04/09/2024

Fund raised by issuing Subsidiary’s Compulsorily Convertible Preference Shares indemnified by Corporate Debtor to construct flats over land owned by Corporate Debtor under the Construction Contract entered into between Subsidiary Company and Corporate Debtor is Financial Debt under IBC – IIRF India Realty XII Ltd. and Anr. Vs. Srigopal Choudhary, RP of Shree Ram Urban Infrastructure Ltd. and Ors. – NCLT Mumbai Bench

In this case, Applicants invested in the shares of Subsidiary based on assurances provided by the Corporate Debtor as well as Subsidiary and these funds were ultimately used for the benefit of the Corporate Debtor.

Hon’ble NCLT Mumbai Bench held that:

(i) Adjudicating Authority has no hesitation to say that the amount paid under the transaction of subscription to CCPS had the commercial effect of borrowing.
(ii) Contravention, if any taken place, or bar under FEMA cannot be a ground to characterize a transaction to hold it not be in nature of a debt, if it otherwise qualifies to be so under the definition(s) of Financial Debt contained in the Code.
(iii) The duty to verify claim in terms of CIRP Regulation 13 requires the IRP/RP to verify each claim received form the proof of claim in order to ascertain the claim amount and the class under which such claim is admissible because if the verification does not encompass the determination of class of a creditor, this will disable the IRP/RP to decide the class of claimant which may render the exercise of verification of claim futile.

Fund raised by issuing Subsidiary’s Compulsorily Convertible Preference Shares indemnified by Corporate Debtor to construct flats over land owned by Corporate Debtor under the Construction Contract entered into between Subsidiary Company and Corporate Debtor is Financial Debt under IBC – IIRF India Realty XII Ltd. and Anr. Vs. Srigopal Choudhary, RP of Shree Ram Urban Infrastructure Ltd. and Ors. – NCLT Mumbai Bench Read Post »

Is conversion of a Company from the company limited by shares to company limited by guarantee without share capital allowed under Section 18 of the Companies Act, 2013? – Azim Premji Trust Services Pvt. Ltd. – NCLT Bengaluru Bench

In this case, ROC objected the conversion from the company limited by shares to company limited by guarantee without share capital that no rules have been provided for conversion of a company limited by shares into company limited by guarantee.

Hon’ble NCLT Bengaluru Bench held that merely because the rules have not yet been notified for the conversion of the company limited by shares into a company limited by guarantee, it does not mean that such conversion cannot be allowed when it is allowable under the provisions of Section 18 of Companies Act, 2013. This is essentially covered within the scope of ‘arrangement’ between the company and its members, and under Section 2(21) of the Act, such company limited by guarantee prescribed for an undertaking to be given by the members to contribute to the assets of the Company in the event of its being wound up.

Is conversion of a Company from the company limited by shares to company limited by guarantee without share capital allowed under Section 18 of the Companies Act, 2013? – Azim Premji Trust Services Pvt. Ltd. – NCLT Bengaluru Bench Read Post »

Can reply by Personal Guarantor in response to Notice issued by Financial Creditor to Borrowers under Section 13(2) of SARFAESI Act, 2002, endorsing to Personal Guarantor, be treated an acknowledgement within meaning of Section 18 of the Limitation Act? – Mr. Jagdishchandra Mansukhani Vs. STCI Finance Ltd. and Anr. – NCLAT New Delhi

Hon’ble NCLAT observed that a Letter written by Personal Guarantor in response to the Notice issued by Financial Creditor under Section 13(2) of SARFAESI Act, 2002, mentioning that borrowers are at advance stage of discussion and the loan is expected to be closed shortly and further Financial Creditor were requested to grant time, contains clear acknowledgment of debt under Section 18 of the Limitation Act.

The Bench held that it is well settled that acknowledgement whether by Borrower or by Guarantor has effect of extending the limitation under Section 18 of the Limitation Act.

Can reply by Personal Guarantor in response to Notice issued by Financial Creditor to Borrowers under Section 13(2) of SARFAESI Act, 2002, endorsing to Personal Guarantor, be treated an acknowledgement within meaning of Section 18 of the Limitation Act? – Mr. Jagdishchandra Mansukhani Vs. STCI Finance Ltd. and Anr. – NCLAT New Delhi Read Post »

Whether transactions between the Family Companies were out to help each other is a Financial Debt under Insolvency Code? – Sushil Kumar Bajaj Vs. Mandyati Dealcomm Pvt. Ltd. and Anr. – NCLAT New Delhi

Hon’ble NCLAT observed that transaction between the two Companies were out to help each other, which were the family Companies and amounts were given as help to one Family Company by other Family Companies which amount was repaid from time to time. The transaction was never a Financial Debt nor any loan transaction.

Whether transactions between the Family Companies were out to help each other is a Financial Debt under Insolvency Code? – Sushil Kumar Bajaj Vs. Mandyati Dealcomm Pvt. Ltd. and Anr. – NCLAT New Delhi Read Post »

Any clause in Resolution Plan which requires Creditors to take a hair-cut cannot be construed as being violative of Section 30(2) of the IBC | When Resolution Plan has been approved by CoC, irrespective of whether a single-member CoC or multi-member CoC, the decision becomes a collective business decision – Yogesh Kelkar and Ors. Vs. RP of Anudan Properties Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) When the resolution plan has been approved by the CoC with requisite majority and after holding due deliberations, the decision becomes a collective business decision.
(ii) A matter relating to approval of resolution plan which is indubitably distinct and unrelated to a scheme of compromise or arrangement contemplated under the Companies Act.
(iii) As regards approval of resolution plan is concerned, the IBC provides for 66% vote share and once this threshold is met, the decision of the CoC, irrespective of whether it is a single-member or multi-member, the decision of the CoC becomes sacrosanct and binding on all stakeholders.
(iv) The Adjudicating Authority cannot substitute its views with the commercial wisdom of the CoC in rejecting the resolution plan simply because the Appellants are aggrieved by the amounts proposed to be paid to them under the resolution.
(v) Merely because there is a reduction in the claim of any creditor does not make the resolution plan fall foul of law. Any clause in the resolution plan which requires creditors to take a hair-cut cannot be construed as being violative of Section 30(2) of the IBC.
(vi) Once the CoC has approved the resolution plan by requisite majority and the same is in consonance with applicable provisions of law and nothing has come to light to show that any material irregularities have been committed in the conduct of the CIRP proceedings, the same cannot be a subject matter of judicial review and modification.

Any clause in Resolution Plan which requires Creditors to take a hair-cut cannot be construed as being violative of Section 30(2) of the IBC | When Resolution Plan has been approved by CoC, irrespective of whether a single-member CoC or multi-member CoC, the decision becomes a collective business decision – Yogesh Kelkar and Ors. Vs. RP of Anudan Properties Pvt. Ltd. – NCLAT New Delhi Read Post »

Operational Creditors are denied any payment when the amount payable to them in the event of Liquidation is NIL, but till the Legislature comes to the aid of the claim of Operational Creditor by amending the Legislative Scheme hands of the Courts are tied to take any other view in the matter – Rajat Metaal Polychem Pvt. Ltd. Vs. Mr. Neeraj Bhatia RP Vinayak Rathi Steels Rolling Mills Pvt. Ltd. and Anr. – NCLAT New Delhi

Hon’ble NCLAT already in Damodar Valley Corporation Vs. Dimension Steel and Alloys Pvt. Ltd. & Ors. (2022) ibclaw.in 387 NCLAT has observed that time has come when it should be examined by the Government to find out as to whether there are any grounds for considering change in the Legislative Scheme towards the payment to the Operational Creditor which also consists of the Government dues.

In this judgment, it is again held that it is true that Operational Creditors as the law stands now are denied any payment when the amount payable to them in the event of Liquidation is NIL, but till the Legislature comes to the aid of the claim of Operational Creditor by amending the Legislative Scheme hands of the Courts are tied to take any other view in the matter.

Operational Creditors are denied any payment when the amount payable to them in the event of Liquidation is NIL, but till the Legislature comes to the aid of the claim of Operational Creditor by amending the Legislative Scheme hands of the Courts are tied to take any other view in the matter – Rajat Metaal Polychem Pvt. Ltd. Vs. Mr. Neeraj Bhatia RP Vinayak Rathi Steels Rolling Mills Pvt. Ltd. and Anr. – NCLAT New Delhi Read Post »

Whether IBBI Disciplinary Committee constituted under Section 220 of the IBC can consist of a Single Whole-Time Member – Rohit J. Vora Vs. Insolvency & Bankruptcy Board of India (IBBI) – Bombay High Court

Division Bench of Hon’ble Bombay High Court held that:

(i) The proviso to Section 220(1) of IBC merely requires that the members of the Disciplinary Committee should be whole-time members of the IBBI. The said proviso does not seek to provide the number of members who should constitute the Disciplinary Committee.
(ii) While Section 220(1) of the Code deals with constitution of a Disciplinary Committee with the requirement that its members ought to be whole-time members of the IBBI, the constitution of the Disciplinary Committee as regards the number of its members is provided by Clause 2(1)(c) of the Regulations of 2017.
(iii) Regulation 2(1)(c) of the IBBI (Inspection and Investigation Regulations) Regulations, 2017 cannot be said that this clause travels beyond what has been provided by Section 220(1).
(iv) It would be permissible to constitute a Disciplinary Committee consisting of either a single whole-time member or more than one whole-time member of the IBBI.

Whether IBBI Disciplinary Committee constituted under Section 220 of the IBC can consist of a Single Whole-Time Member – Rohit J. Vora Vs. Insolvency & Bankruptcy Board of India (IBBI) – Bombay High Court Read Post »

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