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IBC Cases Weekly Round-Up: 19 September To 25 September, 2022

Pallavi Mishra
26 Sep 2022 4:17 PM GMT
IBC Cases Weekly Round-Up: 19 September To 25 September, 2022
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Supreme Court IBC - Approval Of A Resolution In Respect Of One Borrower Cannot Discharge A Co-Borrower: Supreme Court Case Title: Maitreya Doshi vs Anand Rathi Global Finance Ltd Case No.: 2022 LiveLaw (SC) 789, CA 6613 OF 2021 The Supreme Court Bench comprising of Justices Indira Banerjee and JK Maheshwari has held that approval of a resolution in respect of one borrower...

Supreme Court

IBC - Approval Of A Resolution In Respect Of One Borrower Cannot Discharge A Co-Borrower: Supreme Court

Case Title: Maitreya Doshi vs Anand Rathi Global Finance Ltd

Case No.: 2022 LiveLaw (SC) 789, CA 6613 OF 2021

The Supreme Court Bench comprising of Justices Indira Banerjee and JK Maheshwari has held that approval of a resolution in respect of one borrower cannot discharge a co-borrower.

The Bench observed that if there are two borrowers or if two corporate bodies fall within the ambit of corporate debtors, there is no reason why proceedings under Section 7 of the IBC cannot be initiated against both the Corporate Debtors. On a parity of reasoning, the approval of a resolution in respect of one borrower cannot certainly discharge a co-borrower. Needless to mention, the same amount cannot be realised from both the Corporate Debtors. If the dues are realised in part from one Corporate Debtor, the balance may be realised from the other Corporate Debtor being the co-borrower. However, once the claim of the Financial Creditor is discharged, there can be no question of recovery of the claim twice over.

IBC - No Bar To Withdraw Admitted CIRP Application Before Constitution Of Committee Of Creditors: Supreme Court

Case Title: Ashok G. Rajani vs Beacon Trusteeship Ltd.

Case No.: 2022 LiveLaw (SC) 790, CA 4911 OF 2021

The Supreme Court Bench comprising of of Justices Indira Banerjee and JK Maheshwari observed that there is no bar to withdrawal of an admitted CIRP application before constitution of Committee of Creditors. The Bench observed that settlement cannot be stifled before the constitution of the Committee of Creditors in anticipation of claims against the Corporate Debtor from third persons. The bench noted that Section 12A of the IBC enables the Adjudicating Authority to allow the withdrawal of an application admitted under Section 7 or Section 9 or Section 10, on an application made by the applicant with the approval of 90% voting shares of the Committee of Creditors in such a manner as may be specified.

"Section 12A of the IBC clearly permits withdrawal of an application under Section 7 of the IBC that has been admitted on an application made by the applicant. The question of approval of the Committee of Creditors by the requisite percentage of votes, can only arise after the Committee of Creditors is constituted. Before the Committee of Creditors is constituted, there is, in our view, no bar to withdrawal by the applicant of an application admitted under Section 7 of the IBC."

NCLAT

Payment Of TDS Towards Interest Payable Does Not Amount To Acknowledgment Of Debt: NCLAT Directs IBBI To Investigate Into Conduct Of RP

Case Title: P.M. Cold Store Pvt. Ltd. v. Goouksheer Farm Fresh Pvt. Ltd. & Ors.

Case No: Company Appeal (AT) (Insolvency) No. 615 of 2020

The National Company Law Appellate Tribunal ("NCLAT") Principal Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member), Mr. Kanthi Narahari and Dr. Alok Srivastava (Technical Members), has held that payment of TDS towards interest payable does not amount to acknowledgement in writing of the liability of the Corporate Debtor. The Bench directed the IBBI to investigate into the conduct of the Resolution Professional for violation of Regulation 13 of the CIRP Regulations, 2016.

Corporate Debtor Willing To Pay Full Amount, Financial Creditor Opposes, NCLAT Upholds Dismissal Of Section 7Petition

Case Title: Reliance Commercial Finance Limited v Darode Jog Builder Private Limited

Case No.: Company Appeal (AT) (Insolvency) No. 1005 of 2022

The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Justice M. Satyanarayana Murthy (Judicial Member) and Mr. Barun Mitra (Technical Member), has upheld the Adjudicating Authority's decision to not admit a petition under Section 7 of IBC, despite there being a debt and default. The Bench accorded the Corporate Debtor an opportunity to pay/settle the full amount of default despite the Financial Creditor's unwillingness to enter settlement.

"When the Corporate Debtor has complied to deposit the entire defaulted amount of the Financial Creditor as permitted by the Adjudicating Authority, no purpose and occasion shall survive to still proceed with the Insolvency Resolution of the Corporate Debtor."

NCLT

Moratorium Doesn't Apply On Property Unlawfully In Possession Of Corporate Debtor: NCLT Hyderabad

Case Title: State Bank of India v Meenakshi Energy Ltd.

Case No.: CP (IB) No. 184/7/HDB/2019

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 held that moratorium imposed under Section 14 of IBC is not applicable to properties which are in unlawful possession of the Corporate Debtor. The Bench observed that Corporate Debtor is in possession of the Disputed Land which it is not entitled to. Hence it is wrongful possession. The Corporate Debtor's right under Section 14 of IBC to not be dispossessed of property in its possession during moratorium, cannot be extended to possessions without right, wrongful or adverse.

Asian Hotels (West), Owner Of Hyatt Regency (Mumbai), Admitted Into Insolvency: NCLT Delhi

Case Title: JM Financial Asset Reconstruction Co. Ltd. v Asian Hotels (West) Ltd.

Case No.: C.P. (IB) No. 571 (PB)/2021

The National Company Law Tribunal ("NCLT"), New Delhi Bench, comprising of Shri Dharminder Singh (Judicial Member) and Shri Binod Kumar Sinha (Technical Member), has initiated Corporate Insolvency Resolution Process ("CIRP") against Asian Hotels (West) Ltd. over a default of Rs. 264,07,35,129/-. The Asian Hotels (West) Ltd. owns the five star hotels namely Hotel Hyatt Regency Mumbai and JW Marriott, New Delhi Aerocity (through its subsidiary). The Bench also held that an officer delegated with power, can claim to be an Authorized Representative for filing a Section 7 petition under IBC.

IBBI

RP And COC Can Request Resolution Plan For A Second Time; IBBI Notification

Notification No.: IBBI/2022-23/GN/REG093

The Insolvency and Bankruptcy Board of India ("IBBI") has amended the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations") for a fourth time and has notified the amendment on 16.09.2022.

The amendment enables the resolution professional (RP) and the Committee of creditors (CoC) to issue request for resolution plan a second time for sale of one or more of assets of the corporate debtor (CD) in cases where no resolution plan has been received for the corporate debtor as a whole. It enables for a resolution plan to include sale of one or more assets of CD to one or more successful resolution applicants submitting resolution plans for such assets and providing for appropriate treatment of the remaining assets.

COC To Function As Stakeholder's Consultation Committee For First 60 Days: IBBI Amends Liquidation Process Regulations

Notification No.: IBBI/2022-23/GN/REG095 and No. IBBI/2022-23/GN/REG094

The Insolvency and Bankruptcy Board of India ("IBBI") on 16.09.2022 has notified amendments to the IBBI (Voluntary Liquidation Process) Regulations, 2016 ("Voluntary Liquidation Regulations") and IBBI (Liquidation Process) Regulations, 2016 ("Liquidation Regulations") for a second time. These amended Regulations have come into force on 16.09.2022. The following amendments have been introduced:

  1. The Committee of Creditors (CoC) constituted during Corporate Insolvency Resolution Process (CIRP) shall function as Stakeholders Consultation Committee (SCC) in the first 60 days. After adjudication of claims and within 60 days of initiation of process, the SCC shall be reconstituted based upon admitted claims.
  2. SCC may even propose replacement of liquidator to the Adjudicating Authority (AA) and fix the fees of liquidator, if the CoC did not fix the same during CIRP.
  3. If any claim is not filed during liquidation process, then the amount of claim collated during CIRP shall be verified by the liquidator.
  4. Specific event-based timelines have been stipulated for auction process.
  5. Before filing of an application for dissolution or closure of the process, SCC shall advice the liquidator, the manner in which proceedings in respect of avoidance transactions or fraudulent or wrongful trading, shall be pursued after closure of liquidation proceedings.
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