Monthly Digest Of IBC Cases: April 2024

Supreme Court When Does Debt Become Financial Debt & Operational Debt Under IBC? Supreme Court Explains Case Title: Global Credit Capital Limited & Anr. Versus Sach Marketing Pvt. Ltd. & Anr. Citation: 2024 LiveLaw (SC) 331 The Supreme Court bench comprising Justice Abhay S. Oka and Justice Pankaj Mithal, has held that debt would be treated as an operational debt only if the claim subject matter of the debt has some connection or co-relation with the 'service' rendered by the creditor to the debtor. "Where one party owes a debt to another and when the creditor is claiming under a written agreement/ arrangement providing for rendering 'service', the debt is an operational debt only if the claim subject matter of the debt has some connection or co-relation with the 'service' subject matter of the transaction.", the Bench opined. The Court summarized the conclusions as follows : · There cannot be a debt within the meaning of sub- section (11) of section 5 of the IB Code unless there is a claim within the meaning of sub-section (6) of section 5 of thereof; · The test to determine whether a debt is a financial debt within the meaning of sub-section (8) of section 5 is the existence of a debt along with interest, if any, which is disbursed against the consideration for the time value of money. The cases covered by categories (a) to (i) of sub-section (8) must satisfy the said test laid down by the earlier part of sub-section (8) of section 5; · While deciding the issue of whether a debt is a financial debt or an operational debt arising out of a transaction covered by an agreement or arrangement in writing, it is necessary to ascertain what is the real nature of the transaction reflected in the writing; and · Where one party owes a debt to another and when the creditor is claiming under a written agreement/ arrangement providing for rendering 'service', the debt is an operational debt only if the claim subject matter of the debt has some connection or co- relation with the 'service' subject matter of the transaction. Process For IBC Offences To Be Issued By Sessions Court Despite Companies Act Amendment Vesting Jurisdiction On Judicial Magistrate: Supreme Court Case Title: Insolvency And Bankruptcy Board Of India Versus Satyanarayan Bankatlal Malu & Ors. Citation: 2024 LiveLaw (SC) 317 The Supreme Court bench comprising Justice BR Gavai and Justice Sandeep Mehta, while observing that the offences committed under the Insolvency and Bankruptcy Code, 2016 (“IBC”) would be tried by the Special Court established under Section 435 of the Companies Act, 2013 and the sessions judge would have the power to issue process against the accused, has upheld the issuance of process by the sessions judge to the accused. The Court rejected the contention of the accused that the Sessions Judge wasn't empowered to issue process to the accused for the offences punishable up-to two years under the IBC but the judicial magistrate. Reversing the High Court's decision, the Bench interpreted the scheme of Section 236(1) of IBC to hold that the power to try offences punishable under the IBC was vested in the special court by 'legislation by incorporation', meaning thereby the intention of the Parliament was clear to vest the power to issue summons upon the special court consisting of a person qualified to be a Sessions Judge or an Additional Sessions Judge. Thus, the subsequent amendments to the Section 435 of Companies Act, 2013 authorizing judicial magistrates to issue summons for offences punishable up to two years under the IBC would not have any effect on Section 236 of IBC. NCLAT Besides Section 27, RP Can Be Replaced On A Finding Given By NCLT Over His Conduct Or Any Proven Fact: NCLAT Delhi Case title: Katra Realtors Pvt. Ltd. v Mr. Rajesh Ramnani, RP of Ansal Urban Condominiums Pvt. Ltd. & Anr. Case No.: Company Appeal (AT) (Insolvency) No. 382 of 2024. The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member) and Shri Indevar Pandey (Technical Member), has held that an application filed for replacement of Resolution Professional, which is not filed under Section 27 of IBC, can be entertained when NCLT has given a finding on the conduct of Resolution Professional or in presence of any proven fact. The NCLAT upheld the rejection of an application filed by a minority shareholder of the Corporate Debtor seeking replacement of Resolution Professional over mere allegations. NCLAT Delhi Rejects Homebuyers Application To Initiate CIRP Proceeding Against Ansal Hi-Tech Township Case: Pankaj Mehta VS M/s. Ansal Hi-tech Township Limited Citation: Comp. App (AT) (INS) No. 248 / 2023 The National Company Law Appellate Tribunal (NCLAT) New Delhi,...

Monthly Digest Of IBC Cases: April 2024

Pallavi Mishra

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