01/02/2021

There exists a dispute between the parties which are prior to issuance of Demand Notice, neither the Adjudicating Authority nor this Appellate Tribunal, in summary jurisdiction, can go into those issues which otherwise require a regular trial – M/s. M + R Logistics (India) Private Limited Vs. M/s AGA Publications Limited – NCLAT New Delhi

NCLAT referring Mobilox Innovations case held that As per the decision of the Hon’ble Apex Court, the Corporate Debtor (Respondent in this case) must bring to the notice of Operational Creditor, the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute. In the present case, the Respondent very well brought to the notice of the Appellant with regard to the existence of dispute much prior to filing Section 9 Application. Therefore, the Judgment of Hon’ble Apex Court squarely applicable to the facts of present Case.(p20)

There exists a dispute between the parties which are prior to issuance of Demand Notice, neither the Adjudicating Authority nor this Appellate Tribunal, in summary jurisdiction, can go into those issues which otherwise require a regular trial – M/s. M + R Logistics (India) Private Limited Vs. M/s AGA Publications Limited – NCLAT New Delhi Read Post »

There is no termination of contract from either of the parties, therefore, the contract still subsists and the claim is within limitation – Srinivasa Reddy Velagala, Director, K.P.R. Chemicals Limited Vs. Sravanthi Infratech Pvt. Ltd. – NCLAT New Delhi

Learned Counsel for the Appellant relied upon the decision of Hon’ble Apex Court in B.K. Educational Services Pvt. Ltd. Vs. Paras Gupta & Associate, [2018] ibclaw.in 32 SC and Vashdeo R. Bhojwani Vs. Abhudaya Co-operative Bank Ltd. [2019] ibclaw.in 15 SC citing that the period of limitation for Applications seeking initiation of CIRP under Sections 7 & 9 of IBC is covered under Article 137 of the Limitation Act and therefore three years period to be taken into consideration from the date when default occurs for the purpose of limitation. It is reiterated that when we already held that there is no termination of contract from either of the parties, therefore, the contract still subsists and the claim is within limitation. NCLAT held that the default has arisen out of EPC Contract, which itself is a continuing contract. Even from the Demand Notice dated 02.07.2018 in particulars of operational debt at column-1, the Respondent had clearly stated that the debt fell due on 24.12.2010 and the last payment made to the Respondent was on 25.02.2011 through RTGS. It is also mentioned that the debt continues to fall even today as the EPC contract between the Appellant and Respondent never terminated by either parties.

There is no termination of contract from either of the parties, therefore, the contract still subsists and the claim is within limitation – Srinivasa Reddy Velagala, Director, K.P.R. Chemicals Limited Vs. Sravanthi Infratech Pvt. Ltd. – NCLAT New Delhi Read Post »

The Adjudicating Authority is required to pass an order of admission or rejection qua an application under Section 7 of the Code within 14 days of the receipt of application – Vibrant Buildwell Pvt. Ltd. Vs. Dilwara Leasing and Investment Ltd. – NCLAT New Delhi

Around 40 days have been availed by the Corporate Debtor for filing reply but despite the same, no reply had been forthcoming. The mandate of Section 7(5) of the Code is loud and clear. The Adjudicating Authority is required to pass an order of admission or rejection qua an application under Section 7 of the Code within 14 days of the receipt of application. This mandate cannot be overlooked to set aside the impugned order and make room for further adjournment. The task assigned to the Adjudicating Authority at the stage of admission of application is summary in nature as it is supposed to only satisfy itself in regard to financial debt and default on the part of the Corporate Debtor besides looking to the aspect of completion of application. NCLAT held that acceding to Appellant’s prayer would be going against the mandate of law, which even if it held to be directory, furnishes the guidelines so that object of Code and time frame envisaged under it for completion of CIRP is achieved.

The Adjudicating Authority is required to pass an order of admission or rejection qua an application under Section 7 of the Code within 14 days of the receipt of application – Vibrant Buildwell Pvt. Ltd. Vs. Dilwara Leasing and Investment Ltd. – NCLAT New Delhi Read Post »

Only those Financial Creditors that are related parties in praesenti would be debarred from CoC under the first proviso to Section 21(2), those related party Financial Creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder – Phoenix Arc Pvt. Ltd. Vs. Spade Financial Services Limited & Ors. – Supreme Court

An issue of interpretation in relation to the first proviso of Section 21(2) is whether the disqualification under the proviso would attach to a financial creditor only in praesenti, or if the disqualification also extends to those financial creditors who were related to the corporate debtor at the time of acquiring the debt. Thus, facially, it would appear that the use of the simple present tense in the first proviso to Section 21(2) indicates that the disqualification applies in praesenti. Furthermore, this interpretation would also be supported by a reading of the first proviso to Section 21(2), in light of the definition of ‘related party’ under Section 5(24), which uses phrases such as ‘is accustomed to act’ or ‘is associated’ to define a related party in the present tense.(p82 & 84).

While the default rule under the first proviso to Section 21(2) is that only those financial creditors that are related parties in praesenti would be debarred from the CoC, those related party financial creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder. Mr Kaul has argued, correctly in our opinion, that if this interpretation is not given to the first proviso of Section 21(2), then a related party financial creditor can devise a mechanism to remove its label of a ‘related party’ before the Corporate Debtor undergoes CIRP, so as to be able to enter the CoC and influence its decision making at the cost of other financial creditors. (p95)

Only those Financial Creditors that are related parties in praesenti would be debarred from CoC under the first proviso to Section 21(2), those related party Financial Creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder – Phoenix Arc Pvt. Ltd. Vs. Spade Financial Services Limited & Ors. – Supreme Court Read Post »

If Corporate Debtor did not choose to appear in response to the notice issued upon it and did not take stand as regards a pre-existing dispute qua the operational debt, it cannot be heard to say that no opportunity of being heard has been provided to it – Ravinder Kumar Kalra Vs. Ricela Health Foods Limited & Ors. – NCLAT New Delhi

The Adjudicating Authority is obligated under law to issue a limited notice to Corporate Debtor at the pre-admission stage of application filed under Section 9 of the I&B Code. Under Section 9(5), the Adjudicating Authority is required to pass an order of admission on being satisfied about completion of application and there being an unpaid operational debt and default in its payment. The object of limited notice is to enable the Adjudicating Authority to satisfy itself that there is no pre-existing dispute qua the operational debt and no suit or arbitration proceeding in relation to such dispute was pending before the receipt of demand notice by Corporate Debtor as contemplated under Section 8(1) of the I&B Code. If the Corporate Debtor did not choose to appear in response to the notice issued upon it and did not take stand as regards a pre-existing dispute qua the operational debt, it cannot be heard to say that no opportunity of being heard has been provided to it. Viewed in this perspective, consideration of issue of maintainability by the Adjudicating Authority would be of no consequence if the same were neither raised in reply to the demand notice nor in reply to notice served upon the Respondent. The impugned order dated 15th December, 2020 was limited to dismissal of I.A. No. 283/2020 seeking setting aside of ex-parte order dated 17th February, 2020 culminating in passing of order of admission dated 27th February, 2020 limited to the ground of service of notice being invalid. Such ground not having weighed with the Adjudicating Authority, we find no infirmity in its dismissal in terms of the impugned order.

If Corporate Debtor did not choose to appear in response to the notice issued upon it and did not take stand as regards a pre-existing dispute qua the operational debt, it cannot be heard to say that no opportunity of being heard has been provided to it – Ravinder Kumar Kalra Vs. Ricela Health Foods Limited & Ors. – NCLAT New Delhi Read Post »

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