded From Hearing In Section 7 Or 9 IBC Petitions: NCLT Kochi

Case Title: In the matter of: Attukal Devi Institute of Medical Sciences Limited

Case Number: IA (IBC)/282/KOB/2024 IN CP(IBC)/22/KOB/2024

The National Company Law Tribunal Kochi bench of Ravichandran Ramasamy (Technical Member) and T Krishna Valli (Judicial Member) has held that at the admission stage of a petition under Section 7 or 9 of IBC, only the Corporate Debtor and the Financial Creditor are considered necessary parties for hearing. Third parties, including intervenors, do not have the right to be heard at this stage.

The bench held that any allegations of fraud, deceit, or fraudulent and malicious initiation of the Corporate Insolvency Resolution Process (CIRP) under Section 65 of the IBC must be presented by the Corporate Debtor through its authorized representative.

MOU And Loan Agreement For Land Acquisition As Investment, Not Financial Debt Under IBC: NCLT Mumbai

Case Title: RT Advisory Services LLP vs Sardesai Engineering Private Limited

Case Number: CP (IB) No.634/MB/2023

The National Company Law Tribunal, Mumbai bench of Justice V.G. Bisht (Judicial Member) and Prabhat Kumar (Technical Member) has held that the Memorandum of Understanding (MOU) and Loan Agreement intended for the acquisition and development of land constitute an investment rather than financial debt under the Insolvency and Bankruptcy Code (IBC).

Damages Under Section 14B Of EPF Act Are Government Dues, Subject To Section 53 Of IBC, Not Section 36(4)(a)(iii): NCLT Mumbai

Case Title: Regional Provident Fund Commissioner -II (Legal), Regional Office, Pune- II vs Mr. Milind B. Kasodekar

Case Number: Company Appeal (IB)/ 35/MB/ C-III/2023 In C.P. (IB) No. 3806 of 2018

The National Company Law Tribunal, Mumbai bench of Lakshmi Gurung (Judicial Member) and Charanjeet Singh Gulati (Technical Member) has held that damages under Section 14B of the EPF Act are classified as government dues. Consequently, these damages must be paid according to Section 53 of the Insolvency and Bankruptcy Code, 2016 and are not covered under Section 36(4)(a)(iii) of the IBC.

Section 14B of the EPF Act allows the authorities to levy damages on employers who fail to pay their contributions to the Employees' Provident Fund (EPF), the Employees' Pension Fund, or the Employees' Deposit-Linked Insurance Scheme within the prescribed time limits.

Interest Not Essential For Debt To Qualify As Financial Debt Under IBC: NCLT Mumbai

Case Title: In the matter of Spenta Enclave Private Limited (Through its Resolution Professional, Mr. Rajesh Jhunjhunwala) vs Spenta Sun City Private Limited

Case Number: C.P. (IB) 1066/MB/2023

The National Company Law Tribunal Mumbai bench of Anil Raj Chellan (Technical Member) and Kuldip Kumar Kareer (Judicial Member) has held that the inclusion of interest is not essential for a debt to qualify as financial debt.

The bench held that the definition of financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016, does not explicitly exclude interest-free loans.

Arbitration Clause Does Not Bar Operational Creditors From Filing Section 9 Applications Under IBC: NCLT Mumbai

Case Title: Gauder & Co. S.A. Vs Isinox Limited

Case Number: CP (IB) No.1277/MB/2022

The National Company Law Tribunal Mumbai bench of K. R. Saji Kumar (Judicial Member) and Sanjiv Dutt (Technical Member) has held that an arbitration clause in an agreement does not prevent an operational creditor from filing an application under Section 9 of the Insolvency and Bankruptcy Code (IBC).

The bench held that the presence of such a clause does not impose any restriction on the Operational Creditor's right to pursue a Section 9 Application.

Claims Submitted After Resolution Plan Approval Including Related Moratorium Period Not Allowed Under IBC: NCLT Bengaluru

Case Title: Employee's provident Fund Organisation vs CA Shirley Mathew

Case Number: I.A. No.4 & 87 of 2024 U/s 60(5) of the IBC, 2016 in C.P.(IB)No.36/BB/2022

The National Company Law Tribunal Bengaluru bench of K. Biswal (Judicial Member) and Manoj Kumar Dubey (Technical Member) has held that claims submitted after the approval of the Resolution Plan, including those related to the moratorium period, are not allowed under the Insolvency and Bankruptcy Code (IBC).

The bench held that permitting such belated claims at a later stage would interfere with the Corporate Insolvency Resolution Process.

No Liability On Successful Resolution Applicant Post Plan Approval If Not Identified In Corporate Debtor's Financial Records: NCLT Mumbai

Case Title: State Bank Of India V/S Jyoti Structures Ltd

Case Number: IA 1217/2024 IA 1835/2024 in C.P. (IB)/1137(MB)2017

The National Company Law Tribunal Mumbai bench of Prabhat Kumar (Technical Member) and Justice Virendrasingh Bisht (Judicial Member) has held that no liability can be imposed on the Successful Resolution Applicant after the approval of the plan by the Committee of Creditors if such liability is not identifiable from the financial records of the Corporate Debtor.

Resolution Professional Must Confirm Proper Service Of Demand Notice Before Admitting It To Adjudicating Authority: NCLT Amravati

Case Title: State Bank of India vs Dr Jitendra Das Maganti and Anr.

Case No.: CP (IB) No.49/95/AMR/2022

The National Company Law Tribunal (NCLT), Armravati Special Bench of Dr Venkata Ramakrishna Badarinath Nandula (Judicial Member) held that proof of due service of the demand notice presented to the corporate debtor or its guarantor must first be verified by the resolution professional. The creditor cannot present the same directly to the adjudicating authority/tribunal.

Discrepancy In Addresses Used For Serving Demand Notice, NCLT Amravati Dismisses SBI's Petition For Initiating IRP Process Against Personal Guarantor

Case Title: State Bank of India vs Dr Renuka Rani Maganti and Anr.

Case No.: CP (IB) NO.50/95/AMR/2022

The National Company Law Tribunal, Amaravati special bench of Dr Venkata Ramakrishna Badarinath Nandula (Judicial Member) dismissed a petition filed by the State Bank of India under Section 95(1) of the Insolvency and Bankruptcy Code, 2016. Discrepancies were found in the addresses used for the demand notice served to the personal guarantor and it was held that SBI failed to send the notice to the correct address as per the guarantee agreement.

Directing Corporate Debtor To Civil Courts Or Arbitration For Admitted Dues Undermines IBC Objectives: NCLT Mumbai

Case Title: Vineet K. Chaudhary vs NTPC Limited

Case Number: INTERLOCUTORY APPLICATION NO. 3453 OF 2022 IN COMPANY PETITION (IB) NO. 1374 (MB)/2017

The National Company Law Tribunal, Mumbai bench of Kuldip Kumar Kareer (Judicial Member) and Anil Raj Chellan (Technical Member) had held that directing Corporate Debtor to seek resolution through civil courts or arbitration for even admitted dues would undermine the objectives of the Insolvency and Bankruptcy Code.

No Provision To Waive Eligibility Requirements Under Section 43(3) Of the LLP Act For Investigation: NCLT New Delhi

Case Title: Mr. Anirudh Kumar vs M/s. Hydraulics and Pneumatics India LLP & ORS

Case Number: CA-133(ND)/2022 And Company Petition No. 53/45QA/ND/2022

The National Company Law Tribunal New Delhi bench of Dr. Sanjeev Ranjan (Technical Member) and Manni Sankariah Shanmuga Sundaram (Judicial Member) has held that there is no provision empowering it to relax / waive the eligibility requirements prescribed under Section 43(3) of LLP Act.

Section 43(3) outlines the conditions under which the Central Government may appoint inspectors to investigate the affairs of an LLP. This subsection mandates that a minimum of one-fifth of the total number of partners must file a petition for such an investigation.