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IBC

IBC Cases Weekly Round UP: 16th To 22nd May, 2022

Pallavi Mishra
23 May 2022 12:00 PM GMT
IBC Cases Weekly Round UP: 16th To 22nd May, 2022
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SUPREME COURT 1. Supreme Court Declares Noida As An Operational Creditor Under The Insolvency And Bankruptcy Code, 2016 Case title: New Okhla Industrial Development Authority v Anand Sonbhadra Case No.: Civil Appeal No. 2222 of 2021 The Supreme Court Bench comprising of Justice KM Joseph and Justice Hrishikesh Roy has upheld the NCLAT judgment wherein it was held that...

SUPREME COURT

1. Supreme Court Declares Noida As An Operational Creditor Under The Insolvency And Bankruptcy Code, 2016

Case title: New Okhla Industrial Development Authority v Anand Sonbhadra

Case No.: Civil Appeal No. 2222 of 2021

The Supreme Court Bench comprising of Justice KM Joseph and Justice Hrishikesh Roy has upheld the NCLAT judgment wherein it was held that the NOIDA is an Operational Creditor under IBC and not a Financial Creditor. The order was passed on 17.05.2022.

The Bench observed that the subject matter of Section 5(8)(d) of IBC is a lease or a hire-purchase contract which is deemed as a finance or capital lease. NOIDA's contract with the Builders is not any lease or a hire purchase contract, which would entitle the lessor to be treated as the financial creditor. The Bench held that:

"138. We are of the view that in the facts of the appeals before us, we are unable to hold that the lessee has raised any amounts from the appellant. The question, therefore, of considering the last limb of Section 5(8)(f), namely, whether it has commercial effect of a borrowing could not arise. But we can safely say that the obligation incurred by the lessee to pay the rental and the premium cannot be treated as an amount raised by the lessee from the appellant…"

2. SARFAESI Proceedings Cannot Be Continued Against Corporate Debtor Once CIRP Is Admitted And Moratorium Is Ordered: Supreme Court

Case Title: Indian Overseas Bank v RCM Infrastructure Ltd.

Case No.: CA 4750 OF 2021, 2022 LiveLaw (SC) 496.

The Supreme Court Bench comprising of Justices L. Nageswara Rao and B R Gavai has held that the proceedings under the SARFAESI Act, 2002 cannot be continued once the Corporate Insolvency Resolution Process (CIRP) is initiated under IBC and the moratorium is ordered. It was observed that Section 14(1)(c) of the IBC has overriding effect over any other law and therefore, after commencement of CIRP there is complete prohibition for any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property. The words "including any action under the SARFAESI Act" in Section 14 of the IBC convey the legislative intent. The order was passed on 18.05.2022.

3. Section 18 Limitation Act Is Applicable To IBC Proceedings, Reiterates Supreme Court

Case Title: State Bank of India v Krishidhan Seeds Private Limited

Case No.: 2022 LiveLaw (SC) 497, CA 910 of 2021

The Supreme Court Bench comprising of Justices DY Chandrachud and Surya Kant has held that the provisions of Section 18 of the Limitation Act, 1963 are applicable to proceedings under the Insolvency and Bankruptcy Code, 2016. It was observed that an acknowledgement in a balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgement was within a period of three years from the original date of default. The provisions of Section 18 of the Limitation Act are applicable to proceedings under the IBC. The order was passed on 18.04.2022.

NCLAT

1. Pendency Of Proceedings Before DRT,SARFAESI Or Other Fora-Not A Bar For Initiating CIRP: NCLAT Chennai

Case Title: Mr. Amar Vora v City Union Bank Ltd.

Case No.: Company Appeal (AT) (CH) (Ins) No. 130 of 2022.

The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Kanthi Narahari (Technical Member), has held that a petition can be moved under Section 7, 9, or 10 of Insolvency and Bankruptcy Code, 2016 ("IBC"), even when proceedings with respect to the same debt are pending before the Debt Recovery Tribunal; or SARFAESI Act 2002; or Prohibition of Benami Property Transaction Act, 1988 or any other forum. IBC has an overriding effect over other laws. The order was passed on 11.05.2022.

2. Joint Auction Under IBC And SARFAESI Is Permissible: NCLAT

Case Title: Ayan Mallick v Pratim Bayal (Liquidator) & Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 456 of 2022

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Ms. Shreesha Merla (Technical Member), has upheld the Order of NCLT, Kolkata wherein NCLT had held that a joint auction under the provision of Insolvency and Bankruptcy Code, 2016 (IBC) and SARFAESI Act, 2002 is permissible in order to maximize the value of the assets of the Corporate Debtor and the guarantor.

  1. Non-Payment Of TDS Amount Not A Ground For Initiating CIRP: NCLAT Delhi Imposes Cost Of Rs.1 Lakh On The Applicant

Case Title: Amitabh Roy v Master Development Management (India) Pvt. Ltd.

Case No.: Company Appeal (AT) (Insolvency) No. 274 of 2022

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Ms. Shreesha Merla (Technical Member) and Shri Naresh Salecha (Technical Member), has held that an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC") cannot be admitted over defaults relating to non-payment of TDS (Tax Deduction at Source) amount. The Bench observed that the Adjudicating Authority had committed serious error in admitting Section 9 Application on the submission of the Operational Creditor that non-payment of the TDS amounts to default. The Bench also imposed a cost of Rs. 1 Lakh on the Applicant. The order was passed on 18.05.2022.

NCLT

1. IBC AND RBI Guidelines Are 'Disjoint Sets', "There Is No Question Of One Prevailing Over The Other": NCLT Kolkata Dismisses Application Filed By SREI Ex Promoter Hemant Kanoria

Case Title: Reserve Bank of India v SREI Infrastructure Finance Limited

Case No.: CP (IB) No.295/KB/2021.

The National Company Law Tribunal (NCLT), Kolkata Bench, comprising of Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member), has held that the Insolvency and Bankruptcy Code, 2016 ("IBC") and the Reserve Bank of India (RBI) Guidelines do not prevail over each other as they have different scope and purpose. The NCLT does not have jurisdiction to adjudicate upon an audit conducted under RBI guidelines. The application was filed by Ex-Promoter of SREI Infrastructure Finance Ltd., Mr. Hemant Kanoria, challenging the KPMG Audit which was conducted under RBI guidelines. The Bench observed that:

"Therefore, the Code and the RBI circulars work in different fields and are, in a manner of speaking, disjoint sets. The adequacy or otherwise of KPMG's audit report would no doubt be determined by the lenders. We do not see any possibility of conflict between the two. There is no question of one prevailing over the other."

HIGH COURT

1. All Related Proceedings Stand Discharged, Settled, Abated, & Extinguished On Approval Of Resolution Plan: Gujarat High Court

Case Title: Essar Steel Limited & Anr v State of Gujarat & Anr.

Case No.: C/SCA/8741/2006

The Gujarat High Court Bench comprising of Justice Vaibhavi D. Nanavati, while allowing an application filed by Essar Steel Limited seeking abatement of claims of the respondent (Arcelor Mittal Nippon Steel India Ltd.), has held that Section 31(1) of the IBC clarifies that once a resolution plan is approved by the Committee of Creditors then it shall be binding on all stakeholders, including the guarantors. It was further held that Section 31(1) ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate and hence, the claims of the Respondent were irrevocably and unconditionally abated, discharged, settled and extinguished in perpetuity upon approval of the Resolution Plan.

2. Rejected Claims By Resolution Professional In Insolvency Proceedings, To Be Decided By The Arbitrator: Delhi High Court

Case Title: Bharat Petroresources Limited v JSW Ispat Special Products Limited

Case No.: 2022 LiveLaw (Del) 469; ARB.P. 1154 of 2021.

The Delhi High Court Bench comprising of Justice Vibhu Bakhru has held that the claims rejected by Resolution Professional in the insolvency proceedings, on the ground that they arose after the insolvency commencement date, are to be decided by the arbitrator when the parties have an arbitration agreement. The Court observed that the claims arising after the insolvency commencement date would not be automatically extinguished. The order was passed on 11.02.2022.

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