Monthly Digest Of IBC Cases: July 2023

Supreme Court IBC Overrides Electricity Act; Dues To Secured Creditors At Higher Footing Than Electricity Dues : Supreme Court Case Title: Paschimanchal Vidyut Vitran Nigam Ltd vs Raman Ispat Private Limited Citation: 2023 LiveLaw (SC) 534 | 2023 INSC 625 The Supreme Court Bench comprising of Justices S. Ravindra Bhat and Dipankar Datta, has observed that Section 238 of the Insolvency and Bankruptcy Code, 2016 overrides the provisions of the Electricity Act, 2003. It was opined that the provisions of the IBC treat the dues payable to secured creditors are at a higher footing than dues payable to Central or State Government. In this case, the NCLT had set aside an attachment of the property of the respondent Raman Ispat Pvt. Ltd. (“Corporate Debtor”) which was over electricity charge dues to Paschimanchal Vidyut Vitran Nigam Limited (PVVNL) and held that PVVNL can realise its dues by participating in the liquidation process as per the IBC. The NCLAT also approved this view. Further, noting that State Tax Officer v. Rainbow Papers Ltd. 2022 LiveLaw (SC) 743 dealt with a case relating to resolution process and not liquidation process, the Court opined that the judgment in Rainbow Papers has to be confined to the facts of that case. High Court Jharkhand High Court Rejects ESL Steel’s ITC Claim Prior To The Approval Of The Resolution Plan By NCLT Case Title: M/s ESL Steel Limited Versus Principal Commissioner Case No.: W.P.(T) No. 1995 of 2023 The Jharkhand High Court Bench comprising of Justice Rongon Mukhopadhyay and Justice Deepak Roshan, has rejected ESL Steel’s Input Tax Credit (ITC) claim prior to the approval of the resolution plan by the National Company Law Tribunal (NCLT). ESL Steel Limited (Petitioner) contended that no recovery or proceeding can be continued against the petitioner for any alleged dues prior to April 17, 2018, i.e., the date on which the NCLT approved the petitioner's resolution plan. The Petitioner urged that it is only the past obligations of the past period that get extinguished once the new management has taken over the Company as part of the Resolution Plan. There is no statute or judgement that says that past credit due to the company gets expunged. The Bench held that the current management was not a taxpayer for the period prior to June 4, 2018. i.e., the date of the change of management and therefore the liability of the earlier management should not be shifted to the current management. Likewise, the credit available to the earlier management will also not be available to the current management, as the current management is not a taxpayer. IBC | No Writ Can’t Be Issued To Creditor, Free To Proceed Against Personal Guarantor Under IBC : Delhi High Court Case Title: Vineet Saraf v Rural Electrification Corporation Ltd. Case No.: 2023 LiveLaw (Del) 639 | W.P.(C) 3293/2023 & CM APPL 12815/2023 The Delhi High Court Bench comprising of Justice Purushaindra Kumar Kaurav, has refused to issue a Writ of Prohibition to prevent the creditor from approaching the NCLT under Section 95 of IBC against the personal guarantor. On the issue of whether a writ of prohibition can be issued to prevent creditor from approaching NCLT, the Bench opined that when an alternative remedy exists, then the Petitioner must prove, (i) that the proceedings or actions being taken are wholly without jurisdiction; and (ii) as to why the alternate forum must be deprived of an opportunity to decide upon its own jurisdiction. IBC | Sending Demand Notice Under Rule 7(1) To Personal Guarantor Cannot Be Termed As Arbitrary: Delhi High Court Case Title: Vineet Saraf v Rural Electrification Corporation Ltd. Case No.: 2023 LiveLaw (Del) 639 | W.P.(C) 3293/2023 & CM APPL 12815/2023 The Delhi High Court Bench comprising of Justice Purushaindra Kumar Kaurav, has declined to quash a Demand Notice sent to a personal guarantor under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019. It has been held that mere issuance of a Demand Notice to personal guarantor does not reek of arbitrariness, since it has been done to comply with the statutory requirement of Section 95 of IBC, to agitate before the NCLT that there is a debt owed by the personal guarantor to the creditor. “It is not the case that the reliefs prayed for cannot be granted by the concerned NCLT. The petitioner‟s claim of the guarantor getting a right to be heard at a belated stage, is not sufficient to entertain the present petition. The legislature, in its wisdom, thought it fit to give the right of hearing at belated stage. Indeed, if in the present case the petition is entertained, it would subvert the procedure laid down under the IBC. The respondent in turn would be denied the opportunity to present their ...

Monthly Digest Of IBC Cases: July 2023

Pallavi Mishra

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