In this case, an application filed by appellant has been dismissed by the NCLT holding that it is to be noted that a bare reading of Section 65(1), states that “If, any person initiates the insolvency resolution process… “. However, in the present case the CIRP has not yet been initiated and it is currently being heard by this bench, CIRP has not yet been initiated. The Applicant can approach this tribunal under Section 65 of Code, only once the Petition is admitted and CIRP has been initiated. NCLAT set aside the order of NCLT and held that as a matter of fact, the Learned Tribunal has taken a decision, while interpreting Section 65 of the Code, that the application under Section 65 of the Code would be maintainable only once the application under Section 7, 9 or 10 is admitted and the CIRP is initiated. However, in our considered opinion the view taken by the Learned Tribunal is totally erroneous as it has not looked into the basic provisions much less the definitions provided under Section 5(11) and 5(12) of the Code and has been unnecessarily influenced with the word “initiates” used under Section 65 to observe that it would mean that when the CIRP is initiated i.e. after the admission. In case where application is filed under Section 65 of the Code, it would be maintainable after the application is filed either under Section 7, 9 or 10 of the Code.
Category: IBC-Case Laws-NCLAT
IBC proceeding cannot be used for recovery of Success Fee/Brokerage Fee where the Corporate Debtor denies the claim by giving notice of disputes – BNK Securities Pvt. Ltd. Vs. Sebacic India Ltd. – NCLAT New Delhi
By impugned order, the application filed under Section 9 of IBC of the Appellant has been rejected on the ground of pre-existing dispute. The Appellant claimed that he has an agreement with the Corporate Debtor for Success Fee and after the performance of his part, the Appellant issued an invoice to the Corporate Debtor. NCLAT held that we find that there was a pre-existing dispute and Adjudicating Authority did not commit any error in rejecting Section 9 Application. IBC proceeding cannot be used for recovery of Success Fee/Brokerage Fee as in the present case where the Corporate Debtor denies the claim of the Appellant by giving notice of disputes to the Appellant.
The word used in CIRP Regulation 9(2) is ‘may’ as against ‘shall’ in Regulation 9(1) which means that Regulation 9(2) is provided more as a matter of convenience for the workmen or employees but still demands a declaration in respect of claim with proof and verification of the Form ‘Particulars’ mentioned therein – Fort Gloster Industries Ltd. Vs. Resolution Professional, Fort Gloster Industries Ltd. – NCLAT New Delhi
NCLAT held that a close reading of Regulation 9(2) of the Regulations says that where there are dues to be paid to the workmen or employees of the Corporate Debtor, they may collectively choose an authorised representative to submit their claim with proof but in Form-E of the Schedule. The word used in Regulation 9(2) of the Regulations is ‘may’ as against ‘shall’ in Regulation 9(1) of the Regulations which means that Regulation 9(2) of the Regulations is provided more as a matter of convenience for the workmen or employees but still demands a declaration in respect of claim with proof and verification of the Form ‘Particulars’ mentioned therein.
Financial Creditor who does not attend the proceeding, cannot be heard in saying that CIRP has wrongly been conducted – Consolidated Finvest & Holdings Ltd. Vs. Subhash Kumar Kundra, RP – CLC Industries Ltd. & Ors. – NCLAT New Delhi
In this case, the Appellant was challenging the entire process which was not legally done hence prayer was madeto issue fresh EoI and Appellant does not want liquidation of the Corporate Debtor but was interested in resolution of the Corporate Debtor. Out of sixteen CoC meeting, only in one CoC meeting, the Appellant attended and neither he voted in any agenda nor raised any objection regarding the process. NCLAT held that Financial Creditor of the Corporate Debtor have been given rights as per IBC to take steps for resolution of the Corporate Debtor and financial creditor who does not attend the proceeding, can not be heard in saying that process has wrongly been conducted.
There is a dispute around the debt due and payable if Corporate Debtor has raised the issue of reconciliation of accounts – East India Udyog Ltd. Vs. SPML Infra Ltd. – NCLAT New Delhi
NCLAT observed that even prior to receipt of demand notice dated 29.07.2020, the Corporate Debtor on 18.07.2020 had refused to accept the outstanding operational debt, inter-alia, on the ground of reconciliation of accounts. The Operational Creditor that they had given numerous reminders to the Corporate Debtor prior to 18.07.2020 to reconcile the account. The Adjudicating Authority has also taken note of the fact that since the Appellant had themselves sent email to the Corporate Debtor on 31.08.2018 and 04.09.2019 for reconciliation of accounts, that by itself shows that there existed a dispute between the parties regarding the amount of debt due and the requirement for reconciliation of accounts as both the parties were having counter claims against the other. It is the case of the Appellant that the emails for reconciliation of accounts were sent since the Corporate Debtor was not sharing their books of accounts. Be that as it may, this does not detract from the fact that there was a dispute around the debt due and payable since both parties had raised the issue of reconciliation of accounts.
Financial Debt in absent of agreement and amount advanced to the Corporate Debtor is against the time value of money – M/s VRG Healthcare Pvt. Ltd. Vs. M/s VRG Infrastructure Pvt. Ltd. – NCLAT New Delhi
NCLAT held that we agree with the findings given by the Adjudicating Authority that the Appellant has not produced any agreement between the Appellant and the Respondent that any interest would be payable by the Respondent/Corporate Debtor against the alleged loan. Further, the Adjudicating Authority rightly come to the conclusion that in order to qualify the debt to be a ‘financial debt’, it is necessary that the amount advanced to the Corporate Debtor is against the time value of money, which is totally absent in the present matter. Further, it was held that since the Appellant is not a financial creditor as the Appellant has not disbursed money against the consideration for the time value. Accordingly, the claim of the Appellant is not a ‘financial debt’ within the meaning of Section 5(8) of the IBC. Keeping in view of the aforenoted, we do not find any merit in the Appeal to interfere with the order impugned passed by the Adjudicating Authority.
IBC Section 9 proceedings are not the proceedings where the dispute raised by the parties arising out of contract between the parties can be gone into and adjudicated – Jain Irrigation Systems Ltd. Vs. Pragyawan Technologies Pvt. Ltd. – NCLAT New Delhi
NCLAT held that Section 9 Proceedings are not the proceedings where the dispute raised by the parties arising out of contract between the parties can be gone into and adjudicated. The scheme of Insolvency Proceedings contemplate that the proceeding shall go on only when there is an admitted debt and default, forum is not for deciding and adjudicating the contractual dispute between the parties.
The negligence on the part of Corporate Debtor not to have executed lease deed cannot be allowed to become a ruse for fraudulent transaction u/s 43, 49 and 66 of IBC – Jagdish Kumar Parulkar, Liquidator for Kapil Steels Ltd. Vs. M/s Indore Steel & Alloys Pvt. Ltd. – NCLAT New Delhi
The contention of the Liquidator that the ex-management by not getting the name changed in the lease deed in favour of the Corporate Debtor in 2010 used this fact as a loophole to transfer the leasehold rights in favour of Respondent No.1 and that this amounts to conducting fraudulent transaction. NCLAT held that the negligence on the part of the Corporate Debtor not to have executed the lease deed cannot be overlooked and cannot be allowed to become a ruse for fraudulent transaction. Mere possibility of a potential collusion without material on record is not sufficient to persuade this Bench to record any finding on preferential or fraudulent transaction. Liquidators under the IBC are assigned by the Court and are undisputedly vested with sufficient authority to take into custody or control all assets, property, effects and actionable claims of the Corporate Debtor and also collect outstanding receivables including paying off bills and outstanding debts. This includes the authority to commence investigations into the Corporate Debtor’s financial affairs for determination of preferential and undervalued transaction as envisaged under Section 35(1)(ℓ) of IBC. The Liquidator has therefore a fiduciary and legal responsibility to the Corporate Debtor, the creditors and the Court.
An Unsuccessful Resolution Applicant has no locus to assail a Resolution Plan or its implementation – M.K. Rajagopalan Vs. S. Rajendran, RP Vasan Health Care Pvt. Ltd. – NCLAT Chennai
NCLAT held that the Petitioner / Appellant being an Unsuccessful Resolution Applicant has no locus to assail a Resolution Plan or its implementation, coupled with a candid fact that he is not a Stakeholder, as per Section 31 (1) of the IBC, 2016, in relation to the Corporate Debtor, this Tribunal, without any haziness, holds that the Petitioner / Appellant, is not an Aggrieved Person, coming within the ambit of Section 61(1) of the IBC, 2016, especially, when he is not a privy to the Resolution Plan.
If an incomplete or improper authorisation is found in CIRP application, Adjudicating Authority, in compliance of proviso to Section 7 of IBC, 2016 is required to issue notice and provide an opportunity to rectify the defects – Rupesh Anand Vs. Anup Tripathi – NCLAT Chennai
NCLAT held that from the reading of the ingredients of Section 7 of the Code, if an application, filed under Section 7 of the I & B Code, 2016, is found to be incomplete, then the Adjudicating Authority, in compliance of proviso to Section 7 of the I & B Code, 2016 is required to issue notice and provide an opportunity to rectify the defects, within seven days, failing which, the petition, can be rejected. An incomplete or improper authorisation may vitiates the entire proceedings rendering legal action, devoid of authority. It is therefore, felt that the rectification of defects, if any, is of utmost importance and cannot be ignored. The requirement of Section 7 of the Code is that the application should be complete in all respects and in case of defects, the Adjudicating Authority (Tribunal) should provide an opportunity, to the Applicant, for rectifying these defects, before accepting/ rejecting of the application.
