Critique of the NCLT Judgment on Corporate Debtor not being eligible to be treated as an MSME in view of the notification issued on 01.06.2020 – Mr. Sai Sumed Yasaswi Kondapalli

This article critiques the judgment in the case of POSCO India Pune Processing Center Pvt Ltd vs. Dhaval Jitendrakumar Mistry RP for Poggenamp Nagarsheth Powertronics Pvt Ltd (2021) ibclaw.in 01 NCLT, where the Hon’ble NCLT Ahmedabad Bench ruled that a Corporate Debtor which was not an MSME on the date of initiation of CIRP, cannot assume itself to be one later due to change in MSME classification norms vide notification dated 01.06.2020.

Whether the provisions of Section 194-IA of the Income Tax Act, 1961 are inconsistent with Section 53(1)(e) of the Insolvency and Bankruptcy Code, 2016? – NCLAT Landmark Judgment

When the Company is wound up under the orders of Court or otherwise the return shall be verified by the Liquidator referred to in Sub-Section 1 of Section 178 of the IT Act, during CIRP under Section 7, 9 or 10 of the Code, the return shall be verified by the Insolvency Professional appointed by the Adjudicating Authority. However, there is no such provision in the IT Act, Code or IBBI (Liquidation Process Regulation, 2016) that the Liquidator of the Company in Liquidation under the Code is required to file Income Tax Return. For filing of return, the financial statements are required to be annexed but the Code/IBBI (Liquidation Process Regulation 2016) does not assign a duty on the Liquidator to prepare financial statements. NCLAT holds that we are of the view that the Liquidator of a Company in liquidation under the Code is not required to file Income Tax Return, then there is no question of claiming refund of TDS deducted under Section 194 IA of the IT Act.(p22-25) In regard to recovery of the Government dues (Including Income Tax) from the Company in Liquidation under the Code, there is inconsistency between Section 194IA of the IT Act and Section 53(1) (e) of the Code therefore, by virtue of Section 238 of the Code, Section 53(1)(e) of the Code shall have overriding effect on the provisions of the Section 194 IA of the IT Act. Otherwise also Section 53 starts with a non-obstante clause, whereas Section 194 IA of the IT Act, does not start with a non-obstante clause, and it would necessarily be subject to overriding effect of the Code and therefore, there was no requirement to amend the Section 194 IA of the IT Act.

Contempt Conundrum: Conflicting Opinions of NCLT on Applicability of Contempt Provisions in IBC – By Mr. Sai Sumed Yasaswi Kondapalli and CA. Roustam Sanyal

Section 425 of the Companies Act, 2013 confers to the NCLT and the National Company Law Appellate Tribunal (‘NCLAT’), the power to punish for contempt. In light of this, there have been conflicting rulings by various benches of NCLT regarding the applicability of contempt provisions of Companies Act, 2013 to the proceedings under IBC. Those against the applicability of the power of contempt to the Adjudicating Authority while adjudicating matters relating to IBC, argue that there exists no particular provision in IBC that extends the power of contempt under section 425 of the Companies Act, 2013 to proceedings under IBC. Those for the applicability of the power, argue that by virtue of IBC appointing the NCLT as the Adjudicating Authority for matters under IBC, the NCLT naturally draws the powers conferred upon it by the Companies Act, 2013. This article goes on to examine the power of the NCLT to punish for contempt, through the lens of judicial pronouncements, and concludes that the NCLT does in fact have such a power and no new amendment or provision is required to extend the power given to the NCLT by the Companies Act, 2013.

Background of Insolvency and Bankruptcy Code, 2016 – By Adv. Sonam Malik

he bankruptcy code is a one stop solution for resolving insolvencies, which previously was a long process that did not offer an economically viable arrangement. The code aims to protect the interests of small investors and make the process of doing business less cumbersome. The Code also consolidates provisions of the current legislative framework to form a common forum for debtors and creditors of all classes to resolve Insolvency. The IBC has 255 sections and 11 Schedules.

Whether Registration & Stamping of memorandum of deposit of Title Deeds is essential for creation of a valid mortgage? – By Adv. Rohit Dubey

Article 7 of the Schedule 1A to Indian Stamp Act, 1899, as applicable to M.P. provides that, Any instrument evidencing an agreement relating to the deposit of title deeds or instruments constituting or being evidence of the title to any property, where such deposit has been made by way of security for the repayment of money advanced or to be advanced by way of loan or an existing or future debt.  The Explanation II to this Article specifically states that, “any letter, note or memorandum or writing, relating to the deposit of title deeds, whether written or made before, or at the time of, or after, the deposit of title deeds is effected, and whether it is in respect of the first loan or any subsequent loan, such loan, such letter, note, memorandum or writing shall, in the absence of any separate agreement relating to the deposit of title deeds, be deemed to be an instrument evidencing an agreement relating to the deposit of title deeds.” In simpler terms, what the explanation says is that when the terms of mortgage have been reduced to writing upon deposit of title deeds, it will be deemed to be an agreement governing the deposit of title deeds and such a written agreement is not enforceable unless duly stamped in pursuance to section 35 of the Indian Stamp Act. In this article I have provided a brief overview upon the laws applicable to creation, stamping and registration of memorandum of deposit of title deeds. But, any opinion as to any particular transaction may be different on case to case basis.

After replacement of an Interim Resolution Professional, he has no locus standi to maintain the Appeal as he cannot claim invasion of any of his legal rights & under the IBC, he is not a stake holder – Ranjeet Kumar Verma (Erstwhile IRP) Vs. Committee of Creditors of Straight Edge Contract Pvt. Ltd. (Through Resolution Professional) – NCLAT New Delhi

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Retention of records relating to Corporate Insolvency Resolution Process- IBBI Circular IBBI/CIRP/37/2021 dated 04.01.2021

An IP shall preserve copies of records generated in electronic form for a minimum period of eight years, from the date of completion of the CIRP or the conclusion of any proceeding relating to CIRP, before the Adjudicating Authority (AA), Appellate Authority or Court, or any matter pending with the Board, whichever is later.

Transfer of Winding Up Proceedings to NCLT-Resolution of Cobweb and Enigma – By Advocate Sanjiv M Shah

Shri Sanjiv M Shah, B.COM, CA, CS, ICWA, LLB-Advocate Transfer of Winding Up Proceedings to NCLT-Resolution of Cobweb and Enigma   In Action Ispat And Power Pvt. Ltd. Vs. Shyam Metalics And Energy Ltd. dated 15.12.2020 (2020) ibclaw.in 42 SC, Supreme…

The Code on Social Security, 2020 and its relevance to the Insolvency Law – By Chidambaram Ramesh

Sweeping reforms are taking place in the labour laws. The second National Commission on Labour (2002), under the chairmanship of Ravindra Varma, was assigned with the task of proposing a type of umbrella legislation to cover the unorganised workers, particularly regarding wages, hours of work, working conditions, safety and social security. The Commission reviewed the current labour legislation and proposed that it be reconsolidated into broader classes such as industrial relations, wages, social security and welfare and working conditions. It emphasised the need for uniform and adequate social security coverage to prevent compromising workers’ basic needs. It suggested the simplification and unification of current laws towards this end. As a result of these recommendations, the Parliament has enacted the Code on Social Security, 2020.

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