12. December

Whether Purchase Orders can be consolidated to a single agreement and an Arbitrator can be appointed for a consolidated reference – Bridge Track and Tower Pvt. Ltd. Vs. Simplex Infrastructures Ltd. – Calcutta High Court

Hon’ble High Court holds that considering the factual position in the present case and relying on the findings of this Court in AP 291 of 2021, this Court is of the view that the 6 purchase orders should be clubbed and an Arbitrator should be appointed for a consolidated reference. AP/338/2021 is accordingly allowed and disposed of by appointing Ms. Sulagna Mukherjee, Counsel to act as the Arbitrator subject to the learned Arbitrator communicating her consent in the prescribed format to the Registrar, Original Side of this Court within three weeks from date.

Whether Purchase Orders can be consolidated to a single agreement and an Arbitrator can be appointed for a consolidated reference – Bridge Track and Tower Pvt. Ltd. Vs. Simplex Infrastructures Ltd. – Calcutta High Court Read Post »

Section 5 of Limitation Act, 1963 has no application to condone delay in filing a petition under Section 34 of Arbitration and Conciliation Act, 1996 – Mathew P J and Anr. Vs. Cholamandalam Investment and Finance Co Ltd. – Kerala High Court

Hon’ble Kerala High Court held that:
(i) When the special statute provides specified period of limitation, Section 5 of the Limitation Act has no application.
(ii) Section 5 of the Limitation Act, 1963 has no application to condone delay in filing a petition under Section 34 of the Arbitration and Conciliation Act, 1996.
(iii) A conjoint reading of Section 34(3) of the Arbitration and Conciliation Act along with its proviso makes the position emphatically clear that challenge against an arbitral award beyond 4 months cannot be entertained, as the said claim is barred by limitation.

Section 5 of Limitation Act, 1963 has no application to condone delay in filing a petition under Section 34 of Arbitration and Conciliation Act, 1996 – Mathew P J and Anr. Vs. Cholamandalam Investment and Finance Co Ltd. – Kerala High Court Read Post »

A judgment can be open to review if there is a mistake or an error apparent on the face of the record, but an error that has to be detected by a process of reasoning, cannot be described as an error apparent on the face of the record for the Court to exercise its powers of review under Order XLVII Rule 1 CPC | The provision of Sec. 34 of Arbitration & Conciliation Act, 1996 is a self-contained provision and the legislature in its wisdom has extensively enumerated all the eventualities for consideration and adjudication of an arbitral award on merits – Docket Care Systems Vs. Union of India – Allahabad High Court

Hon’ble High Court of Allahabad High Court held that:
(i) There is a clear distinction between an erroneous decision as against an error apparent on the face of the record. An erroneous decision can be corrected by the Superior Court, however, an error apparent on the face of the record can only be corrected by exercising review jurisdiction.
(ii) By virtue of Section 18(3) of the MSME Act, all the provision of Arbitration & Conciliation Act, 1996 would be applicable to the arbitration proceedings by MSME Council, which conversely also means that any order arising and/or passed by the MSME Council has to be interdicted under the available provisions of Arbitration & Conciliation Act, 1996 only.
(ii) The provision of Section 34 of the Act is a self-contained provision and the legislature in its wisdom has extensively enumerated all the eventualities for consideration and adjudication of an arbitral award on merits.

A judgment can be open to review if there is a mistake or an error apparent on the face of the record, but an error that has to be detected by a process of reasoning, cannot be described as an error apparent on the face of the record for the Court to exercise its powers of review under Order XLVII Rule 1 CPC | The provision of Sec. 34 of Arbitration & Conciliation Act, 1996 is a self-contained provision and the legislature in its wisdom has extensively enumerated all the eventualities for consideration and adjudication of an arbitral award on merits – Docket Care Systems Vs. Union of India – Allahabad High Court Read Post »

When an Institution or a NBFC is notified as a Financial Institution u/s Sec. 2(1)(m)(iv) of SARFAESI Act, 2002, it is only for the purposes of SARFAESI Act and not for RDB Act, 1993 | Arbitration is an adjudicatory process and proceedings under SARFAESI Act are enforcement proceedings | Reference to SARFAESI Act in an agreement cannot be a bar to invoke Arbitration – Tata Motors Finance Solutions Ltd. Vs. Naushad Khan c/o. Nazbul Hoda Khan – Bombay High Court

In this important judgment on Arbitration and SARFAESI, Hon’ble High Court of Bombay High Court:
(i) Section 2(1)(m)(iv) of the SARFAESI Act specifies that an institution, which is notified by the central government, shall be a ‘financial institution for the purposes of this Act’. The words used in the aforesaid provision make it very clear that when an institution or a non-banking financial company like the petitioner is notified as a financial institution, it is only for the purposes of the SARFAESI Act.
(ii) This is distinct from the definition of ‘financial institution’ under Section 2(h) of the RDDB Act. It is undisputed that the petitioner is not notified as a financial institution by the central government upon exercising power under Section 2(h)(ii) of the RDDB Act.
(iii) The petitioner is notified as a ‘financial institution’, only under Section 2(1)(m)(iv) of the SARFAESI Act, for the purposes of the said Act and only in that context, can the petitioner approach the DRT for the purposes of enforcement. While arbitration is an adjudicatory process, the proceedings under the SARFAESI Act are enforcement proceedings. It is only after the adjudicatory process of arbitration in the present case leads to determination and crystallization of the debt due to the petitioner, that the petitioner would be able to resort to the enforcement process under the SARFAESI Act.

When an Institution or a NBFC is notified as a Financial Institution u/s Sec. 2(1)(m)(iv) of SARFAESI Act, 2002, it is only for the purposes of SARFAESI Act and not for RDB Act, 1993 | Arbitration is an adjudicatory process and proceedings under SARFAESI Act are enforcement proceedings | Reference to SARFAESI Act in an agreement cannot be a bar to invoke Arbitration – Tata Motors Finance Solutions Ltd. Vs. Naushad Khan c/o. Nazbul Hoda Khan – Bombay High Court Read Post »

Whether Cheques dated prior to commencement of CIRP can be encashed during the Moratorium u/s 14 of IBC – Ms. Vaishali Patrikar, RP Vs. Darshan Developers and Others – NCLT Mumbai Bench

Hon’ble NCLT Mumbai Bench holds that Section 14 of the Code provides that the Adjudicating Authority shall by order declare moratorium for prohibiting, amongst others, transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein. Upon commencement of CIRP, the Bank Accounts of the Corporate Debtor are to be managed and operated by the appointed Insolvency Professional. Further, we find that if the argument of the Ld. Counsel for the Respondent that Section 14 of the Code does not apply to cheques dated prior to commencement of CIRP but intended to be cleared after funds are available therein, we feel that this will defeat the basic object of scheme of the Code which mandates resolution of claims of creditors out of assets of the Corporate Debtor available as on Insolvency Commencement date. Hence, we are of considered view that these cheques were encashed in violation of provisions of Section 14 of the Code.

Whether Cheques dated prior to commencement of CIRP can be encashed during the Moratorium u/s 14 of IBC – Ms. Vaishali Patrikar, RP Vs. Darshan Developers and Others – NCLT Mumbai Bench Read Post »

The provision of some amount should be made for Operational Creditors as well as Dissenting Financial Creditors, and the amount so provided cannot be NIL | Reference to Section 53(1) of IBC in Sec. 30(2)(b) is only for the purpose of calculating the amount payable to Operational Creditors and Dissenting Financial Creditors, otherwise, there is no place for Sec 53(1) when it comes to resolution of a Corporate Debtor under CIRP – Shankar Mukherjee and Anr. v. Ravi Sethia, RP of Suasth Healthcare Foundation and Ors. – NCLT Kolkata Bench

Important decision of NCLT Kolkata Bench:
(i) Code contemplates a scenario where a provision made to an operational creditor or dissenting financial creditor in a Resolution Plan could be lesser than what they would have got in the event of liquidation in terms liquidation value as per section 53(1).
(ii) That is the reason for the word “not less than” used in Section 30(2)(b). If the legislature wanted to restrict the amount payable to them to liquidation value at the most, then the words “not more than liquidation value” would have been used.
(iii) The code contemplates mandatory allocation to dissenting financial creditors and to operational creditors and the allocation would be the amount provided in the plan or liquidation value whichever is higher and the contention that such creditors can be paid NIL value because liquidation value for them is NIL, would defeat the very purpose of the beneficial amendment made in Section 30(2) of the I&B Code.
(iv) On careful examination of Section 30(2)(b) of the I&B Code, 2016 in our view, two legal propositions emerge:
(a) Reference to Section 53(1) of the I&B Code is only for the purpose of calculating the amount payable to operational creditors and dissenting financial creditors. Otherwise, there is no place for Section 53 (1) when it comes to the resolution of a corporate debtor under the CIR Process.
(b) The provision of some amount should be made for operational creditors as well as dissenting financial creditors, and the amount so provided cannot be NIL.

The provision of some amount should be made for Operational Creditors as well as Dissenting Financial Creditors, and the amount so provided cannot be NIL | Reference to Section 53(1) of IBC in Sec. 30(2)(b) is only for the purpose of calculating the amount payable to Operational Creditors and Dissenting Financial Creditors, otherwise, there is no place for Sec 53(1) when it comes to resolution of a Corporate Debtor under CIRP – Shankar Mukherjee and Anr. v. Ravi Sethia, RP of Suasth Healthcare Foundation and Ors. – NCLT Kolkata Bench Read Post »

Whether Section 30(2)(b)(ii) of IBC, 2016 entitles Dissenting Financial Creditor to be paid the minimum value of its security interest? | Contradiction in India Resurgence ARC Pvt. Ltd. and CoC of Essar Steel India Ltd. and Jaypee Kensington Boulevard judgments | Refers to Larger Bench – DBS Bank Ltd. Singapore Vs. Ruchi Soya Industries Ltd. and Another – Supreme Court

Hon’ble Supreme Court holds that:
(i) A secured creditor cannot claim preference over another secured creditor at the stage of distribution on the ground of a dissent or assent, otherwise the distribution would be arbitrary and discriminative. The purpose of the amendment was only to ensure that a dissenting financial creditor does not get anything less than the liquidation value, but not for getting the maximum of the secured assets.
(ii) There is a contradiction in the reasoning given in the judgment of this Court in India Resurgence ARC Pvt. Ltd. v. Amit Metaliks Ltd. & Anr. (2021) ibclaw.in 87 SC which is in discord with the ratio decidendi of the decisions of the three Judge Bench in CoC of Essar Steel India Limited v. Satish Kumar Gupta & Ors. (2019) ibclaw.in 07 SC and Jaypee Kensington Boulevard Apartments Welfare Association & Ors. v. NBCC (India) Ltd. & Ors. (2021) ibclaw.in 63 SC.
(iii) Section 53(1) is referred to in Section 30(2)(b)(ii) with the purpose and objective that the dissenting financial creditor is not denied the amount which is payable to it being equal to the amount of value of the security interest.
(iv) The dissenting financial creditor has to statutorily forgo and relinquish his security interest on the resolution plan being accepted, and his position is same and no different from that of a secured creditor who has voluntarily relinquished security and is to be paid under Section 53(1)(b)(ii) of the Code.
(v) It would be appropriate and proper if the question framed at the beginning of this judgment is referred to a larger Bench.

Whether Section 30(2)(b)(ii) of IBC, 2016 entitles Dissenting Financial Creditor to be paid the minimum value of its security interest? | Contradiction in India Resurgence ARC Pvt. Ltd. and CoC of Essar Steel India Ltd. and Jaypee Kensington Boulevard judgments | Refers to Larger Bench – DBS Bank Ltd. Singapore Vs. Ruchi Soya Industries Ltd. and Another – Supreme Court Read Post »

By payment of Insurance Company to Operational Creditor of its claim, Corporate Debtor cannot be absolved from its liability to discharge its Operational Debt and cannot be a ground to reject IBC Section 9 application – Mr. Milan Aggarwal (Suspended Director of Prayag Polytech Pvt. Ltd.) Vs. Saudi Basic Industries Corporation (SABIC) – NCLAT New Delhi

In this important judgment on payment by Insurance Company, Hon’ble NCLAT held that:
(i) The Corporate Debtor cannot take benefit of the fact that Insurer had paid the claim to the Insured. By payment of the Insurance Company to the Operational Creditor of its claim, the Corporate Debtor cannot be absolved from its liability to discharge its operational debt.
(ii) Operational Creditor is under obligation to take proceeding to recover its dues and handover the amount to the Insurance Company.
(iii) When Operational Creditor has filed Section 9 Application, it is not open for the Corporate Debtor to submit that Application deserves to be rejected, since the amount has been received by the Operational Creditor from the Insurance Company.
(iv) Corporate Debtor cannot take shelter on the ground that Operational Creditor has received the claimed amount from insurance Company. Insurance Company has made payment to the Operational Creditor of its claim, cannot be a ground to reject Section 9 Application.

By payment of Insurance Company to Operational Creditor of its claim, Corporate Debtor cannot be absolved from its liability to discharge its Operational Debt and cannot be a ground to reject IBC Section 9 application – Mr. Milan Aggarwal (Suspended Director of Prayag Polytech Pvt. Ltd.) Vs. Saudi Basic Industries Corporation (SABIC) – NCLAT New Delhi Read Post »

When goods are not in possession of Port Authority, there is no actual lien to invoke Section 171 of Indian Contract Act, 1872 and claim of Port cannot be treated as a Secured Creditor for distribution of liquidation assets under Sec. 53 of Code – V O Chidambaranar Port Authority v. Shri Rajesh Chillale, RP of IndBharath Power Gencom Ltd. – NCLAT Chennai

Hon’ble NCLAT held that a careful reading of the Section of 171 Indian Contract Act, 1872 would show that wharfingers as the Appellant claiming itself to be a security for a general balance of account any goods bailed to them whereas in the present case, the goods are not in possession of the Appellant which is also admitted by the Appellant during the course of hearing and thus there was no actual lien to invoke Section 171 of the Act.

When goods are not in possession of Port Authority, there is no actual lien to invoke Section 171 of Indian Contract Act, 1872 and claim of Port cannot be treated as a Secured Creditor for distribution of liquidation assets under Sec. 53 of Code – V O Chidambaranar Port Authority v. Shri Rajesh Chillale, RP of IndBharath Power Gencom Ltd. – NCLAT Chennai Read Post »

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