NCLT Has Discretion To Not Admit Financial Creditor's CIRP Application Even If Corporate Debtor Is In Default:Supreme Court

Case Title: Vidarbha Industries Power Ltd. vs Axis Bank Limited

Case No.: 2022 LiveLaw (SC) 587, CA 4633 OF 2021

The Supreme Court Bench comprising of Justices Indira Banerjee and JK Maheshwari has observed that it is not mandatory for the Adjudicating Authority to admit an application to initiate Corporate Insolvency Resolution Process even if a debt existed and the Corporate debtor is in default. However, such discretionary power cannot be exercised arbitrarily or capriciously.

"Ordinarily, the Adjudicating Authority (NCLT) would have to exercise its discretion to admit an application under Section 7 of the IBC of the IBC and initiate CIRP on satisfaction of the existence of a financial debt and default on the part of the Corporate Debtor in payment of the debt, unless there are good reasons not to admit the petition.. The Adjudicating Authority (NCLT) has to consider the grounds made out by the Corporate Debtor against admission, on its own merits. For example when admission is opposed on the ground of existence of an award or a decree in favour of the Corporate Debtor, and the Awarded/decretal amount exceeds the amount of the debt, the Adjudicating Authority would have to exercise its discretion under Section 7(5)(a) of the IBC to keep the admission of the application of the Financial Creditor in abeyance, unless there is good reason not to do so. The Adjudicating Authority may, for example, admit the application of the Financial Creditor, notwithstanding any award or decree, if the Award/Decretal amount is incapable of realisation. The example is only illustrative."

NCLAT

NCLAT Chennai Rejects Claim Of PF Department For Delay Of 936 Days

Case Title: The Regional Provident Fund Commissioner v Mr. Vasudevan

Case No.: Company Appeal (AT) (CH) (INS) No. 182 of 2022

The National Company Law Appellate Tribunal ("NCLAT"), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Shri Kanthi Narahari (Technical Member), has dismissed a claim filed by the Provident Fund Commissioner after a delay of 936 days and held that no indulgence or latitude can be shown for a Statutory Organization, since the law applies to all. The officials must act with as much as diligent as is expected from a Litigant.

The Bench opined that speed is the essence of IBC and time wasted or lost cannot be regained. The process of Liquidation is time bound, to be completed within one year in the teeth of IBC. "Undoubtedly, the Code is an inbuilt and self-contained one and the object of the I & B Code, 2016, is that, a time barred `Debt' cannot be resurrected or given a fresh tenure of life, as opined by this `Tribunal'."

NCLT

A Report Under Section 99 Of IBC Cannot Be Filed By Resolution Professional Without The Adjudicating Authority's Directions: NCLT Mumbai

Case Title: Bank of Baroda Limited v Mr. Pawan V Kikavat

Case No.: C.P.(IB)-140(MB)/2022.

The National Company Law Tribunal, Mumbai Bench, comprising of Shri H. V. Subba Rao (Judicial Member) Shri Chandra Bhan Singh (Technical Member), has directed the Resolution Professional to file a fresh a report under Section 99 of the Insolvency and Bankruptcy Code, 2016 ("IBC") for recommending approval or rejection of insolvency petition against the Personal Guarantor, which was previously filed by the Resolution Professional on its own accord, without there being any direction from the Adjudicating Authority. The Personal Guarantor had raised objections before the NCLT Bench that a report u/s 99 of the IBC cannot be filed until the Adjudicating Authority directs so.

Arbitrarily Rejection Of Resolution Plan Is Void, NCLT Allahabad Declares The COC's Action As Void

Case Title: Exim Scrips Dealers Pvt. Ltd v Rathi Graphic Technologies Limited

Case No.: CP (IB) NO.325/ALD/2019

The National Company Law Tribunal ("NCLT"), Allahabad Bench, comprising of Shri Rajasekhar V.K. (Judicial Member) and Shri Virendra Kumar Gupta (Technical Member), has held that principles of natural justice are applicable to proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). The Committee of Creditors (CoC) had declined to consider the revised resolution plan submitted by the resolution applicant for being submitted three days after the deadline and had rather given approval to another plan which had a lower value and was conditional in nature. The NCLT declared the action of CoC as void and directed to re-conduct the process of submission of resolution plan.

"It can be safely concluded that all actors/ institutions associated with the conduct of CIRP are bound to follow the principles of natural justice which are enshrined in the Constitution of India as a public policy and have also been accepted by judicial forums as fundamental policy of Indian law, whether codified or not. These are to be applied necessarily in all administrative/statutory functions under IBC, 2016 unless excluded explicitly or by necessary implications."

NCLT Mumbai Directs Income Tax Authority To Refund TDS To Corporate Debtor Undergoing Liquidation

Case Title: Asset Reconstruction Company (India) Ltd. v Precision Fasteners Ltd.

Case No.: CP.(IB) 1339/MB/2017

The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Justice P. N. Deshmukh (Retd.) (Judicial Member) and Shri Shyam Babu Gautam (Technical Member), has directed the Deputy Commissioner of Income Tax to refund the TDS charged from the Corporate Debtor when the latter was under liquidation.

The liquidator had filed an application under Section 60(5) of the IBC against Deputy Commissioner of Income Tax, Mumbai, seeking a direction to refund Tax Deduction at Source (TDS) aggregating to Rs. 93,81,464/- to the Corporate Debtor. The TDS amount was charged from the Corporate Debtor after the order of liquidation had been passed. The dues of the statutory authorities, including the Income Tax Department, are considered operational debt under IBC and are paid as per the waterfall mechanism under Section 53 of the IBC. NCLAT has previously held that a company under liquidation has no liability to fulfill income tax obligations.

NCLT Ahmedabad Denies Approval Of Resolution Plan For Being Unimplementable

Case Title: IFCI Ltd. v Anil Mega Food Park Pvt. Ltd.

Case No.: CP(IB) 287 of 2019

The National Company Law Tribunal ("NCLT"), Ahmedabad Bench, comprising of Justice Madan B. Gosavi (Judicial Member) and Shri Kaushalendra Kumar Singh (Technical Member), has declined to approve the Resolution Plan submitted by M2K Developers Pvt. Ltd. for Anil Mega Food Park Pvt. Ltd., for not being implementable.

The Bench observed that the Resolution Professional was aware regarding the landlocked status of the Corporate Debtor's unit but tried to portray in the Information Memorandum that an approach road can be made available to the Prospective Resolution Applicant. Accordingly, the SRA's Resolution Plan was based on the condition that it can only be implemented if an approach road is provided by the Resolution Professional/CoC leading to the unit of the Corporate Debtor.

"If there is no approach road connecting to the main road and unit of the Corporate Debtor, we fail to understand how the Resolution Applicant will be able to run that unit…..It is not in dispute that due to the National Highway in between the main road and unit of the Corporate Debtor, there exists no approach road. It is not possible for the RP, and the CoC to make available such an approach road leading to the unit of the Corporate Debtor which the Resolution Applicant is demanding through the Resolution Plan as approved by the CoC."

Guarantor Cannot Enjoy 'Right Of Subrogation' Even After CIRP Against Principal Debtor Gets Concluded: NCLT Hyderabad

Case Title: State Bank of India v Shri. Ghanshyam Surajbali Kurmi

Case No.: CP (IB) No. 297/95 of IBC/HDB/2021

The National Company Law Tribunal ("NCLT"), Hyderabad Bench, comprising of Dr. N. Venkata Ramakrishna Badarinath (Judicial Member) Shri Veera Brahma Rao Arekapudi (Technical Member), has held that a guarantor cannot enjoy a right of subrogation even after the Corporate Insolvency Resolution Process ("CIRP") of the Principal Debtor gets concluded. There is no bar on the Financial Creditor to initiate insolvency process against the Guarantor after conclusion of CIRP of the Principal Debtor. It was observed that as per Section 134 of the Indian Contract Act, 1872, a guarantor is discharged of its liability towards the creditor only if the creditor on its own instance discharges the principal debtor through voluntary act of the creditor and not due to operation of law.

"Therefore, we are also of the view that conclusion of Corporate Insolvency Resolution Plan does not bar Financial Creditor against Guarantor, and Financial Creditor can always approach this Adjudicating Authority as envisaged under the Code."

NCLT Hyderabad Initiates Insolvency Process Against Trident Sugars LTD.

Case Title: NSL Krishnaveni Sugars Ltd v Trident Sugars Limited

Case No.: CP (IB) No. 331/9/HDB/2020

The National Company Law Tribunal ("NCLT"), Hyderabad Bench, comprising of Dr. Venkata Ramakrishna Badarinath Nandula (Judicial Member) and Shri Veera Brahma Rao Arekapudi (Technical Member), has initiated Corporate Insolvency Resolution Process ("CIRP") against Trident Sugars Ltd. after observing that the Corporate Debtor had neither paid the balance amount nor raised any dispute in respect of the quantity or the amount at any point of time. Mr. Medi Yadaiah has been appointed as the Interim Resolution Professional (IRP).

NCLT Mumbai Initiates Insolvency Proceedings Against Sahara Hospitality, Owner Of Hotel Sahara Star

Case Title : Delta Electro Mechanical Private Limited vs Sahara Hospitality Limited

Case No.  CP (IB) No.2430/2018

The National Company Law Tribunal's (NCLT) Mumbai bench has initiated insolvency proceedings against Sahara Hospitality Limited, that owns Hotel Sahara Star, for an alleged default of around Rs 50 crore. The NCLT has appointed Mamta Binani as the Interim-Resolution Professional to run the company's day-to-day affairs, as the company's four directors have been suspended.