IBC Cases Monthly Round Up: August 2022

Supreme Court Entries In Book Of Accounts/Balance Sheet Of Corporate Debtor Can Be Treated As Acknowledgment Of Liability Of Debt Payable To Financial Creditor: SupremeCourt Case Title: Asset Reconstruction Company (India) Limited v Tulip Star Hotels Limited Case No.: 2022 LiveLaw (SC) 648, CA 84-85 OF 2020 The Supreme Court Bench comprising of Justice Indira Banerjee and Justice JK Maheshwari, while adjudicating a petition has observed that the entries in Books of Account/Balance sheet of a company can be treated as acknowledgement of liability in respect of debt payable to a financial creditor. "To sum up, in our considered opinion an application under Section 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years." Term Of Future NCLT Members Should Be 5 Years, Supreme Court Tells Centre While Refusing To Extend 3 Yr Term Of Those Appointed In 2019 Case Title: National Company Law Tribunal Bar Association v Union of India Case No. W.P.(C) No. 180/2022 The Supreme Court Bench comprising of Justice D.Y. Chandrachud and Justice Sudhanshu Dhulia, turned down a plea seeking modification of the tenure of members of National Company Law Tribunal (NCLT) appointed pursuant to the notification dated 20.09.2019 issued by the Ministry of Corporate Affairs, from 3 years to 5 years. It refused to extend tenure for the concerned 23 members, but clarified that while making appointments in future the Central Government would be bound by Section 413 of the Companies Act, 2013, which prescribes the tenure of the members of NCLT to be 5 years. The Apex Court was of the view that an administrative notification for appointment ought to be consistent with the statute. The issue of tenure of members of NCLT is not something that its Bar Association should be interested in. It indicated that the Bar Association should be concerned with the vacancies being filled up at the earliest so that there is no impediment in the justice delivery system. Considering the fact that the process to fill up the vacancies is going on, it refused to interfere and stall it in any manner. S.7(5)(b) IBC | Provision To Notify Financial Creditor Before Rejecting Claim Extends To Appeals Before NCLAT: Supreme Court Case Name: Kotak Mahindra Bank Limited v. Kew Precision Parts Private Limited & Ors. Case No.: Civil Appeal No. 2176 of 2020, 2022 LiveLaw (SC) 673 The Supreme Court Bench comprising of Justice Indira Banerjee and Justice J.K. Maheshwari has held that provision of Section 7(5)(b) of the Insolvency and Bankruptcy Code, 2016, which requires the Adjudicating Authority to notify the Financial Creditor before rejection of a claim, would be applicable to appeals as well, since appeal is the continuation of original proceedings. The Court held that NCLAT had erred in closing the CIRP proceedings without giving the bank an opportunity to explain if there was sufficient cause for the delay in approaching the NCLT. An appeal being the continuation of original proceedings, the bank ought to have been notified under Section 7(5)(b) of the IBC before its claim was rejected. If notified of the proposal to close the proceedings, the bank might have rectified the defects in its application under Section 7 by filing additional pleadings and/or documents. NCLAT CIRP Against Solvent, MSME Company Providing Employment Not Justified: NCLAT Delhi Case Title: M/s Agarwal Veneers v Fundtonic Service Pvt. Ltd. Case No.: Company Appeal (AT) (Ins) No. 968 of 2020 The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Justice Anant Bijay Singh (Judicial Member) and Ms. Shreesha Merla (Technical Member), has upheld the dismissal of a Section 9 petition on the grounds of the Corporate Debtor being a solvent company, operating as a 'going concern' and is also a MSME enterprise providing employment and generating revenue. It was observed that the Preamble of IBC describes its spirit and objective to be 'Reorganisation' and 'Insolvency Resolution', specifically omitting the word 'Recovery'. If IBC is purely used for the purpose of Debt Recovery, particularly when the amounts due are small, and the Company is a solvent entity and is a going concern, the question of 'Reorganising' or 'Resolution of the Company' does not arise. Liability Of Personal Guarantor Survives Even On Becoming Citizen Of A Foreign Country:NCLAT Delhi Case Title: Sudip Dutta v State Bank of India Case No.: Company Appeal (AT) (Insolvency) No. 807 of 2021 The National Company Law Appellate...

IBC Cases Monthly Round Up: August 2022

Pallavi Mishra

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