Monthly Digest Of IBC Cases: April 2022
Pallavi Mishra
3 May 2022 6:56 AM GMT
Supreme Court Wages/Salaries Of Only Those Workmen/Employees Who Actually Worked During CIRP Are To Be Included In CIRP Costs: Supreme Court Case title: Sunil Kumar Jain v Sundaresh Bhatt, Civil Appeal No. 5910 of 2019. A Supreme Court division bench comprising of Justice M.R. Shah and Justice Aniruddha Bose has held that the dues towards the wages/salaries of only...
Supreme Court
Case title: Sunil Kumar Jain v Sundaresh Bhatt, Civil Appeal No. 5910 of 2019.
A Supreme Court division bench comprising of Justice M.R. Shah and Justice Aniruddha Bose has held that the dues towards the wages/salaries of only those workmen/employees who actually worked during the Corporate Insolvency Resolution Process ("CIRP") are to be included in the CIRP costs. The Bench clarified that the wages and salaries of all other workmen/employees of the Corporate Debtor during the CIRP, who actually have not worked and/or performed their duties when the Corporate Debtor was a going concern, shall not be included automatically in the CIRP costs. Such dues will be governed by Section 53(1)(b) and Section 53(1)(c) of the Insolvency and Bankruptcy Code, 2016 ("IBC"). It was further observed that Section 36(4) and Section 53(1) of the IBC shall not be applicable to dues of the workmen/employees on account of provident fund, gratuity and pension. They are to be treated outside the liquidation process and liquidation estate assets under the IBC. The order was passed on 19.04.2022.
Insolvency and Bankruptcy Code Is Not For Money Recovery Proceedings: Supreme Court Reiterates
Case Title: Invest Asset Securitisation and Reconstruction Pvt. Ltd. v Girnar Fibres Ltd., 2022 LiveLaw (SC) 423.
The Supreme Court bench comprising of Justice Dinesh Maheshwari and Justice Aniruddha Bose reiterated that the provisions of Insolvency and Bankruptcy Code, 2016 ("IBC") are essentially intended to bring the Corporate Debtor to its feet and are not of money recovery proceedings as such. The Appellant had filed an appeal before the Supreme Court under Section 62 of the IBC against the NCLAT order dated 18.11.2021, wherein Appellant's appeal was dismissed on the ground that application filed under Section 7 of IBC is barred by limitation. The Supreme noted that the right to sue accrued on the date of declaration of Non Performing Asset (NPA) but there is no evidence of any acknowledgement of liability in terms of Section 18 of the limitation Act, 1963. The order was passed on 25.04.2022.
Supreme Court Keeps CIRP In Abeyance And Permitted Promoter To Complete The Housing Project
Case title: Anand Murti v Soni Infratech Private Limited., Civil Appeal Nos.7534 of 2021.
The Supreme Court bench comprising of Justices L Nageshwara Rao and B R Gavai has directed to keep the Corporate Insolvency Resolution Process (CIRP) of Soni Infratech Pvt. Ltd. ("Corporate Debtor") in abeyance and permitted the erstwhile promoter of Corporate Debtor to complete the construction of real estate housing project within the stipulated time period.
The Promoter of Corporate Debtor had filed an additional affidavit before the Supreme Court, undertaking to complete the project in stipulated time and to return the money along with 6% p.a. interest to seven homebuyers who are objecting to settlement plan. The Bench noted that there are only 7 out of 452 homebuyers who are objecting to settlement plan and therefore, it will be interest of homebuyers to permit the promoter to complete the construction of the project. The Bench further observed that there is every possibility that if the CIRP is permitted, homebuyers will have to play an escalation cost whereas the Promoter is undertaking to honor the existing BBA without any escalation. Therefore, the appeal was disposed off by permitting the promoter to complete the project within stipulated time in terms of the additional affidavit and the same shall be treated as the undertaking to the Supreme Court. The order was passed on 27.04.2022.
Case Title: National Company Law Tribunal Bar Association v Union of India, W.P.(C) No. 180/2022.
A Supreme court Bench comprising of Justices L. Nageswara Rao, B.R. Gavai and Aniruddha Bose, has issued notice to the Central Government on the Writ Petition filed by the National Company Law Tribunal Bar Association (NCLTBA) through its Secretary. The writ petition has been filed seeking modification of the term of 3 years fixed by a notification issued by the Ministry for the members of the National Company Law Tribunal as 5 years. The Notification was issued on 20.09.2019 by the Ministry of Corporate Affairs in exercise of the powers conferred by section 408 of the Companies Act, 2013. The term was fixed as 3 years or till the age of 65 years, whichever is earlier. The order was passed on 05.04.2022.
'Decree Holders' Can't Be Treated At Par With 'Financial Creditors' Under IBC: Supreme Court
Case Title: Shubhankar Bhowmik v Union of India & Anr., SLP 6104/2022.
The Supreme Court Bench comprising of Justice SK Kaul and Justice MM Sundresh, upheld a Tripura High Court judgment wherein it was held that "decree-holders" cannot be treated at par with "financial creditors" under the Insolvency and Bankruptcy Code, 2016 ("IBC").
The Tripura High Court had held that the decree-holder gets a statutory status as a creditor under Section 3(10) of the IBC, by virtue of the decree. Since the decree cannot be executed by operation of the moratorium under Section 14, the IBC makes a provision to protect the interests of a decree holder by recognizing it as a creditor. The interest recognized is that in the decree and not in the dispute that leads to the passing of the decree. This is apparent from the fact that decree holders as a class of creditors are kept separate from "financial creditors" and "operational creditors". No divisions or classification is made by the statute within this class of decree holders. It was further held that once a decree quantifies a debt due the nature of the dispute that resulted in the quantification ceases to exist. In the books of a corporate debtor, it will show only as a liability and not as a financial debt or operational debt. The same cannot be said to be arbitrary, or unreasonable. The Supreme Court Bench dismissed the Special Leave Petition filed against the aforesaid High Court judgment and upheld the decision of the High Court.
Case Title: Narinder Garg v Kotak Mahindra Bank, W.P. (C) 93 OF 2022.
The Supreme Court Bench comprising of Justices UU Lalit, S. Ravindra Bhat and P.S. Narasimha, has reiterated that the moratorium provisions contained in Section 14 of the Insolvency and Bankruptcy Code, 2016 would apply only to the Corporate Debtor and the natural persons mentioned in Section 141 of the Negotiable Instruments Act would continue to be statutorily liable under the provisions of the said Act. The order was passed on 28.03.2022.
High Court
Case Title: NCLT Bar Association Through Its Secretary General v Union Of India And Ors., W.P.(C) 6037/2018.
A Delhi High Court division bench comprising of Acting Chief Justice Vipin Sanghi and Justice Navin Chawla, has recently directed the maintenance of status quo with regards to the occupation, renovation or construction of the space vacated by the Ministry of New and Renewable Energy in the building wherein the National Company Law Tribunal (NCLT) is located, till 04.05.2022. The order was passed on 22.04.2022.
The Bench was of the view that having different Benches of the NCLT at different locations, is bound to cause administrative difficulties in the functioning of the NCLT, as well as difficulties for the Advocates and litigants. Taking note of the fact that since the first floor of the building became available with the vacation of the said floor by the Ministry of New and Renewable Energy, the Court was of the view that the area should have been allotted to the NCLT in preference over any other Ministry. It added that the area earlier allotted to the NCLT admeasuring 11,860 square feet could, instead, be allotted to the other Ministries.
Case Title: Jasani Realty Pvt. Ltd. v. Vijay Corporation, 2022 LiveLaw (Bom) 162; Commercial Arbitration Application (L) No. 1242 of 2022.
The Bombay High Court Single Bench comprising of Justice G.S. Kulkarni, has held that merely because an application under Section 7 of Insolvency and Bankruptcy Code, 2016 is filed before the Adjudicating Authority is pending consideration, it does not oust the jurisdiction of the High Court to entertain an application filed under Section 11 of the Arbitration & Conciliation Act, 1996 ("Arbitration Act").
It was further held that an application filed under Section 7 of the IBC creates an erga omnes effect or involves third party rights only after it has been admitted by the Adjudicating Authority, however, before its admission, there is no embargo on the power of the court to decide on an application filed under Section 11 of the Arbitration Act for the appointment of an Arbitrator. Also, there is no requirement for the defendant to necessarily file an application under Section 8 of the Arbitration Act before taking recourse to the remedy available under Section 11 of the Arbitration Act. The order was passed on 25.04.2022.
National Company Law Appellate Tribunal
Time Period Under Regulation 35A Is Directory And Not Mandatory: NCLAT, Delhi
Case Title: Aditya Kumar Tibrewal v Om Prakash Pandey, Company Appeal (AT) Insolvency No. 583 of 2021.
The National Company Law Appellate Tribunal (NCLAT) principal bench comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that time period prescribed under Regulation 35A of the IBBI (CIRP) Regulations (CIRP Regulations) is directory in nature and not mandatory. Any action taken by the Resolution Professional beyond the time prescribed under Regulation 35A of the CIRP Regulations cannot be held to be non-est or void only on the ground that it is beyond the period prescribed under Regulation 35A of the CIRP Regulations.
Case title: CFM Asset Reconstruction Pvt. Ltd. v SS Natural Resources Pvt. Ltd. & Anr., Company Appeal (AT) (Insolvency) No. 396 of 2022.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has upheld the order dated 06.04.2022 passed by NCLT Kolkata Bench whereby it was held that Corporate Debtor cannot be sent into liquidation just because liquidation value is more than the value of the Resolution Plan. It was reiterated that primary focus of the Insolvency and Bankruptcy Code, 2016 is to ensure revival and continuance of the Corporate Debtor. The order was passed on 19.04.2022.
Case Title: Aditya Kumar Tibrewal v Om Prakash Pandey, Company Appeal (AT) Insolvency No. 583/2021.
National Company Law Appellate Tribunal (NCLAT) Principal Bench comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that the look back period prescribed under Section 46 of Insolvency & Bankruptcy Code, 2016 ("IBC") does not apply to transactions under Section 49 and 66 of the IBC. The Bench further observed that applications questioning the transactions covered by Section 49 and 66 of the IBC are not to be rejected on the ground that Application has been filed beyond the period prescribed under Section 46 of the IBC. The order was passed on 06.04.2022.
Territorial Jurisdiction Of NCLT Cannot Be Taken Away By Agreement Between The Parties: NCLAT Delhi
Case Title: Anil Kumar Malhotra v M/s Mahindra & Mahindra Financial Services Ltd., Company Appeal (AT) (Insolvency) No. 415 of 2022.
The National Company Law Appellate Tribunal (NCLAT) Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that the territorial jurisdiction of NCLT to decide case under Insolvency and Bankruptcy Code, 2016 ("IBC") cannot be taken away by the agreement between the parties. Relying on the provision of Section 60(1) of the IBC, the Bench held that the adjudicating authority in relations to insolvency resolution shall be the NCLT having the territorial jurisdiction over the place where the registered office of corporate person is located.
Interest Free Security Deposit Is An Operational Debt: NCLAT Delhi
Case title: Vibrus Homes Pvt. Ltd. v Ashimara Housing Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 80 of 2022.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that an interest free security deposit towards advance license fee will qualifies as an operational debt under the Insolvency & Bankruptcy Code, 2016. The Bench observed that "In view of the payment made was initially towards the advance license fee it was an operational debt, the Adjudicating Authority has rightly admitted the application under Section 9."
Case Title: Rajesh Kedia v Phoenix ARC Private Limited, Company Appeal (AT) (Insolvency) No. 996 of 2021.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), while adjudicating an appeal has held that the quantum of debt is not be considered at the stage of admission of a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"). The Bench opined that it is not within their domain to decide the 'amount of debt' at the stage of admission of an application under Section 7 of IBC. It was further observed that the Appellant's contention that the debt amount is exaggerated cannot be a ground for rejection of an application under Section 7 of the IBC. The only requirement for admission is that the minimum outstanding debt should be more than the threshold amount provided for under the IBC.
Case Title: M/s Jagbasera Infratech Private Ltd. v Rawal Variety Construction Ltd., Company Appeal (AT) (Ins) No.150 of 2019.
The National Company Law Appellate Tribunal ("NCLAT"), New Delhi Bench, comprising of Justice Anant Bijay Singh (Judicial Member) and Ms. Shreesha Merla (Technical Member), has held that the amount invested in a Joint Venture project in the capacity as a 'Promoter' and 'Investor' does not fall within the definition of 'Financial Debt' under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 ("IBC"). A profit share owner, who in the event of the success of the project would receive the residual gain, the amount invested by him in the land cannot be said to be a 'Financial Debt' as defined under Section 5(8) of the IBC. The order was passed on 04.04.2022.
Fresh Resolution Plan Cannot Be Considered By Committee Of Creditors: NCLAT Delhi
Case Detail: Steel Strips Ltd v Avil Menezes, CA (AT)(Ins.) No. 89/2022.
National Company Law Appellate Tribunal ("NCLAT"), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) & Ms. Shreesha Merla (Technical Member), has held that a fresh resolution plan cannot be considered by a Committee of Creditors ("CoC") once it has already approved a resolution plan. The NCLAT Bench held that the finality has been attached to the Resolution Plan of the Steel Strips Ltd. which was approved by the CoC, and such finality cannot be taken away by the NCLT. It was further observed that late and unsolicited bids by Resolution Applicants, after the original bidder becomes public upon passage of the deadline for submission of the plan, is a deviation of the original objective and timeline under the IBC.
Amount Given As 'Share Application Money' Is Not Covered Under Financial Debt: NCLAT Delhi
Case Title: Pramod Sharma v Karanaya HeartCare Pvt. Ltd., Comp. App. (AT) (Ins.) No. 426 of 2022.
The National Company Law Appellate Tribunal ("NCLAT"), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that money given as 'Share Application Money' cannot be treated as a financial debt in order to initiate Corporate Insolvency Resolution Process ("CIRP") under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"). The order was passed on 21.04.2022. The NCLAT Bench observed that admittedly the amount was given by the Appellant as a 'Share Application Money' on which no share was allotted and afterwards the principal amount was refunded by the Respondent under some settlement. The Bench dismissed the appeal and upheld the order passed by the NCLT Delhi, wherein it was held that the share application money does not fall under Section 5(8) of the IBC as it is not "a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money", since no debt was disbursed by the Appellant to the Respondent and no time value has been attached with the Share Application money.
Nil Payment To Operational Creditors Is Permissible Under The Resolution Plan: NCLAT Chennai
Case title: Genus Security and Allied Service versus Mr. Shivadutt Bannanje & Anr., CA (AT)(CH)(Ins) No. 110/2021.
The National Company Law Appellate Tribunal ("NCLAT"), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Shri. Kanthi Narahari (Technical Member), has held that nil payment to Operational Creditors is permissible under the Resolution Plan if the liquidation value is less than the admitted claims of the Corporate Debtor. It was further observed that question of discrimination will only arise when some of the Operational Creditors were being paid under the resolution plan, to the exclusion of other Operational Creditors, which was not the case here. The Bench held that the Resolution Plan, which proposed nil payment for the operational Creditors, suffered from no infirmity and illegality as it was approved by a majority vote of 95.07% of the Committee of Creditors ("CoC") and the commercial wisdom of the CoC cannot be interfered with by the NCLT or NCLAT. Accordingly, the Resolution Plan was held to be binding on all stakeholders including the Operational Creditors. The judgment was passed on 07.04.2022.
NCLAT Delhi Stays The Constitution Of Committee Of Creditors Of Supertech Limited
Case Title: Ram Kishor Arora Suspended Director of Supertech Ltd. v Union Bank of India & Anr., Comp. App. (AT) (Ins) No. 406 of 2022.
The NCLAT Principal Bench comprising of Justice Ashok Bhushan, Dr. Alok Srivastava (Member Technical) and Ms. Shreesha Meerla (Member Technical) stayed the constitution of committee of creditors and adjourned the appeal preferred by suspended director of Supertech Limited against the order dated 25.03.2022 of NCLT New Delhi which initiated the Corporate Insolvency Resolution Process ("CIRP") against Supertech Limited to 19.04.2022.
Pendency Of Execution Proceedings No Bar To Section 9 Petition: NCLAT
Case Title: Mukul Agarwal vs Royale Resinex Pvt. Ltd & Anr., Company Appeal (AT) (Insolvency) No. 777 of 2020.
The NCLAT Principal bench comprising of Justice Ashok Bhushan and Dr Alok Srivastava held that the pendency of an execution petition pending before the Civil Court does not bar the operational creditor from filing a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016. The order was passed on 30.03.2022.
Case title: Sharavan Kumar Vishnoi v Upma Jaiswal & Anr., Comp. App. (AT) (Ins.) No. 371 of 2022.
The National Company Law Appellate Tribunal (NCLAT), Delhi Bench, comprising of Justice Ashok Bhushan, Dr. Alok Srivastava and Ms. Shreesha Merla, has held that the Resolution Professional is not required to take a decision regarding the ineligibility of the Resolution Applicant under Section 29A of the Insolvency & Bankruptcy Code, 2016. The Resolution Professional can give his opinion with regard to each Resolution Applicants and further steps are to be taken for the Committee of Creditors as per the direction issued by the Adjudicating Authority. The order was passed on 05.04.2022.
Resolution Professional Is Not Entitled To Fees During Stay On Insolvency Proceedings: NCLAT
Case Title: IndusInd Bank Ltd. v Mr. Rajendra K Bhuta, Company Appeal (AT) (Insolvency) No. 177 of 2022.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Ms. Shreesha Merla (Technical Member), has held that the Resolution Professional is not entitled for any professional fees during the period of stay on the Corporate Insolvency Resolution Process ("CIRP") of the Corporate Debtor. The order was passed on 26.04.2022
Case Title: Mr. Aashish Kadam & Anr. v Nagpur Nagarik Sahakari Bank Ltd. & Anr., Comp. App. (AT) (Ins.) No. 355 of 2022.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that if a credit facility agreement is unstamped, then petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") can be admitted based on other material on the record which prove the existence of a financial debt. The Bench observed that the present case is a case of mortgage by deposit of title deed. Therefore, even if the Facility Agreement was not stamped, there were other materials on the record to prove the existence of a financial debt owed by the Appellant. The Bench dismissed the appeal and upheld the order of the Adjudicating Authority wherein CIRP was initiated. The order was passed on 21.04.2022.
Case Title: Ramesh Chander Agarwala v State Bank of India & Anr., Company Appeal (AT) (Insolvency) No. 230 of 2022.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Technical Member) and Ms. Shreesha Merla (Technical Member), has held that the Resolution Professional can submit an additional report under Section 99 of the Insolvency & Bankruptcy Code, 2016 ("IBC"). Personal Guarantors of the Corporate Debtor had filed an appeal under Section 61 of the IBC before NCLAT against the order of the NCLT wherein a Resolution Professional was appointed without furnishing any limited notice to the Personal Guarantors in terms of Para 44 of the judgment of NCLAT in the case of Ravi Ajit Kulkarni Vs. State Bank of India.
NCLAT observed that though it limited notice was not issued, but subsequently the Personal Guarantors had appeared before the Adjudicating Authority. Therefore, in the interest of justice, NCLAT permitted the Personal Guarantors to submit a representation to the Resolution Professional and subsequently, the Resolution Professional can submit an additional report in continuation of his first report and the Adjudicating Authority will consider both the report before taking any decision under Section 100 of the Code. The order was passed on 22.04.2022.
Case title: ICICI Bank v OPTO Circuits India Limited, Company Appeal (AT) (CH) (Insolvency) No. 146 of 2021.
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising of Justice M Venugopal and Mr. Kanthi Narahari, has held that Corporate Insolvency Resolution Process (CIRP) can be revived/resumed in case of failure of settlement agreement between the parties.
ICICI Bank had filed an appeal before NCLAT under Section 61 of the Insolvency & Bankruptcy Code, 2016 ("IBC") against the order dated 17.08.2020 of NCLT Bengaluru, wherein it had allowed the withdrawal of IBC petition but instead of giving liberty to revive the CIRP, it granted liberty to file a fresh petition under IBC against OPTO Circuits (India) limited. NCLAT modified the Impugned Order and granted liberty to ICICI Bank to seek revival/restoration of CIRP in case of non-compliance of the settlement agreement. The order was passed on 28.04.2022.
National Company Law Tribunal
NCLT Delhi Permits Centre To Take Over Delhi Gymkhana Club
Case Title: Union of India v Delhi Gymkhana Club & Ors., C.P. 71/241-242/PB/2020.
The National Company Law Tribunal ("NCLT"), Principal Bench comprising of Justice R Sudhakar and Narendra Kumar Bhola, has allowed the petition filed under Section 241-242 of the Companies Act, 2013 by Union of India against the Delhi Gymkhana Club and allowed the Govt. to take over the control of the Delhi Gymkhana Club by nominating Fifteen (15) persons to be appointed as the directors of the Delhi Gymkhana Club who will manage the affairs of the Company. The NCLT found that the club is generating no income from any sports activities which is the primary objective of the club as per its memorandum of Association. It also observed that the Gymkhana Club is taking deposit form the outsiders in violation of the provisions of the Companies Act, 2013. The order was passed on 01.04.2022.
NCLT Delhi Declares Logix City Developers Insolvent And Appoints IRP
Case Title: Colliers international (India) property services Pvt. Ltd. Vs Logix city developers private limited, IB 883/ND/2020
The National Company Law Tribunal ("NCLT"), New Delhi Bench, has declared Logix City Developers Private Limited as insolvent and has initiated Corporate Insolvency Resolution Process ("CIRP") against it. The NCLT Bench observed that the two requirements for admission of Section 9 of the Insolvency and Bankruptcy Code, 2016 have been fulfilled as there is a default in terms of a debt and no preexisting dispute pertaining to it. The order was passed on 22.03.2022.
NCLT Bengaluru Dismisses Insolvency Petition Against Café Coffee Day
Case Title: M/s Cooperative Rabobank U.A v Coffee Day Global Limited, CP (IB) No. 19/BB/2021.
The National Company Law Tribunal (NCLT), Bengaluru Bench, comprising of Shri Ajay Kumar Vatsavayi ( Judicial Member) and Shri Manoj Kumar Dubey ( Technical Member) has dismissed the insolvency petition filed against the parent company of Cafe Coffee Day namely Coffee Day Global Limited by Cooperative Rabobank U.A. ("Rabobank"). NCLT has observed that other lenders of the Coffee Day initiated the resolution process of Coffee Day under RBI's circular and Rabobank has not agreed to give a formal no dues certificate to release the charge over the vending machine vertical of Coffee Day. The correspondence between the lenders clearly established that Coffee Day suffered because of COVID-19 and sudden demise of its chairman and since then Coffee Day is taking bona fide and sincere efforts to restructure its debts. The order was passed on 29.03.2022.
Case Title: Ramsarup Industries Limited, CP (IB) No.349/KB/2017.
The NCLT Kolkata Bench comprising Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member), while deciding interim applications in the matter of Ramsarup Industries Ltd., has held that just because the liquidation value is being projected higher than the value of the resolution plan, the Corporate Debtor cannot be sent into liquidation for this reason alone. The object of the IBC is to put the Corporate Debtor back on its feet for the larger benefit of all the stakeholders, not just the creditors. The order was passed on 07.04.2022.
Case Title: ICICI Prudential Venture Capital Fund Real Estate Scheme I, through its Investment Manager ICICI Prudential Asset Management Company Ltd. v M/s Anand Divine Developers Pvt. Ltd., (C.P. No. IB 1101 (PB)/2020).
The National Company Law Tribunal, Principal Bench, comprising of Shri Ramalingam Sudhakar (President) and Shri Avinash Kumar Srivastava (Technical Member), has admitted a petition under Section 7 of Insolvency and Bankruptcy Code, 2016 ("IBC") against M/s Anand Divine Developers Pvt. Ltd. and initiated the Corporate Insolvency Resolution Process ("CIRP") vide an order dated 25.03.2022. ATS Infrastructure Limited is the promoter of M/s Anand Divine Developers Pvt. Ltd.
Case title: Bank of Baroda v Ms. Divya Jalan, C.P. (IB) - 363/2021.
The National Company Law Tribunal ("NCLT"), Kolkata Bench Consisting of Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member) while dismissing an application filed by the Bank of Baroda (Financial Creditor), held that the application is not maintainable against legal heirs of the Personal Guarantor under the IBC. As per regulation 3(1)(a)(e) of 'Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019', a personal guarantor to a Corporate Debtor is a person against whom guarantee has been invoked and there is outstanding dues left, partly or fully. The definition does not include the 'legal heirs'.
A circular has been issued by the National Company Law Tribunal ("NCLT"), Delhi, on 07.04.2022, in view of Rule 28 (2) of NCLT Rules, 2016. The circular states on scrutiny, if an Application is found to be defective, after notice to the party, the same shall be returned for compliance. If the defects are not complied within 7 days, the Registrar may pass appropriate orders. This notice was issued since there was a failure to remove the defects raised by the registry and to comply with the direction regarding the list of 'Common Objections' published in the website of NCLT dated 17.3.2022, 25.3.2022 and 04.04.2022.
Case title: Bank of India v Amrit Fresh Pvt. Ltd., C.P. (IB) - 263/2018.
The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri V K Rajasekhar (Judicial Member) and Shri Balraj Joshi (Technical Member) held that an application for preferential transactions cannot be pursued either by the erstwhile Resolution Professional ("RP") or the new Management of the Corporate Debtor after the approval of the Resolution Plan by NCLT. The Bench held that it is incumbent upon the RP to adhere to Section 43 of the Insolvency and Bankruptcy Code, 2016 read with Regulation 35A of the IBBI (Insolvency Resolution Process for the Corporate Debtor Persons) Regulations, 2016, which mandates that the RP has to form an opinion whether the Corporate Debtor has been subjected to preferential transaction within or on 75th day of the Corporate Insolvency Resolution Process ("CIRP") commencement date. Thereafter, the RP has to make a determination and file an application before the 135th day.
Amount Disbursed By NBFC Upon Oral Agreement Not Covered In Financial Debt: NCLT Kolkata
Case title: Narendra Promoters & Fincon Private Limited v Vinline Engineering Private Limited, CP (IB) No.749/KB/2020.
The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member) while deciding a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), has held that a disbursement made by a Non Banking Financial Institution ("NBFC") over an oral agreement cannot be construed as the existence of a financial debt, when there is nothing on record to show that it was disbursed as a loan. The petition was dismissed by the Bench vide an order dated 23.02.2022.
The Bench placed reliance on the RBI guidelines on Fair Practices Code for NBFCs, dated 18.02.2013, wherein it has been stated that the NBFCs should convey in writing to the borrower the amount of loan sanctioned, along with the terms and conditions. It was held that as RBI's circulars have statutory force, hence, it was mandatory on the part of Financial Creditor, being an NBFC, to keep the terms and conditions recorded in writing.
CIRP Initiated Against National Steel And Agro Industries Ltd.: NCLT Mumbai
Case title: JM Financial Asset Reconstruction Co Ltd. v National Steel & Agro Industries Ltd., CP (IB) 2067/MB/2019.
The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Justice P.N. Deshmukh (Judicial Member) and Shri K.K. Vohra (Technical Member), has admitted a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") against National Steel & Agro Industries Ltd. and initiated Corporate Insolvency Resolution Process ("CIRP"), vide an order dated 11.04.2022. The NCLT Bench observed that the Financial Creditor had established that the Credit facilities were sanctioned as well as disbursed to the Corporate Debtor, and that the Corporate Debtor had defaulted in payment of the debt. Accordingly, the two essential qualifications, i.e. existence of 'debt' and 'default', for admission of a petition under Section 7 of the IBC were fulfilled.
Notice Issued To Siti Networks Ltd. In Section 7 IBC Petition Filed By HDFC Ltd.: NCLT Mumbai
Case title: Housing Development Finance Corporation limited v SITI Networks Limited, C.P. (IB)/414(MB) 2022.
The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Smt. Suchitra Kanuparthi (Judicial Member) and Smt. Anuradha Sanjay Bhatia (Technical Member), has issued notice to SITI Networks Ltd. in the matter of Housing Development Finance Corporation Limited v SITI Networks Limited., vide an order dated 30.03.2022. Housing Development Finance Corporation Ltd. ("HDFC") had filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against SITI Networks Ltd., for an alleged default of approximately Rs. 296 Crores in respect of the financial facility granted by HDFC. The matter was heard by the NCLT, Mumbai Bench on 30.03.2022 and accordingly, notice was issued to SITI Networks Ltd. with the liberty to file a reply.
CIRP Can Be Initiated Based On An Unchallenged Arbitral Award: NCLT Kolkata
Case Title: Viom Infra Ventures Limited v Bahula Infotech Private Limited, C.P (IB) No. 197/KB/2021.
The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member), while deciding a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), has held that Corporate Insolvency Resolution Process ("CIRP") can be initiated based on an Arbitral Award if the said Award has not been challenged. Accordingly, CIRP has been initiated against Bahula Infotech Pvt. Ltd. vide an order dated 18.04.2022. The NCLT Bench observed that the Corporate Debtor had neither raised any dispute with respect to the services of the Operational Creditor nor challenged the Arbitral Award by way of Section 34 petition under the Arbitration and Conciliation Act, 1996. Therefore, the debt is undisputed. The NCLT Bench also held that the CIRP cannot not be initiated on basis of Arbitral Award when:
- A counterclaim exceeding the claim awarded was rejected by the Arbitral Tribunal on merits, and such rejection is also a matter of challenge before the Courts; and
- A challenge had also been filed against the Arbitral Award.
Bank Of India Files Petition Under Section 7 Of IBC Against Future Retail Limited: NCLT Mumbai
The Bank of India has filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") before the National Company Law Tribunal ("NCLT"), Mumbai Bench, seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against Future Retail Limited. The matter has not been listed yet for its first hearing. A Framework Agreement was entered into between the Bank of India and Future Retail Limited, the petition has been filed over default of payments due under the said Agreement. The name of Mr. Vijaykumar Iyer has been proposed for the Interim Resolution Professional.
Case Title: Smarkworks Coworking Spaces Pvt. Ltd. v Turbot HQ India Pvt. Ltd., CP (IB) No. 181/CB (2020).
The National Company Law Tribunal ("NCLT"), Cuttack Bench, comprising of Shri P. Mohan Raj (Judicial Member) Shri Satya Ranjan Prasad (Technical Member), while adjudicating a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), has held that Corporate Insolvency Resolution Process ("CIRP") cannot be initiated based on undecided claims and/or unstamped and unregistered agreements, which otherwise require compulsory registration in law.
The Adjudicating Authority observed that liquidated damages will crystalize only after being adjudicated by a competent Civil Court and undecided claim cannot be used to bring an application for insolvency. It was further observed that as per Section 5(21) of the IBC, operational debt means debt due towards the supply of goods or service rendered, however, the Petitioner has claimed amount arising out of breach of contract, which does not come under the definition of 'Operational Debt' in IBC. The order was passed on 08.04.2022.
Case title: M/s Jammu and Kashmir Bank Ltd. v GVK Industries Ltd., CP (IB) No. 320/7/HDB/2020.
The National Company Law Tribunal ("NCLT"), Hyderabad Bench, comprising of Shri Bhaskara Pantula Mohan (Judicial Member) and Shri Veera Brahma Rao Arekapudi (Technical Member), while adjudicating a petition under Section 7 of the Insolvency and Bankruptcy Act, 2016 ("IBC"), has initiated Corporate Insolvency Resolution Process ("CIRP") against GVK Industries Ltd. ("Corporate Debtor") vide an order dated 21.04.2022. Mr. Mukesh Verma has been appointed as the Interim Resolution Professional.
Yes Bank Initiates Insolvency Proceeding Against Zee Learn Ltd, An Essel Group Company: NCLT Mumbai
Case Title: Yes Bank Ltd. v Zee Learn Ltd., C.P. (IB) 301/MB/2022.
The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Justice P.N. Deshmukh (Judicial Member) and Shri K.K. Vohra (Technical Member), has issued notice to Zee Learn Limited in a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"). The order was passed on 12.04.2022.
Zee Learn Ltd. is an Essel group company which operates in the education segment. The company owns a chain of K-12 schools such as Mount Litera Zee School, pre-school network called 'Kidzee' and Mount Litera World Preschool. Yes Bank Limited had sanctioned financial facility to Zee Learn Ltd. under which the current default as per the bank stands at Rs. 468 Crores.
Chairman Of Monitoring Committee Has Locus StandiT o File Application For Fresh CIRP: NCLT Kolkata
Case Title: Beni Gopal Singhi v EMC Limited, CP (IB) No.1237/KB/2018.
The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member), while adjudicating an interim application, has held that the Chairman of Monitoring Committee has the locus to file an application before the Adjudicating Authority to give a fresh lease of life to Corporate Insolvency Resolution Process ("CIRP").
The Adjudicating Authority held that under Section 33(3) of the IBC, in the event of contravention of the Resolution Plan, 'any person' other than the Corporate Debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order. If the Successful Resolution Applicant fails to implement the Plan within a stipulated time, it is the Monitoring Committee's duty to ensure that the interests of the stakeholders are safeguarded. Therefore, the Chairman of Monitoring Committee has locus standi to maintain the application, with or without a resolution to this effect being passed by the Monitoring Committee.
Case title: Beni Gopal Singhi v EMC Limited, CP (IB) No.1237/KB/2018.
The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri Rajasekhar V.K. (Judicial Member) and Shri Balraj Joshi (Technical Member), while adjudicating an interim application filed in Beni Gopal Singhi v EMC Ltd., has held that the affidavit filed by the Successful Resolution Applicant (incorporated in Cayman Islands) was impudent and seems to assume that the judicial authorities in India cannot understand anything beyond the limited territorial jurisdiction of India. Such affidavits are contempt of the authority of court and the Insolvency and Bankruptcy Code, 2016 ("IBC"). The Bench also proceeded against the tax haven based Successful Resolution Applicant ("SRA") under Section 74(3) of the Insolvency and Bankruptcy Code, 2016 ("IBC") for contravention of the approved Resolution Plan.
"The SRA has not exhibited any intention by taking some concrete steps that can instill some degree of confidence in the earnestness of the SRA. The SRA has taken the entire process for a ride, and nothing can really excuse this audacity. The attitude of the SRA really will tick every parameter that can be applied to satisfy the "knowing and wilful contravention" test laid down in section 74(3) of the Code on a reasonable construction."
"A strong message needs to go to the SRA that the majesty of law needs to be respected at all costs, and that Indian judicial processes cannot be taken for a ride like this."
The Adjudicating Authority disposed off the interim application by forfeiting the amount of Rs. 30 Crores paid by the SRA through invocation of Performance Bank Guarantee; proceeded against SRA and its concerned officers under Section 74(3) of IBC; and initiated fresh CIRP against the Corporate Debtor.
Insolvency Proceeding Initiated Against Andhra Cements Ltd., A Jaypee Group Company: NCLT, Amravati
Case title: M/s Pridhvi Asset Reconstruction and Securitisation Company Ltd. v M/s Andhra Cement Ltd., CP (IB) No. 37/7/AMR/2022.
The National Company Law Tribunal ("NCLT"), Amravati Bench, comprising of Justice Telaprolu Rajani (Judicial Member), while adjudicating a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), has initiated Corporate Insolvency Resolution Process ("CIRP") against Andhra Cement Ltd. The NCLT observed that there is an admission of debt and default and the reasons accorded by the Corporate Debtor cannot be considered within the IBC framework. Mr. Nirav Kirit Pujara has been appointed as the Interim Resolution Professional. The order was passed on 26.04.2022.
Insolvency and Bankruptcy Board of India
The Insolvency and Bankruptcy Board of India ("IBBI") had issued a Press Release on 08.04.2022 notifying the public that amendments have been made to Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 ("Voluntary Liquidation Regulations"). The amendments are as follows:
- The Liquidator shall prepare the list of stakeholders within 15 days from the last date for receipt of claims, where no claim from creditors has been received till the last date for receipt of claims.
- The Liquidator shall distribute the proceeds from realization within 30 days the receipt of the amount to the stakeholders.
- The Liquidator shall endeavour to complete the liquidation process of the corporate person within 270 days from the liquidation commencement date, where the creditors have approved the resolution under Section 59(3)(c) of IBC or Regulation 3(1)(c), and 90 days from the liquidation commencement date in all other cases.
IBBI Disciplinary Committee Restrains Insolvency Professional From Rendering Services For Two Years
Citation: IBBI/DC/91/2021
In a matter before the Disciplinary Committee of the IBBI, an Insolvency Professional, namely Mr. Manoj Kumar Singh, has been found to be dispensing his duties as an Interim Resolution Professional in contravention of the Insolvency and Bankruptcy Code, 2016 ("IBC") and its regulations. The Disciplinary Committee, vide an order dated 08.04.2022, has directed Mr. Singh to not seek or accept any process or assignment; or render any services under the IBC for a period of two years from the date when the said order comes into force.
The Committee had observed that Insolvency Professional ("IP") had failed to conduct the Corporate Insolvency Resolution Process ("CIRP") as per the provisions of the IBC and its Regulations, as no proper actions were taken by him to constitute the Committee of Creditors. The Committee held that the IP has acted in contravention to the provisions of Sections 17, 18, 20, 25, 208(2)(a) and (e) of the IBC, regulations 16B, 27, 35A, 36, 36A and 40A of CIRP Regulations, Regulation 7(2)(a) and (h) of the IP Regulations and clauses 1, 2, 10, 13 and 14 of the Code of Conduct specified in First Schedule of the IP Regulations.
Reliance Cancels Rs. 24,713 Crores Worth Of Deal With Future Group
Future Retail Limited ("FRL") is the flagship company of the Future Group of companies that operates popular retail chains such as Big Bazaar, Foodhall, Easyday Club, WH Smith et al. In August 2020, FRL became part of Rs. 24,713 Crores worth deal wherein Future Group had intended to sell nineteen of its companies operating in retail, wholesale, logistics and warehousing segments to Reliance Retail Ventures Ltd. ("RRVL"), a subsidiary of Reliance Industries Limited. All these companies were to consolidate into one entity named 'Future Enterprises Limited'. The National Company Law Tribunal, Mumbai Bench vide an order dated 28.02.2022 had permitted FRL to conduct its Shareholder's meeting. Accordingly, a Shareholder's meeting was convened by FRL from 20th April to 23rd April 2022 for seeking approval from its shareholders for its scheme of arrangement with Reliance. The shareholders and unsecured creditors have voted in favour of the deal but the secured creditors did not. Consequently, Reliance Industries Limited has cancelled the deal with Future Group on 23.04.2022.
