Monthly Digest Of IBC Cases: October 2024

SUPREME COURT 'Breaches Discipline Of Law Laid Down In IBC' : Supreme Court Disapproves Of HC Deferring CIRP Under Article 226 Case Title: CoC of KSK Mahanadi Power Company Ltd. v. Uttar Pradesh Power Corporation Ltd. and Ors. Citation : 2024 LiveLaw (SC) 815 The Supreme Court recently took exception to the Telangana High Court ordering the deferring of the Corporate Insolvency Resolution Process in the exercise of powers under Article 226 of the Constitution. The Bench of Chief Justice of India DY Chandrachud , Justice J.B. Pardiwala and Justice Manoj Misra, held that the High Court was not justified in deferring the Corporate Insolvency Resolution Process (CIRP) when the main relief sought in the writ petition uto consolidate the CIRP of two companies was refused. Supreme Court Sets Aside NCLAT Order Which Closed Insolvency Process Against Byju's Based On Settlement With BCCI Case Details : GLAS TRUST COMPANY LLC Vs BYJU RAVEENDRAN | Diary No. - 35406/2024 Citation : 2024 LiveLaw (SC) 826 The Supreme Court today (October 23) set aside the order of the National Company Law Appellate Tribunal which closed the insolvency proceedings against ed-tech company Byju's (Think and Learn Pvt Ltd) accepting a settlement between it and the Board of Control for Cricket in India (BCCI) for about Rs 158 crores. The Court held that the NCLAT erred in allowing the withdrawal of the insolvency application by invoking its inherent powers under Rule 11 of the NCLAT Rules 2016. When there is a specific procedure provided for the withdrawal of insolvency applications, the NCLAT cannot invoke its inherent powers. IBC | No Compulsion To Specify Names Of Creditors In Balance Sheet, General Entry Acknowledging Debt Sufficient To Initiate CIRP : Supreme Court Case Title: VIDYASAGAR PRASAD VERSUS UCO BANK & ANR. Citation : 2024 LiveLaw (SC) 825 Observing that there's no compulsion for the companies to specify the names of every secured/unsecured creditor in their balance sheet, the Supreme Court dismissed the plea of a corporate debtor's suspended director against the initiation of Corporate Insolvency Resolution Process (“CIRP”). In other words, the bench comprising Justices PS Narasimha and Sandeep Mehta observed that when debt entries exist in the corporate debtor's balance sheet, the debtor could not deny its liability merely on the ground that there were no specific entries of the particular creditor in their balance sheet regarding the debt owed to that creditor. Inherent Powers Under Rule 11 of NCLT Rules Cannot Be Used To Circumvent Procedure To Withdraw CIRP Under S.12A IBC & R. 30A: Supreme Court Case Title : GLAS TRUST COMPANY LLC Vs BYJU RAVEENDRAN | Diary No. - 35406/2024 Citation : 2024 LiveLaw (SC) 826 The Supreme Court Bench led by CJI DY Chandrachud comprising Justices JB Pardiwala and Manoj Misra held that 'inherent powers' cannot be used to subvert legal provisions, which exhaustively provide for a procedure. To permit the NCLAT to circumvent this detailed procedure by invoking its inherent powers under Rule 11 would run contrary to the carefully crafted procedure for withdrawal. In the Impugned Judgement, the NCLAT does not provide any reasons for deviating from this procedure or the urgency to approve the settlement without following the procedure. HIGH COURT Negotiable Instruments Proceeding Under Section 138 Does Not Abate On Initiation Of Insolvency Proceeding: Himachal Pradesh High Court Case Title: Tushar Sharma v. State Bank of India Case Reference: Cr. MMO No. 924 of 2023 It was held that while section 14 of the IBC imposes a moratorium on all the proceedings against the corporate debtor once the corporate debtor is admitted into insolvency. However, this does not absolve the directors and signatories to the dishonoured cheque from their personal liability under section 138 of the Negotiable Instrument Act. The Supreme Court observed as under: “52 Thus, where the proceedings under Section 138 of the NI Act had already commenced and during the pendency the plan is approved or the company gets dissolved, the directors and the other accused cannot escape from their liability by citing its dissolution. What is dissolved is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act. They will have to continue to face the prosecution in view of the law laid down in Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661. Where the company continues to remain even at the end of the resolution process, the only consequence is that the erstwhile directors can no longer represent it”. Adjudicating Authority Decides Fairness And Reasonableness While Approving Resolution Plan, High Court Cannot- Delhi High Court Case Title: Gateway Investment Management Services Ltd. v. Reserve Bank of India and Ors. Citation:...

Monthly Digest Of IBC Cases: October 2024

Mohd Malik Chauhan

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