Weekly Digest Of IBC Cases: 1st To 7th January 2024

Supreme Court IBC | Statutory Set Off Or Insolvency Set Off Inapplicable To Corporate Insolvency Resolution Process: Supreme Court Case Title: Bharti Airtel Limited and Another V Vijaykumar V. Iyer and Others Citation: 2024 LiveLaw (SC) 11 The Supreme Court has held statutory set off or insolvency set off is not applicable to Corporate Insolvency Resolution Process (“CIRP”) proceedings under the Insolvency and Bankruptcy Code, 2016 (“IBC”). Further, Regulation 29 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (“Liquidation Regulations”), which provides for mutual dealing and set off, does not apply to Part II of the IBC which deals with CIRP. The principle of Set-off recognizes the right of a debtor to adjust the smaller claim owed to him against the larger claim payable to his creditor. The Bench has also carved out two exceptions to the application of statutory or insolvency set off to CIRP proceedings. First being, when a party is entitled to contractual set-off, on the date which is effective before or on the date of commencement of CIRP. Secondly, in cases of 'equitable set-off' when the claim and counter claim in the form of set-off are linked and connected on account of one or more transactions that can be treated as one. The Bench comprising Justice Sanjiv Khanna and Justice S.V.N. Bhatti, has observed that Section 30(2)(b) does not support the plea of insolvency set-off, since the provision deals with the amounts to be paid to creditors and not amount payable by creditors to Corporate Debtor. Further, the specific legislative mandate given in Chapter II Part II of IBC, the provisions of IBC relating to CIRP do not recognize the principle of insolvency set-off. “We would not extend it by implication, when the legislature has not accepted applicability of mutual set-off at the initial stage, that is, the Corporate Insolvency Resolution Process stage.” IBC - Is Dissenting Financial Creditor Entitled To Minimum Value Of Security Interest? Supreme Court Refers To Larger Bench, Doubts Precedent Case Title: DBS Bank Ltd Singapore v. Ruchi Soya Industries Ltd and another Citation: 2024 LiveLaw (SC) 6 The Supreme Court has referred to larger bench the issue whether a dissenting financial creditor is to be paid the minimum value of its security interest as per the Insolvency and the Bankruptcy Code 2016. A bench comprising Justices Sanjiv Khanna and SVN Bhatti, in the case DBS Bank Ltd Singapore v. Ruchi Soya Industries Ltd and another, referred the following question : Whether Section 30(2)(b)(ii) of the Insolvency and Bankruptcy Code, 20161, as amended in 2019, entitles the dissenting financial creditor to be paid the minimum value of its security interest? The bench differed from the view expressed by a coordinate bench in the 2021 judgment in the case India Resurgence ARC Private Limited v. Amit Metaliks Limited & Another which held that a dissenting secured creditor cannot challenge an approved resolution plan contending that higher amount should have been paid to it based on the security interest held by it over the corporate debtor. The bench in the instant case observed that there was a contradiction between India Resurgence ARC Private Ltd with the ratio decidendi of the decisions of the three-Judge Bench judgments in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta(2019) and Jaypee Kensington Boulevard Apartments Welfare Association vs. NBCC (India) Ltd(2021). IBC | Inappropriate For NCLAT To Direct NCLT To Admit Petition Under Section 7 Without Evaluating Rival Contentions On Merits: Supreme Court Case Title: Maneesh Pharmaceuticals Ltd v Export Import Bank of India and Ors. Citation: 2023 LiveLaw (SC) 1073 The Supreme Court has set aside an order passed by the National Company Law Appellate Tribunal (“NCLAT”) whereby the National Company Law Tribunal (“NCLT”) was directed to admit a petition under Section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC”). The Bench comprising Chief Justice of India Dr. Dhananjaya Y Chandrachud, Justice J B Pardiwala and Justice Manoj Misra, has held that it was inappropriate for the NCLAT to direct the NCLT to admit the application under Section 7 of IBC straightaway without an evaluation of the rival contentions on merits. The Bench has directed the NCLT to determine whether the petition under Section 7 of IBC is liable to be admitted, after hearing the parties. NCLAT Scheme Of Compromise Decided In Absence Of Shareholder Who Submitted It, NCLAT Chennai Directs Re-Consideration In Presence Of The Shareholder Case Title: Sanjeev Mitla v Mr. Madhusudhan Rao Gonugunta & Anr. Case No.: Company Appeal (AT) (CH) (Ins) No. 387 of 2023 The National Company Law Appellate Tribunal (“NCLAT”), Chennai Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member) and...

Weekly Digest Of IBC Cases: 1st To 7th January 2024

Pallavi Mishra

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