IBC(Application to Adjudicating Authority) Rules, 2016 [AAA Rules]

Failure to serve Demand Notice under Section 8 of IBC is not a mere technical or curable defect but a mandatory precondition for filing Application under Section 9 of the Code for initiating CIRP against Corporate Debtor – Quess Corp Ltd. Vs. Wardwiz (India) Solutions Pvt. Ltd. – NCLT Mumbai Bench

Hon’ble NCLT Mumbai held that:

(i) Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 mandates that the statutory Demand Notice must be served on the Corporate Debtor at its registered office by hand or RPAD or Speed Post. In this case, it is seen that the Demand Notice was not sent to the registered address of the Corporate Debtor as per the Master Data of the Corporate Debtor available on the MCA website.
(ii) In this connection, it would not be out of place to refer to the judgment of Hon’ble NCLAT in the matter of Shailendra Sharma Vs. Ercon Composites (2021) ibclaw.in 14 NCLAT wherein it has been held that the service of Demand Notice to the corporate debtor as per Section 8 is a mandatory requirement.
(iii) Thus, it is settled that failure to serve the Demand Notice under Section 8 of the Code is not a mere technical or curable defect but a mandatory precondition for filing Application under Section 9 of the Code for initiating CIRP against the Corporate Debtor.

Failure to serve Demand Notice under Section 8 of IBC is not a mere technical or curable defect but a mandatory precondition for filing Application under Section 9 of the Code for initiating CIRP against Corporate Debtor – Quess Corp Ltd. Vs. Wardwiz (India) Solutions Pvt. Ltd. – NCLT Mumbai Bench Read Post »

Whether the threshold requirement of Rs. one crore under Section 4 of IBC is in individual or joint capacity where joint CIRP applications filed? – Mr. Nethi Jagadish Reddy and Ors. Vs. APITCO Ltd. – NCLT Hyderabad Bench

Hon’ble NCLT Hyderabad Bench held that filing of joint application raises the question as to whether the threshold requirement of Rs.one crore under Section 4 is in individual or joint capacity. Claim of each individual workman/employee needed to meet Section 4 threshold requirements. The judgement in Mr. Suresh Narayan Singh supra has been followed in Sadashiv Nomaya Naik and other v. M/s.Gammon Engineers & Contractors Private Limited (2023) ibclaw.in 455 NCLAT, held that each individual has to meet the requirements of Section 4.

Whether the threshold requirement of Rs. one crore under Section 4 of IBC is in individual or joint capacity where joint CIRP applications filed? – Mr. Nethi Jagadish Reddy and Ors. Vs. APITCO Ltd. – NCLT Hyderabad Bench Read Post »

Whether filing of Record of Default(RoD) of Information Utility is mandatory? and without obtaining an Authentication of Default(AoD) as per IU Regulation 21, no application under Sec. 7 can be filed by Financial Creditor? – Vijay Kumar Singhania Vs. Bank of Baroda and Anr. – NCLAT New Delhi

In this landmark judgment, Hon’ble NCLAT, bench comprising of three members, held that:
(i) IU Regulation 20 although has been amended w.e.f 14.06.2022 but there is no amendment either in Section 7 of the IBC which empowers Financial Creditor to file record of the default recorded in the information utility or such other record and default as may be specified or in Rules 2016 or CIRP Regulations 2016.
(ii) The statutory scheme contemplates furnishing record of default by the financial creditor as recorded with the information utility or such other record or evidence of default as may be specified.
(iii) Record of default recorded with the information utility is not the only document which has to be furnished by financial creditor.
(iv) Regulations framed by the Board as per Section 240(1) has to be consistent with provisions of the Code and the Rules. When Section 240 itself provides that regulations have to be consistent with provision of Code and Rules, no regulation can be implemented or enforced which is not in consonance with the Code and the Rules.
(v) If IU Regulation 20(1A) is to be read as Regulation now mandating the Financial Creditor to file only the record of default in the information utility, the said Regulation will not be consistent with provision of Section 7(3) of the Code and AAA Rule 4 which provides that what documents have to be filed by the Financial Creditor.
(vi) IU Regulation 20(1A) cannot be read to mean that after the said amendment brought in regulation w.e.f 14.06.2022 an application filed under Section 7 which is not supported by information of default from an information utility is to be rejected and if the Financial Creditor has filed other evidence to prove default which is contemplated by the AAA Rules, 2016 and the CIRP Regulations, 2016, the said application has not to be considered.
(v) Filing of counter claim or money suit shall not absolve the Appellant from its liability to discharge its debt and if there is a financial debt which is due and default is committed by the Corporate Debtor proceedings under Section 7 can be initiated. Mere filing of the counter claim or money suit cannot lead to dismissal of Section 7.

Whether filing of Record of Default(RoD) of Information Utility is mandatory? and without obtaining an Authentication of Default(AoD) as per IU Regulation 21, no application under Sec. 7 can be filed by Financial Creditor? – Vijay Kumar Singhania Vs. Bank of Baroda and Anr. – NCLAT New Delhi Read Post »

Can Adjudicating Authority allow an Interlocutory Application(IA) filed after the matter is reserved for Order in an application u/s 7 of IBC- Loramitra Rath Suspended Director of Maa Durga Commotrade Pvt. Ltd. Vs. JM Financial Asset Reconstruction Company Ltd. – NCLAT New Delhi

NCLAT held that it is a well settled proposition of law that the two stages of reserving of judgment and pronouncement of judgment are in a continuum with no hiatus or gap as such in the two stages. That being the well accepted and time-tested practice in court proceedings, subsequent pleadings filed by way of an I.A. after the judgement is reserved is normally not entertained for reasons of procedural propriety.

Can Adjudicating Authority allow an Interlocutory Application(IA) filed after the matter is reserved for Order in an application u/s 7 of IBC- Loramitra Rath Suspended Director of Maa Durga Commotrade Pvt. Ltd. Vs. JM Financial Asset Reconstruction Company Ltd. – NCLAT New Delhi Read Post »

Whether to prove a Financial Debt a Financial Creditor has to enter into a ‘written’ Financial Contract? – Agarwal Polysacks Ltd. Vs. K. K. Agro Foods and Storage Ltd. – NCLAT New Delhi

In this landmark judgment, Hon’ble NCLAT held that:
(i) A bare perusal of Part V of Form-1 indicates that particulars of financial debt, several documents, records and evidence of default has been referred to which documents are contemplated to be particulars of financial debt.
(ii) Use of word “or” in Regulation 8(2)(a) indicate by any of the document referred to in Sub-regulation (2) existence of debt can be proved.
(iii) A financial contract supported by financial statements as evidence of the debt is one of the documents contemplated in Regulation 8(2) but that is not exclusive requirement for proving existence of debt.
(iv) When we look into the statutory scheme as reflected in the Application to Adjudicating Authority Rules, 2016 and CIRP Regulations, 2016, it is clear that financial debt can be proved from other relevant documents and it is not mandatory that written financial contract can be only basis for proving the financial debt.

Whether to prove a Financial Debt a Financial Creditor has to enter into a ‘written’ Financial Contract? – Agarwal Polysacks Ltd. Vs. K. K. Agro Foods and Storage Ltd. – NCLAT New Delhi Read Post »

Submission of a copy of CIRP application to IBBI in compliance of Rule 4(3) of Application to Adjudicating Authority Rules, 2016 during the course of proceedings would suffice and on that account the application cannot be treated as defective – Laxmi Engineering Industries (Bhopal) Pvt. Ltd. Vs. Canara Bank – NCLT Indore Bench

The present IA has been filed in the context of proceedings under Section 7 of the IBC against the Corporate Debtor for initiation of CIRP. Through this IA the applicant/Corporate Debtor has taken a plea that Financial Creditor has not complied with the mandatory Rule 4(3) of the Insolvency and Bankruptcy (Application before Adjudicating Authority) Rules, 2016 and thereby the application being effective and deserves to be dismissed.

Submission of a copy of CIRP application to IBBI in compliance of Rule 4(3) of Application to Adjudicating Authority Rules, 2016 during the course of proceedings would suffice and on that account the application cannot be treated as defective – Laxmi Engineering Industries (Bhopal) Pvt. Ltd. Vs. Canara Bank – NCLT Indore Bench Read Post »

The primary and operative requirement of Section 5(21) of IBC, ‘Operational Debt’ is that the claim must bear some nexus with a provision of goods or services irrespective of who is to be the supplier or receiver – Manoj Stone Infra Pvt. Ltd. Vs. Railsys Engineers Pvt. Ltd. – NCLAT New Delhi

NCLAT held that from a plain reading of the Section 5(20) and Section 5(21), it is clear that the primary and operative requirement of Section 5(21) is that the claim must bear some nexus with a provision of goods or services irrespective of who is to be the supplier or receiver. Further the Application to Adjudicating Authority Rules, 2016 under Rule 5(1) provides that any operational creditor can issue a notice in relation to an operational debt either through a demand notice or copy of invoices. Also, an operational creditor who is seeking to claim an operational debt in a CIRP can rely either on a contract or on an invoice for the supply of goods and services with the corporate debtor under Regulation 7(2)(b)(i) and (ii) of the CIRP Regulations 2016. Thus, all forms of contracts for the supply of goods or services between the operational creditor and the corporate debtor are included in this.

The primary and operative requirement of Section 5(21) of IBC, ‘Operational Debt’ is that the claim must bear some nexus with a provision of goods or services irrespective of who is to be the supplier or receiver – Manoj Stone Infra Pvt. Ltd. Vs. Railsys Engineers Pvt. Ltd. – NCLAT New Delhi Read Post »

Whether it is the discretion of Operational Creditor or the nature of the Operational Debt, that determines the issuance of Demand Notice in Form-3 or Form-4 under Section 8 of the Insolvency and Bankruptcy Code, 2016? – Tejinder Pal Setia Vs. Kone Elevator India Pvt. Ltd. and Ors. – NCLAT New Delhi

NCLAT held that the Operational Creditor is at liberty to submit Demand Notice either in Form-3 or Form-4. When Notice is issued in Form-4, copy of the Invoice is required to be attached with the Notice. The Demand Notice issued by the Operational Creditor was in Form-3, hence, no infirmity can be found in the Demand Notice, if invoices were not attached. In the present case, the basis of the Demand Notice was Supply Agreement and acknowledgement letter issued by the Corporate Debtor. No invoices were referred to in the Demand Notice. Hence, submission of the Appellant that Demand Notice should have been accompanied with the invoices cannot be accepted.

Whether it is the discretion of Operational Creditor or the nature of the Operational Debt, that determines the issuance of Demand Notice in Form-3 or Form-4 under Section 8 of the Insolvency and Bankruptcy Code, 2016? – Tejinder Pal Setia Vs. Kone Elevator India Pvt. Ltd. and Ors. – NCLAT New Delhi Read Post »

Whether service of Demand Notice u/s 8 of IBC to official email id of Corporate Debtor available on MCA portal which is not the email address of Whole-Time Director/Key Managerial Personnel is valid or not? – DHL Supply Chain India Pvt. Ltd. Vs. Eicher Motors Ltd. – NCLT New Delhi Bench Court-II

In this case, the Respondent stated that the Demand Notice is not served upon the Corporate Debtor at the registered office by hand, registered post, or speed post with acknowledgment due or by electronic mail service to a whole-time director or designated partner or key managerial personnel. It is served via official email which is not the email address of a key managerial personnel.
The Adjudicating Authority held that no illegality or deficiency in the service of the Demand Notice, which has been duly served through the E-mail addressed to the Corporate Debtor with “Attention to its Managing Director”, who is a “Key Managerial Personnel” of the Corporate Debtor. Hence, we would like to proceed ahead in examining the application on its merits.

Whether service of Demand Notice u/s 8 of IBC to official email id of Corporate Debtor available on MCA portal which is not the email address of Whole-Time Director/Key Managerial Personnel is valid or not? – DHL Supply Chain India Pvt. Ltd. Vs. Eicher Motors Ltd. – NCLT New Delhi Bench Court-II Read Post »

NCLAT upholds admission of IBC Sec. 10 application and issue of applicability of moratorium where aircrafts leases were terminated prior to admission of Section 10 application need to be considered by NCLT – SMBC Aviation Capital Ltd. Vs. Interim RP of Go Airlines (India) Ltd., Abhilash Lal – NCLAT New Delhi

NCLAT upheld the decision of NCLT in Go Airlines (India) Ltd. and held that (i) the mere fact that no notice was issued to the creditors or any opportunity was given to the objectors before proceeding to hear, the Corporate Applicant, cannot be held to vitiate any procedure or violating the principles of natural justice, more so when objectors were heard by the Adjudicating Authority. (ii) In appropriate case where there is an Application under Section 65 of the Code before the Adjudicating Authority, the Adjudicating Authority after initiation of proceedings under Section 10 and before passing any order on Section 10 Application notices that initiation is fraudulent and malicious, the Adjudicating Authority is well within its jurisdiction to consider the Application and if it is held and found that initiation is fraudulent and malicious, the Adjudicating Authority is fully entitled to reject the said Application.
Further, NCLAT directed that (i) The Appellant(s) as well as IRP are at liberty to make appropriate Application before the Adjudicating Authority for declaration with regard to applicability of the moratorium on the aircrafts with regard to which Leases in favour of the Corporate Applicant were terminated prior to admission of Section 10 Application, which Application need to be considered and decided by the Adjudicating Authority in accordance with law.
(ii) The Appellant(s) and the IRP are also at liberty to make an appropriate Application under Section 60, sub-section (5) with regard to claim of possession and other respective claims of both the parties relating to the aircrafts in question, which need to be decided by the Adjudicating Authority in accordance with law.

NCLAT upholds admission of IBC Sec. 10 application and issue of applicability of moratorium where aircrafts leases were terminated prior to admission of Section 10 application need to be considered by NCLT – SMBC Aviation Capital Ltd. Vs. Interim RP of Go Airlines (India) Ltd., Abhilash Lal – NCLAT New Delhi Read Post »

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