Monthly Digest Of IBC Cases: September 2022

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." NCLT Has Discretion To Not Admit Financial Creditor's CIRP Application? Supreme Court Allows Open Court Hearing For Review Case Title: Axis Bank Ltd versus Vidarbha Industries Power Ltd Case No.: RP (Civil) 1043/2022 The Supreme Court Bench comprising of Justice Indira Banerjee and Justice MM Sundersh allowed open court hearing for the review petition filed against the judgment in Vidarbha Industries Power Ltd. vs Axis Bank Limited which held that the National Company Law Tribunal has discretion to not admit the insolvency application filed by a financial creditor even if the corporate debtor is in default. The Petition is listed for hearing in open court on September 19, 2022. The judgment delivered in Vidarbha Industries Case on July 12, 2022 had held 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. The Adjudicating Authority (NCLT) would have to exercise its discretion to admit 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. CIRP Can Be Initiated Against Corporate Guarantor Without Proceeding Against Principal Borrower: Supreme Court Case Title: K Paramasivam vs Karur Vysya Bank Ltd Case No.: 2022 LiveLaw (SC) 742, CA 9286 OF 2019 The Supreme Court Bench comprising of Justice Indira Banerjee and Justice JK Maheshwari, has held that Corporate Insolvency Resolution Process (CIRP) can be initiated against the Corporate Guarantor without proceeding against the principal borrower. The liability of the guarantor is co-extensive with that of the Principal Borrower. The court further noted that, under Section 7 of the IBC, CIRP can be initiated against a Corporate entity who has given a guarantee to secure the dues of a non-corporate entity as a financial debt accrues to the corporate person, in respect of the guarantee given by it, once the borrower commits default and the guarantor is then, the Corporate Debtor. Resolution Plan Which Ignores Statutory Dues Payable To State Government/Legal Authority Liable To Be Rejected: Supreme Court Case Title: State Tax Officer (1) vs Rainbow Papers Limited ...

Monthly Digest Of IBC Cases: September 2022

Pallavi Mishra

Tags