Judgment of Day-IBC

If CIRP having come to an end and liquidation has not been ordered, no further steps are required to be taken by RP, CIRP proceedings may be treated to be closed and Resolution Professional cannot file application for dissolution under Section 54 of IBC | RP can intimate the RoC for striking off the name of Corporate Debtor from the Register of the Companies – Janak Jagjivan Shah RP Rainbow Infrabuild Pvt. Ltd. Vs. CoC of Rainbow Infrabuild Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) CIRP having been unsuccessful and no liquidation order having been passed, recourse to Section 54 of IBC, could not have been taken by the RP
(ii) When the entity, who has initiated the CIRP is not ready to proceed any further and CIRP period having already come to an end, no further steps were required in the CIRP of the Corporate Debtor and RP could have closed the matter by intimating the Registrar of Companies for striking off the name of Company from the Register of the Companies.
(iii) The CIRP having come to an end and liquidation has not been ordered, no further steps are required to be taken by the RP. The CIRP proceedings may be treated to be closed.

If CIRP having come to an end and liquidation has not been ordered, no further steps are required to be taken by RP, CIRP proceedings may be treated to be closed and Resolution Professional cannot file application for dissolution under Section 54 of IBC | RP can intimate the RoC for striking off the name of Corporate Debtor from the Register of the Companies – Janak Jagjivan Shah RP Rainbow Infrabuild Pvt. Ltd. Vs. CoC of Rainbow Infrabuild Pvt. Ltd. – NCLAT New Delhi Read Post »

Supreme Court sets Guidelines for Withdrawal and Settlement of Insolvency Cases under Section 12A of IBC read with CIRP Regulation 30A | Withdrawal application shall be moved through Resolution Professional only and NCLT Rule 11 or NCLAT Rule 11 or even the power under Article 142 no longer arises – GLAS Trust Company LLC Vs. BYJU Raveendran and Ors. – Supreme Court

In this landmark decision, Hon’ble Supreme Court covers following issues:

i. Nature of the proceedings after admission of the application: proceeding in personam or in rem.
ii. Legal framework for withdrawal and settlement of claims.
iii. Four stages of withdrawal of Insolvency cases: A procedure prescribed under the existing framework.
iv. Comprehensive framework to deal with withdrawal and settlement: Rule 11 of the NCLT Rules, or Rule 11 of the NCLAT Rules or even the power under Article 142 no longer arises.
v. Withdrawal application u/s 12A through IRP only, NCLT conducts an adjudicatory exercise and the procedure is not a mere technicality.
vi. Inherent Powers under Rule 11 of NCLT/ NCLAT Rules, 2016.
vii. Meaning of the phrase “any person aggrieved” under Section 61 and Section 62 of IBC.

Supreme Court sets Guidelines for Withdrawal and Settlement of Insolvency Cases under Section 12A of IBC read with CIRP Regulation 30A | Withdrawal application shall be moved through Resolution Professional only and NCLT Rule 11 or NCLAT Rule 11 or even the power under Article 142 no longer arises – GLAS Trust Company LLC Vs. BYJU Raveendran and Ors. – Supreme Court Read Post »

It is not permissible for the Registrar, NCLT, to go into the merits of a petition filed u/s 94 or 95 of IBC and/or to decide about maintainability | The Registrar does not discharge any adjudicatory or judicial function at this stage | Receiving of insolvency petitions is ministerial and procedural in nature | Adjudicatory process starts at the stage of Section 100 of the Insolvency Code, 2016 – Buoyant Technology Constellations Pvt. Ltd. Vs. Manyata Reallty and Ors. – Karnataka High Court

Hon’ble Karnataka High Court held that the function of registering the applications filed under Section 5 of the Insolvency Code is a ministerial function and a procedural act. This stage does not store any adjudicatory process. The role of the Registrar while registering the application under Section 95 of the Code is not adjudicatory in nature and this duty of the Registrar, NCLT was in no way adjudicatory trapping. Application of judicial mind towards merits has no place in discharge of a ministerial or clerical function. For the Registrar, it is not permissible at the time of registering the petition which is filed by the debtor or creditor. Adjudicatory function of adjudicatory authority commences under Part III of the Code, 2016 after submission of a recommendatory report by the resolution professional. The Registrar at the stage of receipt of the petition filed under Section 94 or 95 of the Code by the debtor or creditor, which is a stage even prior to Section 97 and 99 of the Code can decide on the maintainability of the petition by entering into merit and thus the realm of adjudication.

It is not permissible for the Registrar, NCLT, to go into the merits of a petition filed u/s 94 or 95 of IBC and/or to decide about maintainability | The Registrar does not discharge any adjudicatory or judicial function at this stage | Receiving of insolvency petitions is ministerial and procedural in nature | Adjudicatory process starts at the stage of Section 100 of the Insolvency Code, 2016 – Buoyant Technology Constellations Pvt. Ltd. Vs. Manyata Reallty and Ors. – Karnataka High Court Read Post »

Is a disputed claim included in the definition of ‘claim’ under Section 3(6) of the Insolvency and Bankruptcy Code, 2016? – Gujarat State Road Development Corporation Vs. Mr. Avil Menezes RP of Valecha Kachchh Toll Roads Ltd. and Ors. – NCLT Mumbai Bench

In this important decision of Hon’ble NCLT Mumbai Bench following issues are clarified:

A. Is disputed claim included in the definition of claim under Section 3(6) of the Insolvency and Bankruptcy Code, 2016.
B. Duty cast upon IRP/RP is not confined to the administrative function of the collection of claims but to verify the claims.
C. A debt not capable of verification by IRP/RP based on the documents cannot be admitted.
D. Does Concession granted by Applicant fall within the definition of operational debt.
E. Treatment of claims and counterclaims under the Resolution Plan.
F. Admission of subsequent claim or modification of claim cannot have the effect of re-running the CIRP de novo.

Is a disputed claim included in the definition of ‘claim’ under Section 3(6) of the Insolvency and Bankruptcy Code, 2016? – Gujarat State Road Development Corporation Vs. Mr. Avil Menezes RP of Valecha Kachchh Toll Roads Ltd. and Ors. – NCLT Mumbai Bench Read Post »

Does interim moratorium under Section 96 of IBC on a Partner extend to the Assets of the Partnership Firm? – Ramesh Kumar Chugh Vs. Assets Care & Construction Enterprises Ltd. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT has interpreted the Section 96 of IBC and held that:

(i) The interim moratorium under Section 96(1)(b)(ii) creates a prohibition on the other creditors of the debtor from initiating any legal action in respect of the debt for which Section 95 has been initiated.
(ii) The moratorium imposed under Section 96 of IBC, 2016, would strictly apply to the security interest created by the Appellant in his personal capacity and will not extend to the cover the subject property being the property of the partnership firm against which Section 95 had not been invoked.
(iii) The assets held in the name of the partnership firm is not the personal property of the Appellant and cannot be subjected to the provisions of interim moratorium merely because a Section 95 application has been filed against a partner of the firm in respect of a personal guarantee given for a party other than the partnership firm.
(iv) Merely because notice for dissolution of the partnership firm was given by the Appellant entailing the devolution of liabilities of the partnership on the partners, that the partnership firm can in turn be said to be saddled with the liabilities arising out of the personal guarantee of the Appellant.

Does interim moratorium under Section 96 of IBC on a Partner extend to the Assets of the Partnership Firm? – Ramesh Kumar Chugh Vs. Assets Care & Construction Enterprises Ltd. – NCLAT New Delhi Read Post »

Distinction between Review Petition and Recall Petition | The NCLT & NCLAT have inherent powers to recall order but have no power to review its order – Aircastle (Ireland) Ltd. Vs. Mr. Ashish Chawchharia, RP of Jet Airways (India) Ltd. and Ors. – NCLAT New Delhi

Hon’ble NCLAT summarises points on review and recall petition.

(i) Resolution Professional should not be treated as functus officio.
(ii) The power to recall a judgment will not be exercised when the ground for reopening the proceedings or vacating the judgment was available to be pleaded in the original action but was not done or where a proper remedy in some other proceeding such as by way of appeal or revision was available but was not availed. The right to seek vacation of a judgment may be lost by waiver, estoppel or acquiescence.
(iii) However, the Rule cannot be invoked to revisit the findings and it is not open to re-examine the findings. The mistake/error must be apparent on the face of the record and must have occurred due to oversight, inadvertence or human error.
(iv) Once the issue has been corrected by NCLT through suitable corrections, the NCLT has recorded consequential correction in the Order. This is not in nature of review of its order but rather recall.

Distinction between Review Petition and Recall Petition | The NCLT & NCLAT have inherent powers to recall order but have no power to review its order – Aircastle (Ireland) Ltd. Vs. Mr. Ashish Chawchharia, RP of Jet Airways (India) Ltd. and Ors. – NCLAT New Delhi Read Post »

Whether an insolvency petition under Section 95 of the IBC, 2016 can be filed against a Partnership Firm | Whether a Partnership Firm is covered under the definition of Personal Guarantor under Section 5(22) of Insolvency Code – Union Bank of India Vs. KMR Enterprises and Anr. – NCLT Hyderabad Bench

The Hon’ble NCLT Hyderabad Bench has carefully perused the notification issued by Ministry of Corporate Affairs on 15.11.2019, Section 79(1) of IBC, 2016 and the Section 5(22) of IBC, 2016 and held that conjoint reading of all the above provisions clearly conveys that Section 95 proceedings cannot be initiated against the partnership firm which is not an individual.

Whether an insolvency petition under Section 95 of the IBC, 2016 can be filed against a Partnership Firm | Whether a Partnership Firm is covered under the definition of Personal Guarantor under Section 5(22) of Insolvency Code – Union Bank of India Vs. KMR Enterprises and Anr. – NCLT Hyderabad Bench Read Post »

Whether both the certified copy which is made available free of cost and the certified copy which is made available on the payment of costs, are treated as certified copies for the purpose of NCLT Rule 50? – State Bank of India Vs. India Power Corporation Ltd. – Supreme Court

Hon’ble Supreme Court held that:
(i) The important point to note is that both the certified copy which is provided free of cost as well as the certified copy which is made on an application in that behalf are treated as certified copies for the purposes of Rule 50.
(ii) Both the certified copy which is made available free of cost as well as the certified copy which is made available on the payment of costs, are treated as certified copies for the purpose of Rule 50.
(iii) A litigant who does not apply for a certified copy cannot then fall back and claim that he was awaiting the grant of a free copy to obviate the bar of limitation.
(iv) The provisions of Rule 50 of the NCLT Rules place both the free certified copy as well as the certified copy which is applied for on payment of fees on the same footing.

Whether both the certified copy which is made available free of cost and the certified copy which is made available on the payment of costs, are treated as certified copies for the purpose of NCLT Rule 50? – State Bank of India Vs. India Power Corporation Ltd. – Supreme Court Read Post »

Whether Operational Creditor has priority in payment in distribution under Section 53 of IBC over Unsecured Financial Creditor who is a related party of the Corporate Debtor? – Times Innovative Media Ltd. Vs. Pawan Kumar Aggarwal (Liquidator) and Anr. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) On plain reading of Section 53(1), it is clear that financial debts owed to unsecured creditors ranked higher than debt of operational creditor.
(ii) Scheme of Regulations 2016 does not indicate that related party is excluded from filing a claim.
(iii) Appellant cannot claim any priority in distribution of assets of the corporate debtor as compared to unsecured financial creditor.

Whether Operational Creditor has priority in payment in distribution under Section 53 of IBC over Unsecured Financial Creditor who is a related party of the Corporate Debtor? – Times Innovative Media Ltd. Vs. Pawan Kumar Aggarwal (Liquidator) and Anr. – NCLAT New Delhi Read Post »

Any payment made voluntarily by Corporate Debtor towards electricity dues after insolvency commencement date/ during moratorium under Section 14 of IBC cannot be appropriated towards pre-CIRP electricity charges – Uttarakhand Power Corporation Ltd. Vs. Shirdi Industries Ltd. and Anr. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT held that:

(i) Merely because the Corporate Debtor had paid the pre-CIRP dues, the Appellant cannot insist that this payment has to be accounted only towards payment of pre-CIRP dues and that this amount cannot be subjected to adjustment against current CIRP electricity dues.
(ii) Once moratorium had been declared, it was not open to the Corporate Debtor to appropriate any amount from its account not even to clear pre-CIRP dues as it did not fall within the definition of the “insolvency resolution process costs” as defined under Section 5(13) of the IBC.
(iii) Even if the electricity dues of the pre-CIRP period had been paid voluntarily by the Corporate Debtor, since the amount was paid after the commencement of the CIRP, Section 14 which provides for moratorium would have come into play and no pre-CIRP payments could have been made out of the assets of the Corporate Debtor during CIRP.
(iv) If the sum which had been paid voluntarily not been reappropriated towards assets of the Corporate Debtor, it would have amounted to preferential treatment to the Appellant and attracted Section 43 of the IBC vitiating the resolution process.

Any payment made voluntarily by Corporate Debtor towards electricity dues after insolvency commencement date/ during moratorium under Section 14 of IBC cannot be appropriated towards pre-CIRP electricity charges – Uttarakhand Power Corporation Ltd. Vs. Shirdi Industries Ltd. and Anr. – NCLAT New Delhi Read Post »

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