Weekly Digest Of IBC Cases: 23rd May To 29th May, 2022

NCLAT 1. NCLAT Urges Central Government And IBBI To Consider Legislative Change For Payment To Operational Creditor Under Resolution Plan Case Title: Damodar Valley Corporation v Dimension Steel and Alloys Case No.: Company Appeal (AT) (Insolvency) No. 62 of 2022 The National Company law Appellate Tribunal (NCLAT) bench comprising of Justice Ashok Bhushan and Ms. Shreesha Merla has urged the Central Government and the Insolvency and Bankruptcy Board of India (IBBI) to consider legislative change regarding the payment to operational creditors under the resolution plan. The Bench observed that: "We are consistently receiving the Plans, where Operational Creditors either not paid any amount towards their claim or paid negligible amount, sometime even less than 1%." The Bench noted that time has come to reconsider the payment mechanism to operational creditors under the Resolution plan and urged the Central Government and IBBI to find out if there is any ground to reconsider the legislative change towards payment to the operational creditors under the resolution plan. 2. Article 1 Of Limitation Act,1963 Will Not Apply To Proceedings Under Insolvency And Bankruptcy Code, 2016: NCLAT Case Title: S M Ghogbhai versus Schedulers Logistics India Pvt. Ltd Case No.: Company Appeal (AT) Insolvency No. 281 of 2022 The National Company Law Appellate Tribunal (NCLAT), Principal Bench. comprising of Justice Ashok Bhushan and Dr. Alok Srivastava has held that the Article 1 of Limitation Act, 1963 is not applicable to the Petition filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code (IBC). Reliance was placed on the case of BK Educational Services Pvt. Ltd. v. Parag Gupta and Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries wherein Supreme Court held that the period of limitation for filing an application under Section 7 or 9 of the Code is to be decided as per Article 137 of the Limitation Act. NCLAT further held that Article 1 of Limitation Act deals with "suits relation to accounts" and an application under Section 9 of the Code cannot be said to be a suit relating to accounts. 3. NCLAT Upholds Dismissal Of Section 7 Petition Filed By Hinduja Leyland Finance Ltd. During The Prohibited Period; Grants Liberty To Re-File With Corrected Documents Case Title: Hinduja Leyland Finance Ltd. v Fly Express Logistic Pvt. Ltd. Case No.: Company Appeal (AT) (Ins.) No. 553 of 2022. The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Ms. Shreesha Merla (Technical Member) and Mr. Naresh Salecha (Technical Member), while adjudicating an appeal has upheld that Corporate Insolvency Resolution Process ("CIRP") cannot be initiated over a default which had occurred in the period mentioned under Section 10A of the Insolvency and Bankruptcy Code, 2016 ("IBC"), i.e. between 25.03.2020 to 24.03.2021. The order was passed on 20.05.2022. NCLT 1. NCLT Delhi Initiates Insolvency Process Against National Textile Corporation Ltd., A Public Sector Enterprise Case Title: Hero Solar Energy Pvt. Ltd. v National Textile Corporation Ltd. Case No.: C.P. No. IB-452/ND/2020 The National Company Law Tribunal (NCLT), New Delhi Bench, comprising of Mr. Dharminder Singh (Judicial Member) and Ms. Sumita Purkaysatha (Technical Member), has initiated Corporate Insolvency Resolution Process ("CIRP") against National Textile Corporation Ltd., which is a Public Sector Enterprise under Ministry of Textiles, Government of India. The NCLT Bench observed that there is a claim which is due and payable and the Corporate Debtor had failed to prove existence of any 'pre-existing dispute' in respect of the default. The petition was admitted under Section 9 of IBC and CIRP was initiated against the Corporate Debtor. Mr. Amit Talwar has been appointed as the Interim Resolution Professional and moratorium has been declared. The order was passed on 27.05.2022. 2. CIRP Cannot Be Initiated Solely For Interest Amount, If The Principal Amount Is Discharged: NCLT Delhi Case Title: Saraf Chits Private Limited & Anr. v KAD Housing Private Limited Case No.: (IB)-255(ND)/2021. The National Company Law Tribunal ("NCLT"), New Delhi Bench, comprising of Shri Abni Ranjan Kumar Sinha (Judicial Member) and Shri L.N. Gupta (Technical Member), has held that Corporate Insolvency Resolution Process ("CIRP") cannot be initiated against a Corporate Debtor solely on the basis of the un-paid amount of interest, where the entire principal amount has already been discharged by the Corporate Debtor. The Bench observed that interest is not included in the term "debt" per se under IBC. Rather, "interest" can be claimed as "financial debt" only if such debt exists. The Bench opined that the "interest" component alone cannot be claimed or pursued in...

Weekly Digest Of IBC Cases: 23rd May To 29th May, 2022

Pallavi Mishra

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