Supreme Court Quarterly Digest on IBC [July - September, 2022]

Insolvency and Bankruptcy Code 2016 - There can be no dispute with the proposition that the period of limitation for making an application under Section 7 or 9 of the IBC is three years from the date of accrual of the right to sue, that is, the date of default. (Para 56) Kotak Mahindra Bank Limited v. Kew Precision Parts Pvt. Ltd., 2022 LiveLaw (SC) 673 Insolvency and Bankruptcy Code 2016 -There is no specific period of limitation prescribed in the Limitation Act, 1963, for an application under the IBC, before the Adjudicating Authority (NCLT). An application for which no period of limitation is provided anywhere else in the Schedule to the Limitation Act, is governed by Article 137 of the Schedule to the said Act. Under Article 137 of the Schedule to the Limitation Act, the period of limitation prescribed for such an application is three years from the date of accrual of the right to apply. (Para 55) Kotak Mahindra Bank Limited v. Kew Precision Parts Pvt. Ltd., 2022 LiveLaw (SC) 673 Insolvency and Bankruptcy Code, 2016 - If the Resolution Plan ignores the statutory demands payable to any State Government or a legal authority, altogether, the Adjudicating Authority is bound to reject the Resolution Plan - If a company is unable to pay its debts, which should include its statutory dues to the Government and/or other authorities and there is no plan which contemplates dissipation of those debts in a phased manner, uniform proportional reduction, the company would necessarily have to be liquidated and its assets sold and distributed in the manner stipulated in Section 53 of the IBC - The Committee of Creditors, which might include financial institutions and other financial creditors, cannot secure their own dues at the cost of statutory dues owed to any Government or Governmental Authority or for that matter, any other dues. (Para 52-54) State Tax Officer v. Rainbow Papers Ltd., 2022 LiveLaw (SC) 743 Insolvency and Bankruptcy Code, 2016 - Intended to consolidate and amend the laws with a view to reorganize Corporate Debtors and resolve insolvency in a time bound manner for maximization of the value of the assets of the Corporate Debtor - The statute deals with and/or tackles insolvency and bankruptcy. It is certainly not the object of the IBC to penalize solvent companies, temporarily defaulting in repayment of its financial debts, by initiation of CIRP. (Para 80 - 81) Vidarbha Industries Power Ltd. v. Axis Bank Ltd., 2022 LiveLaw (SC) 587 Insolvency and Bankruptcy Code, 2016 - Limitation Act, 1963; Section 14,18 - IBC does not exclude the application of Section 14 or 18 or any other provision of the Limitation Act. (Para 81) Asset Reconstruction Company (India) Ltd. v. Tulip Star Hotels Ltd., 2022 LiveLaw (SC) 648 Insolvency and Bankruptcy Code, 2016 - NCLT admitted an application for initiating CIRP filed by operational creditor - NCLAT set it aside - Supreme Court dismissed and held: NCLT committed a grave error of law by admitting the application of the Operational Creditor, even though there was a pre-existing dispute as noted by it. SS Engineers v. Hindustan Petroleum Corporation Ltd; 2022 LiveLaw (SC) 617 Insolvency and Bankruptcy Code, 2016 - The IBC is not just a statute for recovery of debts. It is also not a statute which only prescribes the modalities of liquidation of a corporate body, unable to pay its debts. It is essentially a statute which works towards the revival of a corporate body, unable to pay its debts, by appointment of a Resolution Professional. (Para 55) Asset Reconstruction Company (India) Ltd. v. Tulip Star Hotels Ltd., 2022 LiveLaw (SC) 648 Insolvency and Bankruptcy Code, 2016 - The Legislature has consciously differentiated between Financial Creditors and Operational Creditors, as there is an innate difference between Financial Creditors, in the business of investment and financing, and Operational Creditors in the business of supply of goods and services. Financial credit is usually secured and of much longer duration. Such credits, which are often long term credits, on which the operation of the Corporate Debtor depends, cannot be equated to operational debts which are usually unsecured, of a shorter duration and of lesser amount. The financial strength and nature of business of a Financial Creditor cannot be compared with that of an Operational Creditor, engaged in supply of goods and services. The impact of the non-payment of admitted dues could be far more serious on an Operational Creditor than on a financial creditor. (Para 78) Vidarbha Industries Power Ltd. v. Axis Bank Ltd., 2022 LiveLaw (SC) 587 Insolvency and Bankruptcy Code, 2016 - Various stages involved in the corporate insolvency process in India discussed. (Para 34) Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs, 2022 LiveLaw (SC) 715 Insolvency and Bankruptcy Code, 2016; Section...

Supreme Court Quarterly Digest on IBC [July - September, 2022]

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