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Monthly Digest Of IBC Cases: July 2022

Pallavi Mishra
1 Aug 2022 7:30 AM GMT
Monthly Digest Of IBC Cases: July 2022
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Supreme Court

NCLT Not A Debt Collection Forum ; Operational Creditor's Application To Initiate CIRPMust Be Dismissed If The Debt Is Disputed: Supreme Court

Case Title: SS Engineers vs Hindustan Petroleum Corporation Ltd

Case No.: 2022 LiveLaw (SC) 617, CA 4583 OF 2022

The Supreme Court Bench comprising of Justices Indira Banerjee and V. Ramasubramanian observed that application of the Operational Creditor for initiation of Corporate Insolvency Resolution Process (CIRP) must be dismissed, if the debt is disputed.

"It is not the object of the IBC that CIRP should be initiated to penalize solvent companies for non-payment of disputed dues claimed by an operational creditor". The Bench also remarked that the adjudicating authority under IBC i.e. NCLT is not a 'debt collection forum' and the objective of IBC is not to penalize solvent companies for non-payment of disputed dues claimed by an operational creditor. It was further held that there are noticeable differences in the IBC between the procedure of initiation of CIRP by a financial creditor and initiation of CIRP by an operational creditor. On a reading of Sections 8 and 9 of the IBC, it is patently clear that an Operational Creditor can only trigger the CIRP process, when there is an undisputed debt and a default in payment thereof. If the claim of an operational creditor is undisputed and the operational debt remains unpaid, CIRP must commence, for IBC does not countenance dishonesty or deliberate failure to repay the dues of an Operational Creditor. However, if the debt is disputed, the application of the Operational Creditor for initiation of CIRP must be dismissed.

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

Resolution Professional Is Only Authorized To Operate Accounts Of Corporate Debtor : NCLAT Chennai

Case Title: Beauty Etiole Pvt. Ltd. v C. Sanjeevi & Ors.

Case No.: Company Appeal (AT) (CH) (Ins.) No. 316/2021

The National Company Law Appellate Tribunal, Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Mr. Kanthi Narahari (Technical Member), has held that the Resolution Professional is only authorized in law to exercise control over Bank Accounts operated by the Corporate Debtor and not otherwise.

NCLAT Holds Lease Rental As Operational Debt Under The Insolvency And Bankruptcy Code, 2016

Case Title: Jaipur Trade Expocentre Private Limited versus Metro Jet Airways Private Limited

Case No.: Company Appeal (AT) (Insolvency) No. 423 of 2021

The National Company Law Appellate Tribunal comprising of Justice Ashok bhushan, Justice Rakesh Kumar, Justice Rakesh Jain, Mr. Naresh Salecha and Mr. Barun Mitra held that the lease rental qualifies as an operational debt under the provisions of the Insolvency and Bankruptcy Code, 2016.

NCLAT noted that the definition of operational debt as mentioned under Section 5(21) of the Code provides that the operational debt means a claim arising out of provision of goods and services but the term "services" is not defined anywhere under the IBC.

The Bench referred to the license agreement which provides that the licensee shall pay all govt. taxed including GST and observed that the payment of GST is only provided for goods and service and the license agreement itself provided for payment of GST which clearly indicates that the license is taxed for services. It was also observed that if the agreement was not for services then there was no requirement of payment of GST. NCLAT also held that the term operation is derived from "operate" and "operating cost" is an expense incurred in the conduct of the principal activities of the enterprise and similarly operational debt is also a debt which is incurred in the conduct of the principal activities of the enterprise.

NCLAT Upholds Eligibility Of NTPC As A Resolution Applicant For Jhabua Power Ltd.: NCLAT Delhi

Case Title: Avantha Holdings Limited v Mr. Abhilash Lal

Case No.: Company Appeal (AT) (Insolvency) No. 304 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), has upheld the eligibility of NTPC Ltd. under Section 29A of the IBC to submit Resolution Plan for Jhabua Power Ltd.

The NCLAT Bench observed that Section 12A does not entitle Promoters of the Corporate Debtor to submit a Settlement Plan as is claimed by the Appellant. The pre-condition of accepting any withdrawal Application under Section 12A is on approval by CoC by 90% of its voting shares. CoC having never granted its approval, Section 12A route was never open for withdrawal of CIRP. The Bench opined that Section 12A proposal cannot be forced upon the lenders.

On Recusal From Hearing, Members Can't Transfer Case To Another Bench In Another Place : NCLAT Delhi

Case Title: Sonia Khosla & Anr. v Montreaux Resorts (P) Ltd. & Ors.

Case No.: Comp. App. (AT) No. 118 of 2021

The National Company Law Appellate Tribunal ("NCLAT") Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Ms. Shreesha Merla (Technical Member) and Dr. Alok Srivastava (Technical Member), has held if Members of NCLT Bench recuse from hearing a case, they cannot transfer the same to another NCLT Bench situated in another city. The matter should be posted before the President/Acting President to be assigned to a different coram.

NCLAT Delhi Stays The CIRP Of 'LaResidentia Developers' As Parties Enter Settlement

Case Title: Amrapali LA-Residentia Flat Buyers Welfare Association (ALRFBWA) v LA Residentia Developers Pvt. Ltd. & Anr.

Case No.: Company Appeal (AT) (Insolvency) No. 704 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. Naresh Salecha (Technical Member), has stayed the Corporate Insolvency Resolution Process ("CIRP") of LA Residentia Developers Pvt. Ltd. as parties have entered settlement. The Bench has directed the Interim Resolution Professional to not take any further steps in the CIRP. The order was passed on 07.07.2022.

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'."

OTS Proposal Is An 'Acknowledgement Of Debt' Under Section 18 Of Limitation Act: NCLAT Delhi

Case Title: Tejas Khandhar v Bank of Baroda,

Case No.: Company Appeal (At) (Insolvency) No. 371 Of 2020

The National Company Law Appellate Tribunal ("NCLAT"), New Delhi Bench, comprising of Justice Anant Bijay Singh (Judicial Member) and Ms. Shreesha Merla (Technical Member), has held that a One Time Settlement (OTS) proposal falls within the definition of 'acknowledgement of debt' under Section 18 of the Limitation Act, 1963. Reliance was placed on the Supreme Court judgment of Dena Bank v C. Shivkumar Reddy and Anr., (2021) 10 SCC 330, wherein it has been held that an offer of One Time Settlement of a live claim, made within the period of limitation, should also be construed as an acknowledgment to attract Section 18 of the Limitation Act.

Payment Of Earnest Money Towards Purchase Of Land Is Not A Financial Debt: NCLAT Delhi

Case Title: S. Chandriah v Sunil Kumar Agarwal & Ors.

Case No.: Company Appeal (AT) Insolvency No. 22 of 2022

The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Mr. Naresh Salecha (Technical Member), has held that payment of Earnest Money towards purchase of land is a financial liability but not a 'financial debt' as per the Insolvency and Bankruptcy Code, 2016 ("IBC"), as it has not been disbursed for consideration of time value of money.

For a debt to be financial debt, essential condition is that the debt is disbursed against the consideration for the time value of money. Time value of money means the price received for the length of time for the money for which the money has been disbursed. It was opined that the disbursement made by the Appellant to the Corporate Debtor was only a payment of Earnest Money, to be adjusted in sale of the land and was not a disbursement in consideration for the time value of money.

NCLAT Sets Aside The Order Of NCLT Rejecting CIRP Initiation, Finds That The Service On The Respondent Was Effected As Per Master Data Details

Case Title: Sparta Global Projects Pvt. Ltd. v KUGD Services Pvt. Ltd.

Case No.: Company Appeal (AT) (Insolvency) No. 341 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 directed the Adjudicating Authority to admit a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC") which was earlier rejected. The Adjudicating Authority had rejected the petition on the basis of Demand Notice not being delivered to the Corporate Debtor in strict consonance of Rule 5(2) of the Adjudicating Authority Rules.

NCLAT Delhi Sets Aside The CIRP Of LAResidentia Developers, As Parties Enter Settlement

Case Title: Amrapali LA-Residentia Flat Buyers Welfare Association (ALRFBWA) v LA Residentia Developers Pvt. Ltd. & Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 704 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. Naresh Salecha (Technical Member), has set aside the Corporate Insolvency Resolution Process ("CIRP") of LA Residentia Developers Pvt. Ltd. as parties have entered settlement. It was observed that the continuing business relation between the Parties show that the Corporate Debtor is not insolvent.

NCLT

"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 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.

NCLT Hyderabad Initiates Insolvency Process Against The Personal Guarantor Of Deccan Chronicle Holdings

Case Title: L&T Finance Limited v Tikkavarapu Venkaram Reddy

Case No.: CP (IB) No. 88/95 of IBC/HDB/2021

The National Company Law Tribunal, Hyderabad Bench, comprising of Dr. N. Venkata Ramakrishna Badarinath (Judicial Member) Shri Veera Brahma Rao Arekapudi (Technical Member), has initiated insolvency resolution process against Mr. Tikkavarapu Venkatarami Reddy, who is the Personal Guarantor of M/s Deccan Chronicle Holdings Ltd. in respect of the credit facilities availed by Deccan Chronicle Holdings from L&T Finance Ltd. The order was passed on 24.06.2022.

Bid For Corporate Debtor As 'Going Concern' To Be Given Preference Over The Standalone Bid; NCLT Ahmedabad

Case Title: Arrhum Tradelink Private Limited v Vineeta Maheshwari & Ors.

Case No.: CP(IB) 320 of 2018

The National Company Law Tribunal, Ahmedabad Bench, comprising of Madan B. Gosavi (Judicial Member) Kaushalendra Kumar Singh (Technical Member), has held that when two equal bids are received in an auction, then Corporate Debtor must be sold to the bidder who purchases it as a 'going concern', rather than to a bidder who purchases the assets at a standalone basis. The object of the Insolvency and Bankruptcy Code, 2016 (IBC) is not only to clear the debts of the Corporate Debtor, therefore, the liquidator must protect the existence of the Corporate Debtor and avoid its death by ultimately pushing it into dissolution.

"In our considered opinion since the liquidator allowed the system to run even after the successful bidder had offered the highest amount and exactly at that point of time within two minutes the Applicant offered the same price. The fact is that the Applicant had offered the same price to purchase the Corporate Debtor as a going concern, the liquidator ought to have considered this aspect. It is the object of the Insolvency and Bankruptcy Code, 2016 i.e., to maximize the value of the assets of the corporate person and to promote entrepreneurship etc."

Suspended Management Must Be Provided With A Copy Of The Resolution Plan: NCLT Indore Reiterates

Case Title: Chandraudai Automobiles Pvt. Ltd. v Rajpal Abhikaran Pvt. Ltd.

Case No.: CP(IB) 6 of 2020

The National Company Law Tribunal, Indore Bench, comprising of Shri Madan B. Gosavi (Judicial Member) and Shri Kaushalendra Kumar Singh (Technical Member), has held that a copy of the Resolution Plan must be provided to the Suspended Management of the Corporate Debtor and has also directed the Resolution Professional in the matter to consider the relevant objections raised by the Suspended Management to the Resolution Plan.

The Bench further held, "Considering the above, we hereby direct the resolution professional to provide the resolution plans to the suspended management and then convene a meeting of the CoC and the CoC will deliberate on the resolution plans afresh and either reject them or approve them with the requisite majority, after which, the further procedure detailed in the Code and the Regulations will be followed. Further, the resolution professional and CoC may consider the other objections of the suspended management, if relevant. It is to be done within two weeks."

NCLT Have The Power To Replace Liquidator Under Insolvency And Bankruptcy Code, 2016: NCLT Chennai

Case Details: Axis Bank v. Venkata Sivakumar

Case No.: CP 1307/IB/2018

The National Company Law Tribunal (NCLT) , Chennai Bench, comprising of Justice S Ramathilagam and Mr. Anil B Kumar held that the NCLT have the power to replace the liquidator during the liquidation process of a Corporate Debtor under the Insolvency and Bankruptcy Code, 2016.

NCLT observed that though IBC does not provide for grounds on which liquidator can be removed but recourse can be made to Section 276 of the Companies Act, 2013 which provides for ground of removal of Liquidator such as misconduct, fraud, professional incompetence and others. The Bench held that in the present case, the liquidator shared the valuation report of the Corporate Debtor with the prospective scheme proponents and the said act would amount to failure to exercise due and diligence and therefore, the liquidator can be changed. Consequently, NCLT allowed the application and removed Mr. Venkata Sivakumar as the liquidator and appointed Mr. S Hari Karthik as the liquidator of Jeypore Sugar.

Even Though Limitation Is Not Set Up As Defence, Tribunal Should Examine: NCLT Chennai

Case Title: Bank of Baroda v Rajiv Rai

Case No.: CP/89/IB/2021

The National Company Law Tribunal (NCLT), Chennai Bench, comprising of Justice (Retd.) S. Ramathilagam (Judicial Member) and Shri Anil Kumar B (Technical Member), has held that limitation applies to an application filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 ("IBC") for initiating insolvency process against a Personal Guarantor. The Bench dismissed an application which was filed after six years of default.

The NCLT Bench observed that the loan recall notice was issued on 06.11.2014 and the application has been filed on 10.04.2021, i.e. after 6 years. It was held that Section 238A of IBC applies to entire provisions of IBC and Article 136 of the Limitation Act, 1963 was also applicable to an application filed under Section 95 of IBC. "In the said circumstances, as per Section 3 of the Limitation Act, 2013, even Court/Tribunal is required to examine the debt on the point of limitation, even though such a defence has not been setup."

Information Memorandum Should Reflect Creditors Claim , If It Finds Place In Balance Sheet: NCLT Indore

Case Title: Bank of Baroda v Divya Jyoti Industries Ltd.

Case No.: C.P. (IB) 628/2018

The National Company Law Tribunal ("NCLT"), Indore Bench, comprising of Shri Madan B. Gosavi (Judicial Member) and Shri Kaushalendra Kumar Singh (Technical Member), has held that if a claim of a creditor appears in the audited balance sheet of the Corporate Debtor, then it is the duty of the Resolution Professional to include such claims in the Information Memorandum.

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 Future Retail Ltd., Rejects Amazon's Intervention Plea

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 initiated Corporate Insolvency Resolution Process ("CIRP") against Future Retail Ltd. over an application filed under Section 7 of IBC by Bank of India, for a default of Rs. 856.10 Crores. Mr. Vijay Kumar V Iyer has been appointed as the Interim Resolution Professional. Further, the Intervention Petition filed by Amazon.com NV Investment Holdings LLC in the matter has been dismissed by the Bench over lack of locus standi. The order has been passed on 20.07.2022.

DHL Supply Chain Files Insolvency Plea Against Eicher Motors: NCLT Delhi To Decide The Issue Of Maintainability

Case Title: DHL Supply Chain Pvt. Ltd. v Eicher Motors Ltd.

Case No.: IB 272/ND/2022.

The National Company Law Tribunal (NCLT), New Delhi Bench, comprising of Dharminder Singh (Judicial Member) and Sumita Purkayastha (Technical Member), while adjudicating an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC") in DHL Supply Chain Pvt. Ltd. v Eicher Motors Ltd., has directed DHL to convince the Bench on the maintainability of the application in terms of Section 10A of the IBC. DHL Supply Chain Pvt. Ltd. ("Applicant") is an Indian division of Deutsche Post DHL group and is engaged in the business of logistic operations. Eicher Motors Ltd. ("Respondent") is the listed parent of Royal Enfield motorcycles, which is the world's oldest motorcycle brand, with its flagship product being the 'Royal Enfield Bullet' in India. The matter is next listed on 01.08.2022.

NCLT Disallows JSW To Withdraw From Status Of Successful Resolution Applicant Of Ind-Barath Energy

Case Title: Bank of Baroda v Ind-Barath Energy (Utkal) Ltd.

Case No.: CP (IB) NO. 276/7/HDB/2018

The National Company Law Tribunal, Hyderabad Bench, comprising of Bhaskara Pantula Mohan (Judicial Member) and Dr. Binod Kumar Sinha (Technical Member), has held that under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 ("IBC"), Adjudicating Authority is not empowered to terminate or remand back a resolution plan to the Committee of Creditors for re-consideration, an assessment can only be made to see whether the plan incorporates provisions for its smooth implementation or not. The Bench observed that the proviso to Section 31(1) cannot be construed so as to allow the Adjudicating Authority once again to get into the questions of deterioration or revaluation of assets etc. which must be left to the commercial wisdom of the CoC. The Adjudicating Authority would not have any jurisdiction to either terminate the Resolution Plan or even send it to CoC for reconsideration. Further, the resolution plan submitted by JSW Energy Ltd. has been approved for Ind-Barath Energy (Utkal) Ltd.

Mumbai Terminates The CIRP Of Sahara Hospitality, As Parties Enter Settlement

Case Title: Delta Electro Mechanical Pvt. Ltd. v Sahara Hospitality Ltd.

Case No.: C.P. (IB)/2430(MB)2018

The National Company Law Tribunal ("NCLT"), Mumbai Bench, comprising of Justice P.N. Deshmukh (Judicial Member) and Shri Shyam Babu Gautam (Technical Member), has permitted withdrawal of insolvency proceedings and termination of Corporate Insolvency Resolution Process ("CIRP") against Sahara Hospitality Ltd., over an application filed under Section 12A of IBC by the IRP, as Parties enter full and final settlement. The order was passed on 28.07.2022.

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.

Gujarat High Court Stays IBBI's Order Requiring Resolution Professional To Undergo Pre-Registration Educational Course From IPA

Case Title: Sunil Kumar Agarwal v Insolvency and Bankruptcy Board of India (IBBI)

Case No.: R/Special Civil Application No. 13767 of 2022

The Gujarat High Court, Ahmedabad Bench, comprising of Justice A.S. Supehia, has stayed the order passed by the Disciplinary Committee of IBBI against the Resolution Professional, requiring the latter to undergo pre-registration educational course from the IPA of which he is a member. The order was passed in view of a Show Cause Notice which was served upon the Resolution Professional by the IBBI alleging that the former had conducted the CIRP of the Corporate Debtor in contravention of IBC provisions. The next date of hearing is 09.09.2022.

IBBI

IBBI Notifies Amendments To Insolvency Professional Regulations

Notification No. IBBI/2022-23/GN/REG088

The Insolvency and Bankruptcy Board of India ("IBBI") vide a notification dated 04.07.2022 in the Gazette of India (Extraordinary) has notified amendments to the IBBI (Insolvency Professionals) Regulations, 2016. These amendments have come into force on 04.07.2022.

The following clauses have been inserted in the Insolvency Professional Regulations:

  • Clause 8B: Insolvency professional shall disclose his relationship, if any, with the corporate debtor, other professionals engaged by him, financial creditors, interim finance providers, and prospective resolution applicants to the insolvency professional agency of which he is a member, within the specified time period.
  • Clause 8C: An insolvency professional shall ensure disclosure of the relationship, if any, of the other professionals engaged by him with himself, the corporate debtor, the financial creditor, the interim finance provider, if any, and the prospective resolution applicant, to the insolvency professional agency of which he is a member, within the time specified.
  • Clause 15A: An insolvency professional shall prominently state in all his communications to a stakeholder, his name, address, e-mail, registration number and validity of authorisation for assignment, if any, issued by the insolvency professional agency of which he is a member.
  • Clause 25B: An insolvency professional shall raise bills or invoices in his name towards his fees, and such fees shall be paid to him through banking channel.
  • Clause 25C: An insolvency professional shall ensure that the insolvency professional entity or the professional engaged by him raises bills or invoices in their own name towards their fees, and such fees shall be paid to them through banking channel.
  • Clause 27A: An insolvency professional shall, while undertaking assignment or conducting processes, exercise reasonable care and diligence and take all necessary steps to ensure that the corporate person complies with the applicable laws.
  • Clause 27B: An insolvency professional shall not include any amount towards any loss, including penalty, if any, in the insolvency resolution process cost or liquidation cost, incurred on account of non-compliance of any provision of the laws applicable on the corporate person while conducting the insolvency resolution process, fast track insolvency resolution process, liquidation process or voluntary liquidation process, under the Code.

Shri.Jayanti Prasad Takes Charge As Whole-Time Member Of IBBI

Press Release. No. IBBI/PR/2022/30 5th July, 2022.

The Insolvency and Bankruptcy Board of India ("IBBI") on 05.07.2022 has issued a press release stating that Shri.Jayanti Prasad has taken charge as whole-time Member of Insolvency and Bankruptcy Board of India in New Delhi.

He belongs to 1986 batch Indian Audit and Accounts Service officer, superannuated as Deputy Comptroller & Auditor General (Human Resources and International Relations). Before joining IBBI, he had accomplished thirty-five years of experience in the civil services, national and international assignments, having held key positions within the Office of Comptroller and Auditor General of India and in the United Nations (UN).

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