IBC | No Casual Interference With Commercial Wisdom Of CoC: Supreme Court Sets Aside NCLT Direction To Reevaluate Corporate Debtor's Assets

Case Title: Ramkrishna Forgings Limited v Ravindra Loonkar & Anr.

Citation: 2023 LiveLaw (SC) 1007

The Supreme Court bench comprising Justice Vikram Nath and Justice Ahsanuddin Amanullah, has set aside an order whereby the National Company Law Tribunal (“NCLT”) kept the approval of a resolution plan in abeyance while directing an Official Liquidator to conduct re-valuation of the Corporate Debtor’s assets. Consequently, the order of National Company Law Appellate Tribunal (“NCLAT”) affirming the NCLT’s order has also been set aside.

An application under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) was filed by the Resolution Professional before NCLT, seeking approval of the resolution plan submitted by Successful Resolution Applicant(SRA). The valuation of Corporate Debtor’s assets was already done Resolution Professional as per the provisions of IBC and its Regulations. However, the NCLT kept the resolution plan in abeyance and appointed an Official Liquidator to conduct re-valuation of assets.

The Bench has held, “In the case at hand, we find that there was no occasion before the Adjudicating Authority NCLT to be swayed only on the per se ground that the hair-cut would be about 94.25% and that it was not convinced that the fair value of the assets have been projected in proper manner as the bid of the appellant was very close to the fair value of the assets of ACIL. Ordering revaluation of the assets, by the OL, Ministry of Corporate Affairs, Government of India, in-charge of the particular area, cannot be justified.”

NCLAT

Corporate Debtor Denying Liability Prior To Issuance Of Demand Notice Is Pre Existing Dispute: NCLAT New Delhi

Case title: Panjwani Electrical Engineers and Consultants v Larsen And Toubro Ltd.

Case No.: Company Appeal (AT) (Insolvency) No.1399 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member) and Shri Arun Baroka (Technical Member), has held that when Corporate Debtor denied its liability to pay even prior to issuance of Demand Notice under Section 8 of IBC, then the petition under Section 9 of IBC is liable to be dismissed on the ground of pre-existing dispute.

NCLAT Delhi: Doctrine Of Promissory Estoppel Can’t Be Applied Against An Approved Resolution Plan

Case Title: Fervent Synergies Limited VS Manish Jaju

Case No.: Company Appeal (AT) (Insolvency) No.1338 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr Arun Baroka (Technical Member), has held that the doctrine of promissory estoppel cannot be applied against an approved Resolution Plan by the Committee of Creditors (“CoC”) under IBC.

“The mandatory contents of the Resolution Plan are laid down in the CIRP Regulations, 2016. If a Resolution Plan is compliant with the provision of Section 30, sub-section (2) of the IBC and the provisions of the Regulations, 2016, the Plan cannot be faulted on the ground of the promissory estoppel, which the Appellant is pressing against the Resolution Professional, who has admitted the claim.”

Section 7 Petition Seeking ‘Joint’ CIRP Of Separate Corporate Entities Involved In Common Real Estate Project Is Maintainable: NCLAT Delhi

Case title: Mist Avenue Pvt. Ltd. v Nitin Batra & Ors. and connected matters.

Case No.: Company Appeal (AT) (Insolvency) No. 127 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has held that a petition under Section 7 of IBC, filed by allottees for joint CIRP of separate corporate entities involved in a common real estate project is maintainable.

Three separate companies were engaged in the development of a real estate project. When the construction of units was not completed within time, the Allottees filed a Section 7 petition under IBC, seeking initiation of joint CIRP against all three companies involved. The NCLAT while upholding the maintainability of such Section 7 petition, has observed as under:

“All the three Appellants being involved with the one single project in which the allottees have been allotted units, all are necessary ingredients of any resolution which may help the allottees to receive their units, in absence of any of the appellants in Corporate Insolvency Resolution Process, Resolution of project and revival of the Resolution of project is impossible………We are in agreement with the view expressed by the Adjudicating Authority that Section 7 Application filed against all the three appellants together is maintainable. The three appellants being part of one Common Real Estate Project and the Applicants of Section 7 Application being part of the said project they had every right to initiate Section 7 Application against all the three appellants together.”

CIRP Under Section 7 Can Commence Even If Claims Of Certain Allottees Are Time Barred Or Below Threshold Of Rs. 1 Crore: NCLAT Delhi

Case title: Mist Avenue Pvt. Ltd. v Nitin Batra & Ors. and connected matters.

Case No.: Company Appeal (AT) (Insolvency) No. 127 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has held that in a petition under Section 7 of IBC jointly filed by real estate allottees, the debt of each individual allottee need not meet the minimum threshold of Rs. 1 Crore default or limitation requirements. The CIRP under Section 7 of IBC can commence even if only few Financial Creditors (allottees) fulfill the minimum threshold of Rs. 1 Crore default.

“The provision of Section 7(1) Second Proviso inserted by Act No. 1 of 2020 having been explained by the Hon’ble Supreme Court, the law is well settled that all applicants who have joined the Section 7 Application have not fulfilled the threshold individually nor claim of all the applicants individually has to be within time in event there is default of more than Rs. 1 Crore and default of Rs. 1 Crore on basis of which the application is filed is well within time. The mere fact that claim of some other barred by time is insignificant. Application under Section 7 of the Code triggered when default of Rs. 1 Crore qua some of the applicant or some other financial creditors is fulfilled, Insolvency Resolution Process under Section 7 can commence.”

Requirement Of Minimum 100 Allottees Under Section 7 To Be Met At The Date Of Filing, Subsequent Settlement By Allottees Inconsequential: NCLAT Delhi

Case title: Mist Avenue Pvt. Ltd. v Nitin Batra & Ors. and connected matters.

Case No.: Company Appeal (AT) (Insolvency) No. 127 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has held that requirement of minimum 100 allottees to file a petition under Section 7 of IBC is to be met on the date of filing of the petition. If any allottee(s) enter settlement with the Corporate Debtor post filing of the petition, then they are not required to be excluded from the count of 100 allottees.

“In Manish Kumar itself it has been answered that requirement of threshold under proviso in Section 7(1) must be fulfilled as on the date of filing of the Application. The fact that eight allottees have settled the matter is thus inconsequential and eight allottees cannot be excluded in the counting of 100 allottees which are required to be fulfilled as threshold.”

Application For Certified Copy Filed Beyond Limitation, Not Entitled To Exclude Time In Preparation Of Certified Copy: NCLAT

Case Title: Nipan Bansal v Employees Provident Fund Organization

Case No.: Company Appeal (AT) (Insolvency) No. 1454 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member) and Shri Arun Baroka (Technical Member), has held that when the application for obtaining certified copy of an NCLT order is submitted beyond the limitation period for filing of appeal (i.e. 30 days), then the Appellant is not entitled to exclude the time consumed in preparation of certified order from the period of limitation for filing of appeal before NCLAT.

“When the application is filed beyond the period of limitation, the Appellant is not entitled to exclude the period during which period certified copy remains under preparation. Thus, the Appellant is not entitled for any exclusion of the period during which copy was under preparation.”

NCLAT Delhi: Refusal To Rehear A Matter After Reserving An Order In A Company Petition Does Not Result In A Miscarriage Of Justice

Case Title: Loramitra Rath Vs JM Financial Asset

Case No.: Company Appeal (AT)(Insolvency) No. 1359 & 1360 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr Arun Baroka (Technical Member), has held that refusal to rehear a matter after reserving an order in a company petition does not result in a miscarriage of justice.

NCLAT Delhi: Scope Of Enquiry By The Adjudicating Authority Under Section 31 Is Confined To Section 30(4) Compliance

Case Title: Sita Chaudhary Vs Haryana Telecom Limited

Case No.: Company Appeal (AT)(Insolvency) No. 727-728 of 2023

The National Company Law Appellate Tribunal (“NCLAT”), Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has dismissed an appeal and held that the scope of enquiry of the National Company Law Tribunal (“NCLT”) as per Section 31 of IBC is confined to scrutinising whether Section 30(4) IBC has been complied with.

The Bench further pointed out that when the Appellant did not challenge the Corporate Insolvency Resolution Process (“CIRP”) and the admission and constitution of the Committee of Creditors (“CoC “) at the right point of time, it cannot ask for rejection of the duly approved resolution plan.

NCLT

Liquidator Can’t Reject A Rectified Claim For Being Time Barred: NCLT Mumbai

Case Title: IDBI Bank Limited v EPC Constructions India Limited

Case No.: CP (IB) No. 1832/MB/C-II/2017

The National Company Law Tribunal (NCLT), Mumbai Bench, comprising of Shri Kuldip Kumar Kareer (Judicial Member) and Shri Anil Raj Chellan (Technical Member), has held that when a creditor submits a claim before Liquidator within stipulated timeline though not in proper Form, then the Liquidator cannot reject such creditor’s claim on the premise that rectified claim was submitted after due date. The re-submission of rectified claim is a mere technical formality.

NCLT Mumbai: Base Resolution Plan, An Attempt To Circumvent SEBI Takeover Regulation, Can’t Be Approved Under Section 54C Of IBC

Case Title: Garodia Chemicals Limited

Case No.: CP(IBPP) NO. 02 OF 2023

The National Company Law Tribunal (“NCLT”), Mumbai Bench, comprising of (Retd.) Justice Virendra Singh G Bisht (Judicial Member) and Shri Prabhat Kumar (Technical Member), has dismissed a petition under held that a Base Resolution Plan which attempts to circumvent SEBI Takeover Regulations, in respect of the acquisition of a shareholding in a listed entity beyond the specified threshold limit, cannot be approved even under Sec. 54C of IBC for initiation of Pre-Packed Insolvency Resolution Process.

Fixation Of Reserve Price For Auction Being Commercial Decision Of Stakeholders Consultation Committee, NCLT Can’t Sit In Appeal; NCLT Kolkata

Case Title: Sauria Corporation v Kohinoor Pulp & Paper Private Limited

Case No.: C.P (I.B) 511/KB/2018

The National Company Law Tribunal (NCLT), Kolkata Bench, comprising of Shri Rohit Kapoor (Judicial Member) and Shri Balraj Joshi (Technical Member), has held that fixation of reserve price for auction is a commercial decision of Stakeholders Consultation Committee (SCC) and the NCLT would not sit in appeal over such decision.

“We are of the considered opinion, this is a commercial decision of the Stakeholders Consultation Committee (SCC) arrived at after due deliberations. Applicant has stated that he engaged two valuators to determine the value of these assets. This Adjudicating Authority is not expected to sit in appeal over it. We are also of the view, it is the SCC who are in a position to reasonably assess the value of the assets.”

The Liquidator and the Stakeholders Consultation Committee differed on the amount of reserve price fixed for auction of Corporate Debtor’s plant and machinery. The NCLT directed the Liquidator to opt for the reserve price fixed by the Stakeholders Consultation Committee.

NCLT Ahmedabad Directs Promoters To Deposit Rs. 7.78 Crores With Corporate Debtor Based On Forensic Audit Report

Case Title: State Bank of India & Ors. v Sidharth Bharatbhushan Jain & Ors.

Case No.: CP(IB) 62 of 2021

The National Company Law Tribunal (“NCLT”), Ahmedabad Bench, comprising of Shri Shammi Khan (Judicial Member) and Shri Sameer Kakar (Technical Member), has directed the Promoters/Suspended Management of Sysco Industries Ltd. (Corporate Debtor) to deposit Rs. 7.78 Crores with the Corporate Debtor on the basis of a forensic audit report. The Resolution Plan for the Corporate Debtor was approved by NCLT in 2022. Further, the amount of Rs. 7.78 Crores is to be distributed to the erstwhile CoC members in their respective share.

The Resolution Professional had filed an application under Section 43 of IBC based on a forensic audit report, seeking reversal of amounts to the Corporate Debtor, in view of preferential transactions undertaken by the Promoters/Suspended Management with a related party.

HIGH COURT

No Recovery Towards TAS Can Be Made Towards Deductee Even If Deductor Is Undergoing CIRP: Delhi High Court

Case Title: BDR Finvest Pvt. Ltd. Versus DCIT

Case No.: W.P.(C) 9043/2021 & CM No.55881/2023

The Delhi High Court has held that no recovery towards Tax at Source (TAS) can be made towards the deductee even if the deductor is undergoing the Corporate Insolvency Resolution Process (CIRP).

The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that the deductee (petitioner) followed the regime framed in the Act for collecting TAS through an agent (Ninex) of the government, i.e., the deductor. It was the agent who was required to deposit the tax with the government. The agent is undergoing CIRP; therefore, possibly, the ability of the Central Government to recover the amount from the agent may seem remote.

Gujarat High Court: Protection Granted U/S 32A(2) & 33(5) Of IBC Overrides The Power Of Enforcement Directorate To Attach The Properties Under PMLA

Case Title: AM Mining India Private Limited vs Union of India

Case No.: R/SPECIAL CIVIL APPLICATION NO. 808 of 2023

The Gujarat High Court bench comprising Justice Vaibhavi D. Nanavati, has held that the protection granted under Section32A(2) and Section 33(5) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) would override the power of Enforcement Directorate to attach the properties under Section 5 of the Prevention of Money Laundering Act, 2002 (“PMLA”).

The Bench opined that the Enforcement Directorate has proceeded to confirm the order of provisional attachment passed under Section 5(1) of PMLA without any application of mind.

“In the opinion of this Court, confirmation of attachment interdicts and interferes with the consummation of the sale process which is part of liquidation of ABG Shipyard in the opinion of this Court, is in teeth of the provisions of Sections 32A, 33(5) and 238 of the IBC”