IBC | Doctrine Of Election Can’t Prevent Financial Creditor From Initiating CIRP Against Corporate Debtor: Supreme Court

Case Title: Tottempudi Salalith v State Bank Of India & Ors.

Citation: 2023 LiveLaw (SC) 914

The Supreme Court has held that the ‘Doctrine of Election’ cannot be applied to prevent a Financial Creditor from approaching the National Company Law Tribunal (NCLT) for initiation of Corporate Insolvency Resolution Process (“CIRP”) against a Corporate Debtor, under the Insolvency and Bankruptcy Code, 2016 (IBC).

The Doctrine of Election is embodied in the law of evidence, which bars prosecution of the same right in two different fora based on the same cause of action.

The Bench comprising Justice Aniruddha Bose and Justice Vikram Nath, has observed, “The question of election between the fora for enforcement of debt under the 1993 Act and initiation of CIRP under the IBC arises only after a recovery certificate is issued. The reliefs under the two statutes are different and once CIRP results in declaration of moratorium, the enforcement mechanism under the 1993 Act or the SARFAESI Act gets suspended. In such circumstances, after issue of recovery certificate, the financial creditor ought to have option for enforcing recovery through a new forum instead of sticking on to the mechanism through which recovery certificate was issued.

NCLAT

NCLAT New Delhi Suspends Finolex Cable Order Post Supreme Court Directs NCLT Delhi Chairperson To Conduct Inquiry

Case Title: Deepak Kishan Chhabria & Anr. vs. Orbit Electricals Pvt. Ltd. & Ors.

Case No.: Company Appeal (AT) No. 64 of 2020

The National Company Law Appellate Tribunal (‘NCLAT’) Principal Bench, comprising Justice Rakesh Kumar (Judicial Member) and Dr. Alok Srivastava (Technical Member), suspended its order dated 13.10.2023 due to the disclosure of the result of the Annual General Meeting of the Finolex Cable.

NCLAT had faced an inquiry by the Supreme Court as per which it was brought to the notice of the Supreme Court order dated 13.10.2023 directing the NCLAT that Judgment in pending appeal shall be delivered by it being duly apprised of the fact that the result of the Annual General Meeting has been declared.

The matter related to Finolex Cable's Annual General Meeting and Prakash and Deepak Chhabria's legal tussle over the management control of the company. The NCLAT via its order dated 13.10.2023 had allowed Deepak Chhabria to continue as the chairman of Finolex Cables and put on hold the changes that were to be brought into the Articles of Association of the Company.

The Supreme Court in its order dated 13.10.2023 had directed the NCLT chairperson Justice Ashok Bhushan to conduct an inquiry into whether a bench of the Appellate Tribunal defied the Supreme Court’s order and Justice Bhushan was required to submit such report on 16.10.2023 by 5 pm.

The NCLAT via its order on 21.09.2023 had directed the status quo on the conduct of the Annual General Meeting until the dispute between Prakash Chabria and Deepak Chabria over the management of the Company was settled.

The Apex Court had observed that decisions relating to the appointment of an Executive Chairperson would be subject to the outcome of the litigation at the NCLAT.

NCLAT Chennai: Transfer Of Shares Not An Act Of Oppression And Mismanagement | SEBI Is The Competent Forum To Decide Disputes Of Transfer Of Shares And Not NCLT

Case Title: Jitendra Virmani vs. MRO – Tek Reality Limited

Case No.: Company Appeal (AT) No.363/2019

The National Company Law Appellate Tribunal (‘NCLAT’), Chennai Bench comprising of Justice M. Venugopal (Judicial Member) and Ms. Shreesha Merla (Technical Member) has held the Transfer of Shares is not an act of ‘oppression’ and ‘mismanagement’ against the shareholders of the Company and disputes relating to the Transfer of Shares fall within the ambit of the Securities Board of India (‘SEBI’) and not NCLT.

NCLAT Chennai: Mere Irregularity Not A Ground For Oppression And Mismanagement

Case Title: Jitendra Virmani vs. MRO – Tek Reality Limited

Case No.: Company Appeal (AT) No.363/2019

The National Company Law Appellate Tribunal (‘NCLAT’), Chennai Bench comprising of Justice M. Venugopal (Judicial Member) and Ms. Shreesha Merla (Technical Member), has held that a mere irregularity or infirmity is not a ground for oppression and mismanagement and a single act is not oppression and a continuous course of oppressive conduct by the majority is required and necessary for oppression and mismanagement proceedings.

NCLAT Chennai: NCLT Has Inherent Powers To Look Into Earlier Litigations To Ascertain The Bonafide Of A Party

Case Title: Jitendra Virmani vs. MRO – Tek Reality Limited

Case No.: Company Appeal (AT) No.363/2019

The National Company Law Appellate Tribunal (‘NCLAT’), Chennai Bench comprising of Justice M. Venugopal (Judicial Member) and Ms. Shreesha Merla (Technical Member), has held the NCLT is well within the ambit with its inherent powers to look into the earlier orders and the observations made to ascertain the bona fide of the Appellant.

NCLT

NCLT Mumbai Approves Resolution Plan For Topworth Steel & Power Pvt. Ltd., A Topworth Group Company

Case Title: State Bank of India v Topworth Steel and Power Private Ltd.

Case No.: CP (IB) No. 590/MB/C-I/2018

The National Company Law Tribunal (“NCLT”), Mumbai Bench, comprising of Justice V.G. Bisht (Retd.) (Judicial Member) and Shri Prabhat Kumar (Technical Member), has approved the Resolution Plan submitted by Amalgam Steel and Power Ltd. for Topworth Steel and Power Pvt. Ltd. The Resolution Plan is valued at Rs. 260 Crores, while the total admitted claims of the Corporate Debtor amounted to Rs. 3,499 Crores.

Petitioner Fails To Prove Existence Of Debt In Section 7 Petition, NCLT Ahmedabad Imposes A Cost Of Rs. 2 Lakhs

Case Title: G.L.E. India Solar Private Limited v Bright Solar Limited

Case No.: CP(IB)/66/NCLT/AHM/2022

The National Company Law Tribunal (NCLT), Ahmedabad Bench, comprising of Mrs. Chitra Hankare (Judicial Member) and Dr. Velamur G Venkata Chalapathy (Technical Member), has imposed a cost of Rs. 2 Lakhs on a Petitioner, who failed to prove existence of debt for the purpose of initiating CIRP under Section 7 of IBC against the Respondent.

NCLT Mumbai: Threshold Limit For A Valid Petition Under Section 9 Of IBC For Each Operational Creditor Should Be Rs. 1 Crore

Case Title: Mr Atanu Kumar Chatterjee vs. Rolta Defence Technology Systems Pvt. Ltd.

Case No.: C.P.(IB)-554(MB)/2022

The National Company Law Tribunal (‘NCLT’) Mumbai comprising of Ms. Lakshmi Gurung (Judicial Member) and Shri Charanjeet Singh Gulati (Technical Member), dismissed the petition as non-maintainable filed by 29 Operational Creditors to initiate CIRP against Corporate Debtor.

The NCLT held as per NCLAT judgment in Suresh Narayan Singh vs. Tayo Rolls Ltd. and the revised notification dated 24.03.2020, increasing the threshold limit from Rs. 1 Lakh to Rs. 1 Crore, for a valid petition under Section 9 of IBC, threshold limit for each individual is required to be Rs. 1 Crore.

NCLT Kolkata: Dismissal Of Scheme Of Compromise At First Motion, Liquidator Not Entitled To Claim Fees And Other Costs

Case Title: Radhasiriya Properties Pvt. Ltd. Vs. Jai Narayan Gupta Liquidator of Barcle Enterprises Ltd.

Case No.: C.P. (IB) No. 830/KB/2018

The National Company Law Tribunal (‘NCLT’) Kolkata Bench comprising Mrs. Bidisha Banerjee (Judicial Member) and Mr. D. Arvind (Technical Member), has held that when scheme of compromise and arrangement proposed by Applicant is rejected at its first motion by Creditors, Proviso to Rule 2B(3) of Liquidation Process Regulations 2016 does not apply and Liquidator is not entitled to claim his fees and other costs from the Applicant.

Liquidator is not entitled to claim his fees and other costs in relation to liquidation, from the Applicant who is a proponent of a composite scheme of compromise and arrangement, when the scheme proposed by him is rejected by the creditors.

NCLT Delhi Approves Resolution Plan For Educomp Solutions Limited

Case Title: Educomp Solutions Limited

Case No.: Company Petition No. (IB)-101/(PB)/2017

The National Company Law Tribunal (“NCLT”), New Delhi Bench, comprising of Shri Ashok Kumar Bhardwaj (Judicial Member) and Shri L.N. Gupta (Technical Member), has approved the Resolution Plan submitted by Ebix Singapore Pte. Ltd. for Educomp Solutions Limited. The Resolution Plan is valued at Rs. 325 Crores, while the total admitted claims of the Corporate Debtor amounts to Rs. 3,008.3 Crores.

Educomp Solutions Limited (“Corporate Debtor”) is one of India’s oldest education technology companies with its operations in India, USA and Singapore. The Corporate Debtor offers smart class products and ICT solutions to schools; has a network of pre-schools & schools; provides internet based learning and coaching classes for entrance exams, employment linked vocational courses and placement assistance. The brands related to the Corporate Debtor are Educomp Smart Class, The Millenium School, Raffles Millenium International, Vidyamandir classes et al.

Party Who Benefits From Preferential Transaction Can Only Be Directed To Contribute To Corporate Debtor: NCLT Delhi

Case title: Mr. Saptarshi Nath & Anr. v Kapil Dev Taneja

Case No.: Company Appeal (AT) (Insolvency) No. 1356 of 2022

The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has held that under Section 44(1)(d) of IBC a direction to contribute to the assets of the Corporate Debtor can be only given to a person who has received benefits from the Corporate Debtor. The Bench concluded that in a preferential transaction where a third party received benefit from the Corporate Debtor, the Erstwhile Management/Director cannot be directed by NCLT under Section 44(1)(d) to contribute to the assets of the Corporate Debtor.

IBBI

IBBI Invites Suggestions To Simplify And Reduce Cost Of Compliance Of IBC Regulations

Ref No. IBBI/PR/2023/14

The Insolvency and Bankruptcy Board of India (“IBBI”) has issued a Press Release dated 12.10.2023, inviting suggestions to simplify, ease and reduce cost of compliance of Regulations notified under the Insolvency and Bankruptcy Code, 2016 (“IBC”).

The IBBI has framed IBBI (Mechanism for Issuing Regulations) Regulations, 2018 providing for the manner of consultation, framing and review of Regulations. Suggestions/comments have been invited from public and regulated entities on the Regulations under IBC for simplifying, easing and reducing cost of compliance.

The comments can be provided online by visiting the IBBI website at - https://ibbi.gov.in/webfront/regulation_comment.php.

The procedure to submit the comments shall be same as provided in Press Release No. IBBI/PR/2023/05 dated 04.05.2023.