Notable Judgments On Insolvency And Bankruptcy Code, 2016 Part- 2

WHETHER A WINDING UP PETITION CAN BE FILED BY THE SECURED CREDITOR AGAINST A BORROWER EVEN AFTER OBTAINING DECREE FROM THE DEBTS RECOVERY TRIBUNAL? [Swaraj Infrastructure Pvt. Ltd. v. Kotak Mahindra Bank Ltd. (Civil Appeal No. 1291 of 2019 Decided on 29.01.2019)] The Hon'ble Supreme Court maintained the exclusivity of Recovery of Debt and Bankruptcy Act (RDB Act) for recovery of debts and reaffirmed that the winding up process is not an alternate remedy for realization of debts due to a creditor, further it held that a secured creditor can file a winding up petition against the borrower even after obtaining a decree from the Debts Recovery Tribunal (DRT). WHETHER RBI HAS POWER TO ISSUE DIRECTION UNDER SECTION 35AAOF THE BANKING REGULATION ACT TO BANKS AND FINANCIAL INSTITUTIONS? [Dharani Sugars & Chemical Ltd Vs. Union of India Transfer Petition (Civil) No. 1399 of 2018 Decided on 02.04.2019] The Hon'ble Supreme Court analyzed the scope of power of RBI under Section 35 AA of the Banking Regulation Act and held that RBI can direct banking and financial institutions to move under the IBC, if two conditions precedent are specified: (i) the Central Government should authorize RBI to issue direction; and (ii) it should be in respect of specific default. Hence, only Central Government has the power to authorize RBI to issue direction to banking and financial intuitions when it comes to initiate proceeding under IBC in respect of specific defaulters. Therefore, without authorization of the Central Government, the RBI cannot issue such directions. Further the Hon'ble Supreme Court struck down the circular issued by the Reserve Bank of India on February 12, 2018 directing banks to initiate insolvency proceedings against companies having bad debts of Rs 2000 crores or above. The court also held that authorization from Central Government is necessary for RBI to direct insolvency process against stressed assets.WHETHER THE CIRP UNDER THE IBC CAN CONTINUE WHEN WINDING UP PROCEEDINGS WERE PENDING IN THE HIGH COURT?[Forech India Ltd vs Edelweiss Asset Reconstruction Co.Ltd, Civil Appeal No. 818 of 2018 Decided on 22.01.2019] The Hon'ble Supreme Court held that Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC) can continue independent of any pending winding up process against the corporate debtor pending in the High Court under the Companies Act, the bench concluded that CIRP was an independent process. The bench also noted that Section 434 was amended, adding a proviso to enable a party to seek transfer of winding up petition pending in HC to the NCLT. The Court however granted liberty to the appellant to seek transfer of the application in HC to NCLT under Section 434.WHETHER THE WINDING UP PROCEEEDINGS OF A COMPANY UNDER SECTION 20 OF SICA ACT 1985 WILL CONTINUE IN THE HIGH COURT OR THE NCLT? [Jaipur Metal and Electricals Employees Organization vs Jaipur Metal and Electricals Ltd, Civil Appeal No. 12023 OF 2018 Decided on 12.12.2018] The Hon'ble Supreme Court has held that winding up proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 will continue in the High Court and not the National Company Law Tribunal, until an application for transfer to NCLT is filed by a party under Section 434(1)(c) of the Companies Act 2013.Further it was held that "under the scheme of Section 434 (as amended) and Rule 5 of the 2016 Transfer Rules, all proceedings under Section 20 of the SIC Act pending before the High Court are to continue as such until a party files an application before the High Court for transfer of such proceedings post 17.08.2018(under Section 434(1)(c) of the Companies Act)" The SC however found fault with the portion of the HC order which set aside the NCLT order of admission of application under Section 7 IBC. WHETHER THE COMPLIANCE WITH SECTION 9(3)(C) OF THE IBC,2016 WAS MANDATORY IN NATURE? [Macquaire Bank Limited v. Shilpi Cable Technology (2018) 2 SCC 674 Decided on 15.12.2017] The court held that Section 9(1) contains the conditions precedent for triggering the 2016 code in so far as the operational creditor is concerned. The requisite elements are occurrence of a default and delivery of a demand notice of an unpaid operational debt or invoice demanding payment of the amount involved. The bench concluded that a procedural provision is the handmaid of justice and cannot be mandatory where there is a serious general inconvenience. WHAT IS THE TIME LIMIT FOR COMPLETION OF THE INSOLVENCY RESOLUTION PROCESS? [Arcelormittal India Pvt. Ltd. vs. Satish Kumar Gupta &Ors. Civil Appeal no. 9582 of 2018 Decided on 04.10.2018] The Hon'ble Supreme Court, interpreting Section 29A(c) of the Insolvency and Bankruptcy Code, 2016, has observed the stage of ineligibility attaches when the...

Notable Judgments On Insolvency And Bankruptcy Code, 2016 Part- 2

Tariq Khan & Byron Sequeira

Tags