Monthly Digest Of IBC Cases: November 2023

Supreme CourtIBC 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 are factually incorrect. As evident from a bare reading of the judgment, the court had considered not only the waterfall mechanism under Section 53 but also other provisions of IBC for deciding the priority for the purpose of distributing proceeds from the sale as liquidation assets. In view of aforestated legal position, we are of the opinion the judgment sought to be reviewed does not fall within scope and ambit of review. So we’re dismissing all the review petitions.” IBC | Tax & Customs Dues To Be Paid As Per Waterfall Mechanism Under Section 53: Supreme Court Case Title: Principal Commissioner of Customs V Rajendra Prasad Tak & Ors. Citation: 2023 LiveLaw (SC) 952 The Supreme Court Bench comprising Justice Sanjiv Khanna and Justice S.V.N. Bhatti, has clarified that the dues of the Central Board of Indirect Taxes & Customs, Department of Revenue, will be paid as per the waterfall mechanism given under Section 53 of the Insolvency and Bankruptcy Code, 2016 (“IBC”). Section 53 of IBC provides the order of priority in which proceeds from sale of liquidation assets is to be distributed amongst Corporate Debtor’s creditors, stakeholders etc. Supreme Court Upholds Constitutionality Of IBC Provisions Relating To Personal Guarantors; Says Adjudicatory Role Can't Be Read Into Sec 97 Case Title: Surendra B. Jiwrajika and Anr. vs. Omkara Assets Reconstruction Private Limited Case No.: SLP(C) No. 016464/2021 The Supreme Court Bench comprising Chief Justice DY Chandrachud, Justices JB Pardiwala and Justice Manoj Misra, has upheld the constitutionality of the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC) relating to Personal Guarantors' Insolvency Resolution, which were introduced through the amendments made in 2019. The Court held that these provisions (Section 95 to 100 of IBC) cannot be held as unconstitutional for not affording an opportunity of hearing to the personal guarantors before the insolvency petition filed by creditors is admitted against them and the moratorium is automatically applied against them as soon as the insolvency petition is filed. "The statute (IBC) does not suffer from any manifest arbitrariness to violate Art 14 of the Constitution," The bench further held that it cannot read an adjudicatory role into these provisions and that the entire process of timelines would be rendered negatory if the role of adjudicator is changed. For the Court to change the adjudicatory role envisaged under these provisions would amount to "rewriting the legislative functions", the Court said. IBC | No Casual Interference With Commercial Wisdom Of CoC: Supreme Court Sets Aside NCLT Direction To Reevaluate Corporate Debtor's Assets Case Title: Ramkrishna Forgings Limited v Ravindra Loonkar & Anr. Citation: 2023 LiveLaw (SC) 1007 The Supreme Court bench comprising Justice Vikram Nath and Justice Ahsanuddin Amanullah, has set aside an order whereby the National Company Law Tribunal (“NCLT”) kept the approval of a resolution plan in abeyance while directing an Official Liquidator to conduct re-valuation of the Corporate Debtor’s assets. Consequently, the order of National Company Law Appellate Tribunal (“NCLAT”) affirming the NCLT’s order has also been set aside. An application under Section 30(6) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) was filed by the Resolution Professional before NCLT, seeking approval of the resolution plan submitted by Successful Resolution Applicant(SRA). The valuation of Corporate Debtor’s assets was already done Resolution Professional as per the provisions of IBC and its Regulations. However, the NCLT kept the resolution plan in abeyance and appointed an Official Liquidator to conduct re-valuation of assets. The Bench has held, “In the case at hand, we find that there was no occasion before the ...

Monthly Digest Of IBC Cases: November 2023

Pallavi Mishra

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