Monthly Digest Of IBC Cases: October 2023

Supreme Court Homebuyers Who Secure RERA Decrees Can't Be Treated Differently From Other Financial Creditors Under IBC: Supreme Court The Supreme Court bench comprising Justices S Ravindra Bhat and Aravind Kumar, has held that homebuyers cannot be treated differently from other "financial creditors" under the Insolvency and Bankruptcy Code (IBC) 2016 just because they have secured orders from the authority under the Real Estate (Regulation and Development) Act 2016. The bench set aside an order of the National Company Law Appellate Tribunal which held that beneficiary of orders of the RERA Authority should be treated differently from other home buyer allottees. Home buyers who did not approach authorities under RER Act were given the benefit of 50% better terms than that given to those who approached RERA or who were decree holders. IBC | Doctrine Of Election Can’t Prevent Financial Creditor From Initiating CIRP Against Corporate Debtor: Supreme Court Case Title: Tottempudi Salalith v State Bank Of India & Ors. Citation: 2023 LiveLaw (SC) 914 The Supreme Court has held that the ‘Doctrine of Election’ cannot be applied to prevent a Financial Creditor from approaching the National Company Law Tribunal (NCLT) for initiation of Corporate Insolvency Resolution Process (“CIRP”) against a Corporate Debtor, under the Insolvency and Bankruptcy Code, 2016 (IBC). The Doctrine of Election is embodied in the law of evidence, which bars prosecution of the same right in two different fora based on the same cause of action. The Bench comprising Justice Aniruddha Bose and Justice Vikram Nath, has observed, “The question of election between the fora for enforcement of debt under the 1993 Act and initiation of CIRP under the IBC arises only after a recovery certificate is issued. The reliefs under the two statutes are different and once CIRP results in declaration of moratorium, the enforcement mechanism under the 1993 Act or the SARFAESI Act gets suspended. In such circumstances, after issue of recovery certificate, the financial creditor ought to have option for enforcing recovery through a new forum instead of sticking on to the mechanism through which recovery certificate was issued. IBC| Time-Barred Recovery Certificate Can Be Segregated From Composite Claim Under Section 7: Supreme Court Case Title: Tottempudi Salalith v State Bank Of India & Ors. Citation: 2023 LiveLaw (SC) 914 The Supreme Court Bench comprising Justice Aniruddha Bose and Justice Vikram Nath, has held that in a composite application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) based on several Recovery Certificates issued by Debt Recovery Tribunal, if any of the Recovery Certificate(s) is barred by limitation, then the same can be segregated from composite claim. However, as the decree (Recovery Certificate) would still be alive, it can be treated as a claim made in Corporate Insolvency Resolution Process (CIRP) in view of Public Announcement. In 2019, a composite application under Section 7 of IBC was filed based on three recovery certificates, one of which dated back to 2015 and was hence barred by limitation. “The application with respect to the two recovery certificates issued in the year 2017 is maintainable. In the event the Appellate Tribunal is of opinion that the CIRP could not lie so far as the recovery certificate of 2015 is concerned, as the decree would be still alive, the claim based on the said recovery certificate could be segregated from the composite claim and the Committee of Creditors shall, in that event, treat the sum reflected in the said recovery certificate as part of the claims made in pursuance of the public announcement. This direction we are issuing in exercise of our jurisdiction under Article 142 of the Constitution of India”, the Bench held. IBC Resolution Plan Can't Ignore Government Dues: Supreme Court Dismisses Review Petitions Against 'Rainbow Papers' Case title: Sanjay Agarwal v. State Tax Officer Citation: 2023 LiveLaw (SC) 939 The Supreme Court has dismissed a batch of review petitions filed against a 2022 judgment which held that the definition of a secured creditor under the Insolvency and Bankruptcy Code, 2016 (“IBC”) 2016 included any government or governmental authority and that a resolution plan which ignored dues to the government was liable to be rejected. A bench comprising Justices AS Bopanna and Justice Bela M. Trivedi was considering five review petitions filed against the 2022 judgment in State Tax Officer v. Rainbow Papers Ltd 2022 LiveLaw (SC) 743 delivered by a bench comprising Justices Indira Banerjee (since retired) and AS Bopanna. “The submissions made by the counsels for petitioners that the court in the impugned judgment had failed to consider the waterfall mechanism as contained in Section 53 and failed to consider other provisions of IBC...

Monthly Digest Of IBC Cases: October 2023

Pallavi Mishra

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