03/01/2024

IBC provides an enabling framework for CoC to approve a Resolution Plan which provides that all securities for any debt due to the Secured Creditors can be unconditionally released and transferred in favour of Corporate Debtor – Punjab National Bank Vs. Sandwoods Infratech Projects (P) Ltd. Through Shri Ravinder Kumar Goel, RP and Ors. – NCLAT New Delhi

In this landmark decision of Hon’ble NCLAT, the Bench clarifies that CoC can approve a resolution plan of any Corporate Debtor which provides that all securities for any debt due to the secured creditors can be unconditionally released and transferred in favour of the Corporate Debtor.
Appellant pointed out that Clauses of the resolution plan provided that all securities for any debt due to the secured creditors shall stand unconditionally released and transferred in favour of the Corporate Debtor, which would adversely affect the recovery proceedings from the guarantors and collateral securities of third parties thereby making the resolution plan arbitrary.
Hon’ble Bench holds that:
(i) The scheme as delineated by Regulation 37 of CIRP Regulations fully supports the view that if a claim is filed by a Financial Creditor and the claims of the Financial Creditor is part of the CIRP, their security interest can very well be dealt with in the resolution plan.
(ii) From the ratio laid down by this Tribunal in Edelweiss Asset Reconstruction Company Ltd. v. Mr. Anuj Jain and Ors. (2023) ibclaw.in 420 NCLAT and ICICI Bank Ltd v BKM Industries Ltd and Anr. (2023) ibclaw.in 716 NCLAT, it is amply clear that the statutory construct of the IBC read with Regulation 37 of CIRP Regulations provides an enabling framework for CoC to exercise its commercial wisdom to approve a resolution plan of any Corporate Debtor which provides that all securities for any debt due to the secured creditors can be unconditionally released and transferred in favour of the Corporate Debtor.

IBC provides an enabling framework for CoC to approve a Resolution Plan which provides that all securities for any debt due to the Secured Creditors can be unconditionally released and transferred in favour of Corporate Debtor – Punjab National Bank Vs. Sandwoods Infratech Projects (P) Ltd. Through Shri Ravinder Kumar Goel, RP and Ors. – NCLAT New Delhi Read Post »

Date of default cannot be just one day after the date of disbursement especially when there is no written agreement between the parties with regard to the terms and condition of the loan, more particularly the repayment schedule – Varanium Cloud Ltd. Vs. Rolta Pvt. Ltd. – NCLT Mumbai Bench

Hon’ble NCLT Mumbai Bench the same is not tenable. In the previous Petition, which was filed subsequent to 01.08.2019, the date of default was not claimed as 01.08.2019. Even otherwise the date of default cannot be 01.08.2019 as the last tranche was disbursed on 30.07.2019 and the date of default cannot be just one day after the date of disbursement especially when there is no written agreement between the parties with regard to the terms and condition of the loan, more particularly the repayment schedule. As stated above, the date of default cannot be changed at the whim and fancy of the Petitioner. Even otherwise the Petitioner is barred under the provisions of order 2 Rule 2 CPC as well as under Section 11 CPC as the matter on the same set of facts in respect of the same financial debt has already been finally decided in the previous Petition and the Petitioner is barred from taking any new plea in the subsequent litigation which was available to him in the first bout of litigation.

Date of default cannot be just one day after the date of disbursement especially when there is no written agreement between the parties with regard to the terms and condition of the loan, more particularly the repayment schedule – Varanium Cloud Ltd. Vs. Rolta Pvt. Ltd. – NCLT Mumbai Bench Read Post »

Under Section 19(2) of IBC, Adjudicating Authority cannot direct Suspended Board to contribute to Corporate Debtor to the extent the money is not paid by Sundry Debtors of Corporate Debtor – Mr. Mahesh Sureka RP Vs. Minesh Prints Ltd. and others – NCLT Mumbai Bench

The Resolution Professional is seeking directions for cooperation from the Sundry Debtors and the Suspended Directors in realisation of debts owed by the Sundry Debtors to the Corporate Debtor for goods sold to them prior in time.
NCLT Mumbai Bench holds that such directions are not permissible under section 19(2) and this Bench cannot direct them to co-operate. Had this Application been filed in terms of Section 66 of the Code meeting the conditions precedent provided therein, this Bench could have assumed jurisdiction to consider the prayer of the Application, if such prayer would otherwise be permissible under that Section.
The RP has lien over such Goods as “Unpaid Seller” in terms of Provisions contained in Section 47 of Sale of Goods Act, 1930. Accordingly, no specific direction is necessary from NCLT for Sunday Debtors.

Under Section 19(2) of IBC, Adjudicating Authority cannot direct Suspended Board to contribute to Corporate Debtor to the extent the money is not paid by Sundry Debtors of Corporate Debtor – Mr. Mahesh Sureka RP Vs. Minesh Prints Ltd. and others – NCLT Mumbai Bench Read Post »

When a party appears on a date which is fixed before the Court, it is presumed that the party is well aware of the proceedings, which was taken up by the Court on the said date – Srigopal Choudhary Vs. SREI Equipment Finance Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:
(i) Rule 49(2) of the NCLT Rules, 2016 entitles the Respondent to apply to the Tribunal for an order to set aside the order of ex-parte hearing, if such Respondent satisfies the Tribunal that the notice was not duly served, or that he or they were prevented by any sufficient cause from appearing, the Tribunal may make an order setting aside the ex-parte hearing against him or them, upon such terms as it thinks fit.
(ii) It is clear from Rule 49, sub-rule (2) that ex-parte order can be recalled on two grounds, firstly, when notice was not served or that the Respondent/ Applicant was prevented by any sufficient cause from appearing when the Application was called for hearing.
(iii) The Adjudicating Authority in the impugned order, rejected the Recall Application holding that no sufficient case was shown for exercising the power under Rule 49 of the NCLT Rules, 2016.

When a party appears on a date which is fixed before the Court, it is presumed that the party is well aware of the proceedings, which was taken up by the Court on the said date – Srigopal Choudhary Vs. SREI Equipment Finance Ltd. – NCLAT New Delhi Read Post »

Section 7(5)(a) of IBC provides that only upon Adjudicating Authority being satisfied that default on a debt had occurred and that the threshold for filing such an application had been met and that the application u/s 7(2) was complete, it may then only admit the Corporate Debtor into insolvency – Vijay Jain and Ors. Vs. Laxmi Foils Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:
(i) Section 7(5)(a) provides that only upon the Adjudicating Authority being satisfied that default on a debt had occurred and that the threshold for filing such an application had been met and that the application under Section 7(2) was complete, it may then only admit the Corporate Debtor into CIRP.
(ii) Upon the Adjudicating Authority being satisfied that a debt was due and that default had occurred, it was bound to commit the Corporate Debtor into insolvency.

Section 7(5)(a) of IBC provides that only upon Adjudicating Authority being satisfied that default on a debt had occurred and that the threshold for filing such an application had been met and that the application u/s 7(2) was complete, it may then only admit the Corporate Debtor into insolvency – Vijay Jain and Ors. Vs. Laxmi Foils Pvt. Ltd. – NCLAT New Delhi Read Post »

Whether Section 30(2)(b)(ii) of IBC, 2016 entitles Dissenting Financial Creditor to be paid the minimum value of its security interest? | Contradiction in India Resurgence ARC Pvt. Ltd. and CoC of Essar Steel India Ltd. and Jaypee Kensington Boulevard judgments | Refers to Larger Bench – DBS Bank Ltd. Singapore Vs. Ruchi Soya Industries Ltd. and Another – Supreme Court

Hon’ble Supreme Court holds that:
(i) A secured creditor cannot claim preference over another secured creditor at the stage of distribution on the ground of a dissent or assent, otherwise the distribution would be arbitrary and discriminative. The purpose of the amendment was only to ensure that a dissenting financial creditor does not get anything less than the liquidation value, but not for getting the maximum of the secured assets.
(ii) There is a contradiction in the reasoning given in the judgment of this Court in India Resurgence ARC Pvt. Ltd. v. Amit Metaliks Ltd. & Anr. (2021) ibclaw.in 87 SC which is in discord with the ratio decidendi of the decisions of the three Judge Bench in CoC of Essar Steel India Limited v. Satish Kumar Gupta & Ors. (2019) ibclaw.in 07 SC and Jaypee Kensington Boulevard Apartments Welfare Association & Ors. v. NBCC (India) Ltd. & Ors. (2021) ibclaw.in 63 SC.
(iii) Section 53(1) is referred to in Section 30(2)(b)(ii) with the purpose and objective that the dissenting financial creditor is not denied the amount which is payable to it being equal to the amount of value of the security interest.
(iv) The dissenting financial creditor has to statutorily forgo and relinquish his security interest on the resolution plan being accepted, and his position is same and no different from that of a secured creditor who has voluntarily relinquished security and is to be paid under Section 53(1)(b)(ii) of the Code.
(v) It would be appropriate and proper if the question framed at the beginning of this judgment is referred to a larger Bench.

Whether Section 30(2)(b)(ii) of IBC, 2016 entitles Dissenting Financial Creditor to be paid the minimum value of its security interest? | Contradiction in India Resurgence ARC Pvt. Ltd. and CoC of Essar Steel India Ltd. and Jaypee Kensington Boulevard judgments | Refers to Larger Bench – DBS Bank Ltd. Singapore Vs. Ruchi Soya Industries Ltd. and Another – Supreme Court Read Post »

Whether the provisions of IBC relating to Corporate Insolvency Resolution Process (CIRP) recognise the Principle of Insolvency Set-off | Interpretation of Regulation 29 of Liquidation Process Regulations, 2016 – Bharti Airtel Ltd. and Another Vs. Vijaykumar V. Iyer and Others – Supreme Court

In this landmark judgment on set-off, Hon’ble Supreme Court describes five different categories to the term ‘set-off’, namely, (a) statutory or legal set-off; (b) common law set-off; (c) equitable set-off; (d) contractual set-off; and (e) insolvency set-off and interprets various provision related to set-off and IBC.
The summary of this landmark judgment is divided in following points:
A. Meaning of set-off and types and principles of set-off
B. Analysis of the provisions of IBC relating to set off
C. Insolvency set-off under Liquidation Regulation 29 and Mutual dealings
D. Principle of pari passu
E. Application of Insolvency set-off to the Corporate Insolvency Resolution Process (CIRP)
F. Other provisions of the Code do not also support principle of insolvency set-off
G. Conclusion

Whether the provisions of IBC relating to Corporate Insolvency Resolution Process (CIRP) recognise the Principle of Insolvency Set-off | Interpretation of Regulation 29 of Liquidation Process Regulations, 2016 – Bharti Airtel Ltd. and Another Vs. Vijaykumar V. Iyer and Others – Supreme Court Read Post »

Mere fact that application for approval of Resolution Plan is pending for consideration by NCLT does not entitle to file an IA for acceptance of claim after more than one and a half year of the approval of Resolution Plan by CoC – D S Kulkarni & Associates Vs. Manoj Kumar Aggarwal RP of D S Kulkarni Developers Ltd. – NCLAT New Delhi

In this case, Resolution Plan was approved by CoC on 13.08.2021 and the Applications were filed by the Appellant(s) in February 2023, i.e., more than one and a half year after approval of the Resolution Plan.
Hon’ble NCLAT holds that:
(i) The MoU, which is the basic document submitted by the Appellant to prove financial debt, does not indicate that transactions are covered by Section 5, sub-section (8) of the Code.
(ii) The mere fact that Application for approval of Resolution Plan is pending for consideration by the Adjudicating Authority does not entitle the Appellant(s) to file an Application for acceptance of their Claim after more than one and a half year of the approval of the Resolution Plan by the CoC.

Mere fact that application for approval of Resolution Plan is pending for consideration by NCLT does not entitle to file an IA for acceptance of claim after more than one and a half year of the approval of Resolution Plan by CoC – D S Kulkarni & Associates Vs. Manoj Kumar Aggarwal RP of D S Kulkarni Developers Ltd. – NCLAT New Delhi Read Post »

The moment Adjudicating Authority is satisfied that a default has occurred, Section 7 application must be admitted unless it is incomplete – Narendrabhai Vs. PNB Housing Finance Ltd. and Anr. – NCLAT New Delhi

Hon’ble NCLAT held that under the ambit of Section 7 of the Code, the Adjudicating Authority is to only determine whether a ‘default’ has occurred and whether the ‘debt’, which may still be disputed, was due and remained unpaid. A debt may not be due if it is not payable in law or in fact. The moment the Adjudicating Authority is satisfied that a default has occurred, the Application must be admitted unless it is incomplete.

The moment Adjudicating Authority is satisfied that a default has occurred, Section 7 application must be admitted unless it is incomplete – Narendrabhai Vs. PNB Housing Finance Ltd. and Anr. – NCLAT New Delhi Read Post »

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