NCLT Kolkata: Filing Of Default Information With Information Utility Under Rule 20(1A) Of IBBI (UI) Regulations 2017 Is Not Mandatory

The National Company Law Tribunal ('NCLT') Kolkata comprising Smt. Bidisha Banerjee (Judicial Member) and Shri D. Arvind (Technical Member) held that the filing of default information with Information Utility in compliance with Rule 20(1A) of IBBI (Information Utilities) Regulations 2017 ('IBBI Regulations 2017') is not mandatory compliance. Background Facts: Avani Projects Infrastructure Ltd (Corporate Debtor) had entered into a Joint venture agreement ('JVA') with Anupriya Management Pvt. Ltd. (Respondent) for the development of real estate projects. State Bank of India ('SBI'), the Financial Creditor granted various credit facilities to the Corporate Debtor since 2013 of Rs. 67 crores with the Respondent as the Corporate Guarantor. Defaults were made by the Corporate Debtor leading to its account being classified as Non-Performing Assets ('NPA') on 28.10.2015. Another Financial Creditor, Devi Trading & Holding Ltd. application of the Corporate Insolvency Resolution Process ('CIRP') of the Corporate Debtor was admitted on 13.03.2019 SBI has filed the present application to initiate CIRP against the Respondent u/s 7 of Insolvency and Bankruptcy Code, 2016 ('IBC'). The total amount of debt default is Rs. 40.90 crores with the date of default as 30.11.2022. NCLT Verdict: The NCLT Kolkata admitted the CIRP application and held that the filing of default information with Information Utility in compliance with Rule 20(1A) of IBBI Regulations 2017 is not mandatory compliance. -The Tribunal took note of Rule 20(1A) of IBBI Regulations 2017 which is read as follows: “20. Acceptance and receipt of information. (1A) Before filing an application to initiate corporate insolvency resolution process under section 7 or 9, as the case may be, the creditor shall file the information of default, with the information utility and the information utility shall process the information for the purpose of issuing record of default in accordance with regulation 21.” It observed that compliance with Rule 20 (1A) of IBBI Regulations 2017 about non-filing of “default information” with information utility is not mandatory compliance. The default can be proved by the Financial Creditor through its records under Section 7(3) of IBC. Section 7 Initiation of corporate insolvency resolution process by financial creditor (3) The financial creditor shall, along with the application furnish-- (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as may be specified by the Board. Thus, the Financial Creditor shall, along with the application furnish the record of the default recorded with the information utility or such other record or evidence of default as may be specified. Further, as per Regulation 2A of CIRP Regulation, 2016, the financial creditor is allowed to produce certified copies of the entries in the relevant account in the banker's book as defined in clause (3) of Section 2 of the Bankers Book Evidence Act 189. Regulation 2A: Contributions to liquidation costs. (1) Where the committee of creditors did not approve a plan under sub-regulations (3) of regulation 39B of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the liquidator shall call upon the financial creditors, being financial institutions, to contribute the excess of the liquidation costs over the liquid assets of the corporate debtor, as estimated by him, in proportion to the financial debts owed to them by the corporate debtor. (2) The contributions made under the plan approved under sub-regulation (3) of regulation 39B of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 or contributions made under sub-regulation (1), as the case may be, shall be deposited in a designated escrow account to be opened and maintained in a scheduled bank, within seven days of the passing of the liquidation order. (3) The amount contributed under sub-regulation (2) shall be repayable with interest at bank rate referred to in section 49 of the Reserve Bank of India Act, 1934 (2 of 1934) as part of liquidation cost.] [Explanation.- It is hereby clarified that the requirements of this regulation shall apply to the liquidation processes commencing on or after the date of the commencement of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019.] In conclusion, NCLT observed that presently SBI, the Financial Creditor, has furnished the same and thus no reason or fault can be attributed to dismiss the CIRP application against the Respondent. Case Title: State Bank of India vs. ...

NCLT Kolkata: Filing Of Default Information With Information Utility Under Rule 20(1A) Of IBBI (UI) Regulations 2017 Is Not Mandatory

Sachika Vij

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