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Whether the payment of interest free Security Deposit as advance for use of the Leased premises falls within the purview of Operational Debt as defined under Section 5(21) of the IBC? – Corob India Pvt. Ltd. Vs. Mr. Birendra Kumar Agrawal RP of Renaissance Indus Infra Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:
(i) The Security Deposit had been advanced as interest free Security Deposit. The Security Deposit was never disbursed or deposited against consideration for time value of money. Only in the event of failure to refund the Security Deposit from the date such refund was due that the deposit was to be returned with interest of 18%. It was bereft of all elements of commercial borrowing. Clearly therefore, the present transaction was not disbursement for time value of money and does not fall within the canvas of financial debt as defined under Section 5(8) of the IBC.

(ii) The sum of Security Deposit made in the facts of the present case which was given in the form of advance by the Appellant to the Corporate Debtor for prospective occupation of the leased premises on rent, this deposit was in the nature of advance for use of the premises. Hence, the payment of Security Deposit as advance for use of the Leased premises is clearly included in the “provision of services” and therefore falls within the purview of operational debt.

Whether the payment of interest free Security Deposit as advance for use of the Leased premises falls within the purview of Operational Debt as defined under Section 5(21) of the IBC? – Corob India Pvt. Ltd. Vs. Mr. Birendra Kumar Agrawal RP of Renaissance Indus Infra Pvt. Ltd. – NCLAT New Delhi Read Post »

In terms of Section 31 of IBC, the scope of enquiry by the Adjudicating Authority is confined to scrutinizing whether Section 30(4) has been complied with or not – Sita Chaudhary Suspended Director of Haryana Telecom Ltd. Vs. Haryana Telecom Ltd. through RP and Ors. – NCLAT New Delhi

Hon’ble NCLAT held that:
(i) The Adjudicating Authority with the limited powers of judicial review available to it, cannot substitute its views with the commercial wisdom of the CoC in rejecting the resolution plan unless it is found it to be contrary to the express provisions of law or there is sufficient basis which establishes material irregularity. There can be no fetters on the commercial wisdom of CoC and the supremacy of commercial wisdom of CoC has been reaffirmed time and again by the Hon’ble Supreme Court in a catena of judgements.
(ii) When the Appellant did not challenge the CIRP admission and constitution of CoC at the right point of time, it cannot raise the matter belatedly and make it a ground for rejection of the duly approved resolution plan.
(iii) When the CoC has approved a Resolution Plan by 100% voting share after considering its feasibility and viability, such decision of CoC is a commercial decision and it is settled law that commercial wisdom of CoC in approving the Resolution Plan is not to be interfered in the exercise of jurisdiction of judicial review either by the Adjudicating Authority or by NCLAT in the exercise of its appellate powers.

In terms of Section 31 of IBC, the scope of enquiry by the Adjudicating Authority is confined to scrutinizing whether Section 30(4) has been complied with or not – Sita Chaudhary Suspended Director of Haryana Telecom Ltd. Vs. Haryana Telecom Ltd. through RP and Ors. – NCLAT New Delhi Read Post »

To bring any existence of debt within the ambit of the definition of “Financial Debt”, disbursement of money is sine qua non – Kesoram Industries Ltd. Vs. Pratim Bayal, RP of Birla Tyres Ltd. – NCLT Kolkata Bench

NCLT Kolkata Bench held that:
(i) It is also a settled position of law that to establish a “financial debt”, the statement of the disbursement of money is essential. To bring any existence of debt within the ambit of the definition of “Financial Debt”, disbursement of money is sine qua non and in the instant application nothing in record substantiates that the money has been disbursed by the Applicant to Corporate Debtor.
(ii) Though it is shown as an “Inter-Company Debt”, the applicant has failed to prove the transaction as a deposit of money or a loan from the Applicant’s account to the Corporate Debtor’s Account before the initiation of CIRP as well as a relationship between the parties which proves that it is a mere transaction of money from one account to another account.

To bring any existence of debt within the ambit of the definition of “Financial Debt”, disbursement of money is sine qua non – Kesoram Industries Ltd. Vs. Pratim Bayal, RP of Birla Tyres Ltd. – NCLT Kolkata Bench Read Post »

The position of an agent of Receiver cannot be termed as possession or occupation contemplated by Section 14(1)(d) of the IBC – Urshila Ajit Kerkar Vs. Office of the Court Receiver, High Court, Bombay & Anr. – Bombay High Court

Hon’ble High Court held that:
(i) on meaningful reading of Section 14(1)(d), it is clear that recovery of property by owner/lessor where such property is “occupied by” corporate debtor is not permissible when a moratorium under IBC is declared. Section 14(1)(d) does not deal with any of the assets or legal right or beneficial interest in such assets of the corporate debtor, but what is referred to therein is the “recovery of any property”. Moreover, the bar under clause (d) is attracted only when the owner or lessee is seeking recovery of property. In the facts of the case, the receiver is seeking property from an agent of the receiver on default of payment of royalty amount. Such proceedings cannot termed as proceedings for the recovery of property by the owner or lessee.
(ii) However, possession of the receiver’s agent cannot be termed as an asset of a company. Applying section 14 of the IBC to the receiver’s agent would amount to reading something into statute that the legislature never intended. However, in the facts of the case, having recorded a finding that the possession of the agent cannot be termed as possession within the meaning of Clause (d) of Section 14 (1) of the IBC, it is not necessary to deal into detail the implications of Section 14 of the IBC.

The position of an agent of Receiver cannot be termed as possession or occupation contemplated by Section 14(1)(d) of the IBC – Urshila Ajit Kerkar Vs. Office of the Court Receiver, High Court, Bombay & Anr. – Bombay High Court Read Post »

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