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IBC Cases Weekly Round-Up: 27 June To 3 July 2022

Pallavi Mishra
4 July 2022 6:00 AM GMT
IBC Cases Weekly Round-Up: 27 June To 3 July 2022
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NCLT

NCLT Kolkata Initiates Insolvency Process Against The Personal Guarantor Of Gontermann-Pipers(India) Ltd.

Case Title: UCO Bank v Vinod Kumar Mittal

Case No.: C.P.(IB)/24(KB)2021

The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri Rohit Kapoor (Judicial Member) and Shri Harish Chander Suri (Technical Member), has initiated Insolvency Resolution Process against Mr. Vinod Kumar Mittal, who is the Personal Guarantor to the loan sanctioned to Gontermann-Pipers (India) Limited by UCO Bank.

Incorporated in 1966, Gontermann-Pipers (India) Limited was a technical collaboration between Mr. H.K. Nathani of Calcutta and Gontermann-Peipers GmBH, Germany, the latter being a leading European manufacturer of rolling mill rolls since 1825. GPIL was a leading manufacturer of iron and steel rolls in India and is presently undergoing liquidation proceedings. Mr. Vinod Kumar Mittal is one of the Directors of GPIL and had furnished Personal Guarantee before UCO Bank in relation to the credit facilities availed by GPIL from the said Bank. When GPIL failed to repay the credit facilities, UCO Bank filed a petition under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 ("IBC") before the NCLT Kolkata, seeking initiation of Insolvency Resolution Process against Mr. Vinod Kumar Mittal, the Personal Guarantor in the concerned credit facilities. The NCLT Bench permitted initiation of insolvency process against the Personal Guarantor. The order was passed on 27.06.2022.

Under 'Right Of Subrogation' Guarantor Is Entitled To Initiate CIRP Against Principal Borrower: NCLT Kolkata

Case Title: Orbit Towers Pvt. Ltd. v Sampurna Suppliers Pvt. Ltd.

Case No.: C.P (IB) No. 2046/KB/2019

The National Company Law Tribunal ("NCLT"), Kolkata Bench, comprising of Shri Rohit Kapoor (Judicial Member) and Shri Harish Chander Suri (Technical Member), has held that if a Guarantor pays the debt on behalf of the Principal Borrower, then it steps into the shoes of the Creditor and can initiate Corporate Insolvency Resolution Process ("CIRP") against the Principal Borrower.

"Any agreement of guarantee between the Indian Bank and the Guarantor is sufficient for the purpose of bestowing all the rights of the Bank/creditor upon the Financial Creditor herein once the Financial Creditor has discharged all the liability of the Corporate Debtor towards Indian Bank. There may or may not be any agreement between the Financial Creditor and the Corporate Debtor. It does not make any difference at all. The Law is very clear that once the Guarantor/surety discharges the liability of the Principal borrower towards the creditor, all the rights of the Creditor to recover that money would automatically be transferred in favour of the surety/ Guarantor. This is exactly the right of subrogation". The order was passed on 27.06.2022.

Bank Of India V Future Retail: NCLT Mumbai Reserves Order On Amazon's Intervention Application

Case title: Bank of India v Future Retail Ltd.

Case No.: CP (IB) No. 527/MB/2022.

The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Justice P.N. Deshmukh (Judicial Member) and Shri Shyam Babu Gautam (Technical Member), has vide an order dated 27.06.2022 reserved the matter for orders on the intervention application.

Amazon has been opposing the insolvency plea filed by Bank of India. It has been argued by Amazon that Future Retail Ltd. (FRL) failed to honour the Emergency Arbitrator's Award passed in Singapore Arbitration proceedings in October 2020, whereby FRL was barred from taking any step to dispose of or encumber its assets or issuing any securities to secure any funding from a restricted party. Therefore, the lenders could not have entered into a Framework Agreement with FRL in breach of the said Award.

"IBC Does Not Protect The Interest Or Claim Of A Partner Against Another Partner Or The Firm": NCLT Mumbai

Case Title: Parul A Vora v Kavya Buildcon Private Limited

Case No.: CP (IB) 2832/MB/2019

The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Justice P. N. Deshmukh (Judicial Member) and Shri Kapal Kumar Vohra (Technical Member), has held that the Insolvency and Bankruptcy Code, 2016 ("IBC") does not protect the interest or claim of a Partner against another Partner or the Partnership Firm."The Petitioner may be entitled to the claims against the Respondent under any other law in force which may provide the legal recourse to the Financial Creditor." The order was passed on 27.06.2022.

Fifteen NCLT Members To Retire On 3rdJuly, NCLT Benches To Suffer From Shortage Of Members

The National Company Law Tribunal Benches across the country are set to undergo shortage of Members as fifteen Members have retired on 03.07.2022 and no extension has been granted to their tenure till now. The Ministry of Corporate Affairs ("MCA") vide a notification dated 20.09.2019 ("Notification") had appointed 23 NCLT Members for a term of 3 years or till the age of 65 years, whichever is earlier. However, Section 413 of the Companies Act, 2013 prescribes the term of the Members as 5 years. The Central Government had granted extension of tenure to eight out of the twenty-three Members appointed through the Notification, while the remaining Members are retiring on 03.07.2022. Till now the total strength of NCLT Members was forty-five, which will come down to thirty on 3rd July 2022. The Supreme Court has also declined to give any interim relief to the retiring Members. Several NCLT benches have been re-constituted with the remaining Members vide circulars dated 01.07.2022.

Sale Of Corporate Debtor As A 'Going Concern' Includes Both Assets And Liabilities: NCLT Mumbai

Case Title: Harsh Vinimay Pvt. Ltd. v Gajanan Industries Ltd.

Case No.: C.P. No. (IB) 2521/MB/2018

The National Company Law Tribunal, Mumbai Bench, comprising of Shri H.V. Subba Rao (Judicial Member) and Shri Chandra Bhan Singh (Technical Member), has held that when a Corporate Debtor is sold as a 'going concern', then such sale shall include both assets and liabilities and not merely assets sans liabilities.

NCLT Allahabad Bench Re-Constituted, Matters To Be Heard Through Video Conferencing

The National Company Law Tribunal, Allahabad Bench, has been re-constituted vide a Circular dated 01.07.2022, issued by NCLT as per Section 419(3) of the Companies Act, 2013. The new Bench shall comprise of:

  1. Shri Harnam Singh Thakur (Judicial Member)
  2. Shri Subrata Kumar Dash (Technical Member)

The reconstituted Bench shall first take up matters of the NCLT Chandigarh and then attend the matters of NCLT Allahabad. The matters are to be heard through Video Conferencing.

NCLT Kochi Bench Re-Constituted,Matters To Be Heard Through Video Conferencing

The National Company Law Tribunal, Kochi Bench, has been re-constituted vide a Circular dated 01.07.2022, issued by NCLT as per Section 419(3) of the Companies Act, 2013. The new Kochi Bench shall comprise of:

  1. Dr. Deepti Mukesh (Judicial Member)
  2. Shri Ajai Das Mehrotra (Technical Member)

The reconstituted Bench shall first take up matters of the NCLT Ahmedabad (Court No. 2) and then attend the matters of NCLT Kochi in the second half. The matters are to be heard through Video Conferencing.

NCLT Chennai Bench Re-Constituted, Matters To Be Heard Through Video Conferencing

The National Company Law Tribunal, Chennai Bench, has been re-constituted vide a Circular dated 01.07.2022, issued by NCLT as per Section 419(3) of the Companies Act, 2013. The new NCLT Chennai Bench shall comprise of:

NCLT Chennai Court Room No. 1 (Second Half)

  1. Justice (Retd.) S. Ramathilagam (Judicial Member)
  2. Shri Sameer Kakar (Technical Member)

NCLT Chennai Court Room No. 2 (First Half)

  1. Justice (Retd.) S. Ramathilagam (Judicial Member)
  2. Shri Sameer Kakar (Technical Member)

The reconstituted Bench shall take up matters through Video Conferencing

HIGH COURT

Cannot Invoke Article 226 If An Effective And Statutory Remedy Exists Before NCLAT: Madras High Court

Case Title: Sunku Vasundhara v State Bank of India

Case No.: W.P.Nos.14398 of 2022

The High Court of Madras Bench comprising of Justice T. Raja and Justice K. Kumaresh Babu, has held that when an effective and statutory remedy lies before the Appellate Authority i.e. National Company Law Appellate Tribunal (NCLAT), aggrieved parties cannot invoke Article 226 of the Constitution of India for relief. The order was passed on 15.06.2022.

The Petitioner had filed a Writ Petition under Article 226 of the Constitution of India before the High Court of Madras, seeking issuance of a Writ of Certiorari against an order passed by the National Company Law Tribunal ("NCLT"), Chennai Bench on 29.04.2022.

The High Court held that the Petitioner has an effective and statutory remedy before the Appellate Authority i.e. National Company Law Appellate Tribunal (NCLAT) and thus Article 226 of the Constitution of India cannot be invoked. An appeal should have been filed before the NCLAT and not the High Court.

IBC Proceedings Can't Dilute Rights Of The Income Tax Department To Reopen Assessment: Madras High Court

Case Title: M/s. Dishnet Wireless Limited versus the Assistant Commissioner of Income Tax (OSD)

Case No.: W.P.No.34668 of 2018, 2022 LiveLaw (Mad) 278

The Madras High Court has ruled that proceedings under the Insolvency and Bankruptcy Code (IBC), 2016 cannot dilute the rights of the Income Tax Department to reopen the assessment under Section 148 of the Income Tax Act, 1961. The Court noted that the Resolution Plan submitted by the assessee did not contemplate any concession from the Income Tax Department, even though notice under Section 148 of the Income Tax Act was issued to the assessee prior to the submission of the Resolution Plan. The Court further ruled that the provisions of Insolvency and Bankruptcy Code cannot be interpreted in a manner which is inconsistent with any other law in the time being in force.

IBBI

IBBI Suspends Insolvency Professional For Violation Of Code Of Conduct

Case No.: No. IBBI/DC/107/2022

The Disciplinary Committee of the Insolvency and Bankruptcy Board of India ("IBBI"), while adjudicating a Show Cause Notice in the matter of Mr. Kedarram Ramratan Laddha (Insolvency Professional), has suspended the Insolvency Professional for a period of one year for accepting assignment as an Interim Resolution Professional without having a valid Authorisation for Assignment ("AFA") and while disciplinary proceedings were pending against him. The Order was passed on 24.06.2022.

The Disciplinary Committee observed that "the Code of Conduct prescribed under Insolvency Professional Regulations mandates the Insolvency Professional to inform such persons under the IBC as may be required, of a misapprehension or wrongful consideration of a fact of which he becomes aware, as soon as may be practicable and not to conceal any material information or knowingly make a misleading statement to the IBBI, the Adjudicating Authority or any stakeholder, as applicable".

It was held that ample opportunities were available to Mr. Kedarram to disclose the facts before Adjudicating Authority regarding non possession of a valid AFA and pendency of disciplinary proceeding against him. Accordingly, the Disciplinary Committee found the conduct of Mr. Kedarram in accepting the assignment as IRP of the Corporate Debtor without holding valid AFA and during pendency of disciplinary proceedings, was in violation of the IBBI Circular No: LA/010/2018 dated 23.04.2018, Section 208(2)(a) and 208(2)(e) of the IBC read with regulation 7A, 7(2)(a) and 7(2)(h) of IP Regulations, Clause 1, 2, 11, 12 and 14 of the Code of Conduct prescribed under IP Regulations.

CIRP Conducted In A "Brazen Manner": IBBI Suspends Insolvency Professional For Three Years

Case No.: IBBI/DC/108/2022

The Disciplinary Committee of the Insolvency and Bankruptcy Board of India ("IBBI"), while adjudicating a Show Cause Notice dated 08.04.2022 in the matter of Mr. Partha Sarathy Sarkar (Insolvency Professional), has suspended the Insolvency Professional for a period of three years for acting in contravention of the Insolvency and Bankruptcy Code, 2016 ("IBC") and the IBBI (Insolvency Resolution process for Corporate Persons) Regulations, 2016 ("CIRP Regulations"). The specific violations were such that the Insolvency Professional had failed to make timely public announcement; did not seek extension from the Adjudicating Authority when CIRP period expired; failed to appoint registered valuers, maintain proper list of creditors and take control of the Corporate Debtor's assets. The Order was passed on 24.06.2022.

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