05/01/2024

Once Resolution Plan has been approved by NCLT, appeal pending for refund of Service Tax stands abated as CESTAT has become functus officio – Ballarpur Industries Ltd. Vs. CCE & ST, Panchkula – CESTAT Chandigarh

An appeal for refund of service tax of Corporate Debtor (assessee) was pending before CESTAT, Chandigarh and during the pendency, an application under section 7 of IBC, 2016 was admitted by NCLT against Corporate Debtor(assessee) and Resolution Plan has also been approved by NCLT.

Hon’ble CESTAT concludes that once the Resolution Plan has been approved by the NCLT, thereafter, the present appeal stands abated as the CESTAT has become functus officio in the matter relating to the present appeal.

Once Resolution Plan has been approved by NCLT, appeal pending for refund of Service Tax stands abated as CESTAT has become functus officio – Ballarpur Industries Ltd. Vs. CCE & ST, Panchkula – CESTAT Chandigarh Read Post »

Possibility of receiving higher offers in a fresh bid is not legally justifiable ground to direct fresh holding of auction in Company Winding-up/Liquidation – Flavuro Foods Pvt. Ltd. Vs. Official Liquidator and Another – Allahabad High Court

Hon’ble High Court holds that:
(i) The purpose and the object of inviting bids at the auction is to secure the best price for the property. For such purposes auction notices are to be widely circulated so that the best offers could be received for the property to be auctioned. Auction process has a sense of sanctity attached to it and it is only for valid reasons that the highest bids can be discarded in an auction otherwise held in accordance with law.
(ii) No reasons are otherwise discernible in the order of the Company Judge for not accepting the highest bid and directing holding of fresh auction. The only reason that can be inferred is the possibility of receiving higher offers in a fresh bid. This reason has also been disapproved by the Supreme Court in Eva Agro Feeds Pvt. Ltd. (2023) ibclaw.in 98 SC.

Possibility of receiving higher offers in a fresh bid is not legally justifiable ground to direct fresh holding of auction in Company Winding-up/Liquidation – Flavuro Foods Pvt. Ltd. Vs. Official Liquidator and Another – Allahabad High Court Read Post »

Whether disbursement for time value of money is essential ingredients to prove a Financial Debt? | Whether claim once admitted by earlier Resolution Professional can be revised by subsequent Resolution Professional? – Kesoram Industries Ltd. Vs. Pratim Bayal – NCLAT New Delhi

Hon’ble NCLAT holds that:
(i) Disbursement against the consideration for time value of money has to be proved for a financial debt.
(ii) There is no disbursement by the Appellant to the Corporate Debtor. When there is no disbursement for time value of money essential ingredients to prove a financial debt is missing.
(iii) The Balance Sheet even if it is taken on its face value does not in any manner prove that there is any financial debt. The financial debt ought to have reflected under the heading of borrowings and there being no reflection of the claim which is filed in Form C under the heading ‘borrowings’.
(iv) The Adjudicating Authority under sub-section (5) of Section 60 of the Code is fully entitled to decide any question regarding any claim made against the Corporate Debtor.

Whether disbursement for time value of money is essential ingredients to prove a Financial Debt? | Whether claim once admitted by earlier Resolution Professional can be revised by subsequent Resolution Professional? – Kesoram Industries Ltd. Vs. Pratim Bayal – NCLAT New Delhi Read Post »

Related Parties cannot claim entitlement of any amount in Resolution Plan and cannot claim any discrimination with regard to payments to unrelated Unsecured Financial Creditors – Manav Investments and Trading Co. Ltd. Vs. Pratim Bayal and Ors. – NCLAT New Delhi

Hon’ble NCLAT refers M.K. Rajagopalan v. Dr. Periasamy Palani Gounder and Anr. (2023) ibclaw.in 60 SC and holds that
(i) Both the Appellants who have filed these Appeals are related parties. Related parties cannot claim entitlement of any amount in the plan and cannot claim any discrimination with regard to payments to unrelated unsecured Financial Creditors.
(ii) Insofar as the submission that distribution is not in accordance with vote share which violates Section 53 r/w Section 32 (b) of the IBC, the said submission need no consideration since the Appellant being related party is not entitled for any distribution and no stakeholder who is entitled for distribution is aggrieved by the decision of the Committee of Creditors regarding mode and manner of distribution.
(iii) With regard to discrimination in payments to the workers and employees, no workers and employees have any grievance nor any workers and employees is dissatisfied with the payments made under the plan to them nor have they come in Appeal.
(iv) Upheld decision of NCLT Kolkata Bench.

Related Parties cannot claim entitlement of any amount in Resolution Plan and cannot claim any discrimination with regard to payments to unrelated Unsecured Financial Creditors – Manav Investments and Trading Co. Ltd. Vs. Pratim Bayal and Ors. – NCLAT New Delhi Read Post »

Merely because Corporate Debtor did not pay Sales Tax collected from the Applicant to Sales Tax Authorities, such amount will by no means qualify as Operational Debt owed to Applicant | A mere bald claim that entries of unpaid debt and interest have been recorded in the books of account will be of no help to Operational Creditor because mere unilateral entries in one’s books of account unsupported by any legal justification will not qualify as Operational Debt within the meaning of Section 5 (21) of IBC – Transtec Overseas Pvt. Ltd. Vs. Dheeraj Aviation Ground Equipments Pvt. Ltd. – NCLT Mumbai Bench

In this important judgment, NCLT Mumbai Bench holds that:
(i) An application under Section 9 of the Code, inter alia, requires strict proof of debt and default.
(ii) A mere bald claim that entries of unpaid debt and interest have been recorded in the books of account of the Applicant will be of no help to the Applicant, because mere unilateral entries in one’s books of account unsupported by any legal justification will not qualify as ‘operational debt’ within the meaning of Section 5 (21) of the Code.
(iii) Merely because the Corporate Debtor did not pay sales tax collected from the Applicant to the Sales Tax Authorities in 2008-09, such amount will by no means qualify as ‘operational debt’ owed to the Applicant because this amount is actually owed by the Corporate Debtor to the Sales Tax Authorities and does not represent the price or consideration for supply of equipment to the Applicant.
(iv) It is well-established that statutory dues like income tax, VAT etc. fall within the meaning of ‘operational debt’ under Section 5(21) of the Code only when these are payable to the relevant statutory authority (rather than a private party) which qualifies as “Operational Creditor” under the Code.

Merely because Corporate Debtor did not pay Sales Tax collected from the Applicant to Sales Tax Authorities, such amount will by no means qualify as Operational Debt owed to Applicant | A mere bald claim that entries of unpaid debt and interest have been recorded in the books of account will be of no help to Operational Creditor because mere unilateral entries in one’s books of account unsupported by any legal justification will not qualify as Operational Debt within the meaning of Section 5 (21) of IBC – Transtec Overseas Pvt. Ltd. Vs. Dheeraj Aviation Ground Equipments Pvt. Ltd. – NCLT Mumbai Bench Read Post »

It shall not be a right in law for a Financial Creditor under Section 7 of IBC to change the date of default | Amendment of date of default in an application under Section 7 is not to be allowed for mere asking – Inakshi Sobti & Ors. Vs. Starlight Systems (I) Pvt. Ltd. – NCLT Mumbai Bench

In this important judgment on amendment in CIRP Application , Hon’ble NCLT Mumbai Bench holds that:
(i) Ordinarily, a party to the litigation is entitled to seek amendments of its pleadings in order to correct mistakes or to bring in clarity of facts and figures or to add or omit certain facts or circumstances to advance its case.
(ii) An amendment of pleading cannot be allowed which takes away the valuable defence available to the opposite side. This Adjudicating Authority cannot cause irretrievable prejudice to one of the parties, especially when the amendment sought has the effect of nullifying a statutory mandate.
(iii) It shall not be a right in law for an applicant under Section 7 of the IBC to change the date of default. We need to be cautious if the change of date of default cuts the very root of maintainability of the Main Application.
(iv) No amendment to an application under Section 7 of the IBC nullifying a statutory mandate can be allowed by the Adjudicating Authority.

It shall not be a right in law for a Financial Creditor under Section 7 of IBC to change the date of default | Amendment of date of default in an application under Section 7 is not to be allowed for mere asking – Inakshi Sobti & Ors. Vs. Starlight Systems (I) Pvt. Ltd. – NCLT Mumbai Bench Read Post »

Trade receivables discounted on non-recourse basis and liability arose to Corporate Debtor to pay Financers, Financers stepped into the shoes of Suppliers | When Section (5)(8)(e) specifically covers receivables sold or discounted, the discounting of invoices cannot be covered by any other clause such as Section 5(8)(f) – Mudraksh Investfin Pvt. Ltd. Vs. Brijesh Singh Bhaduriya, RP of RCI Industries and Technologies Ltd. – NCLAT New Delhi

Hon’ble NCLAT holds that:
(i) Supplier has sold goods to the Corporate Debtor against which invoices were raised by the Supplier against the Buyer. The said invoices were discounted by the Financer from time to time and Corporate Debtor was liable to make payment to the Financer along with interest. The Financers have made payment to the Suppliers. The Corporate Debtor could not make the payment to the Financers.
(ii) The original transaction between the parties were for the sale and purchase of goods.
(iii) Discounting was without any recourse basis. Thus, the discounting is clearly excluded from financial debt under Section 5, sub-section (8) (e).
(iv) When Section 5, sub-section (8) (e) specifically covers receivables sold or discounted, the discounting of invoices cannot be covered by any other clause. Hence, discounting of invoices cannot fall under Section 5, sub-section (8) (f).
(v) The transaction emanates from sale and purchase of goods in the present case. No disbursement was made to the Corporate Debtor, hence, the transactions cannot be held to be a financial debt.

Trade receivables discounted on non-recourse basis and liability arose to Corporate Debtor to pay Financers, Financers stepped into the shoes of Suppliers | When Section (5)(8)(e) specifically covers receivables sold or discounted, the discounting of invoices cannot be covered by any other clause such as Section 5(8)(f) – Mudraksh Investfin Pvt. Ltd. Vs. Brijesh Singh Bhaduriya, RP of RCI Industries and Technologies Ltd. – NCLAT New Delhi Read Post »

Commercial wisdom of CoC in rejection of Resolution Plan of MSME Promoter cannot be called into question unless there are glaring omissions and the deficiencies are stark – Rajesh Kumar Damani Vs. Mr. Jitendra Lohia, RP of Pami Metals Pvt. Ltd. and Ors. – NCLT Kolkata Bench

In this case, the CoC has discussed and deliberated upon the Resolution Plan of the MSME Promoter at length and found that the Plan it is not feasible and viable due to reasons mentioned in the Minutes.
NCLT Kolkata Bench holds that it is almost trite and settled law that the commercial wisdom of CoC cannot be called into question unless there are glaring omissions and the deficiencies are stark. In view of the fact that the CoC is of the opinion that the PMPL Plan in fact, does not deal with the source of funds and is based on contingencies which is a fact evident from records, we find no reason to interfere with the well considered decision of the CoC in rejecting the said Plan with reasons.

Commercial wisdom of CoC in rejection of Resolution Plan of MSME Promoter cannot be called into question unless there are glaring omissions and the deficiencies are stark – Rajesh Kumar Damani Vs. Mr. Jitendra Lohia, RP of Pami Metals Pvt. Ltd. and Ors. – NCLT Kolkata Bench Read Post »

The business decision of the CoC is not to be interfered with by the Adjudicating Authority or this Tribunal unless it is shown that there is violation of Section 30(2) of the IBC – Authum Investment and Infrastructure Ltd. Vs. Rajneesh Sharma Administrator of SREI Equipment Finance Ltd. and SREI Infrastructure Finance Ltd. and Ors. – NCLAT New Delhi

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The business decision of the CoC is not to be interfered with by the Adjudicating Authority or this Tribunal unless it is shown that there is violation of Section 30(2) of the IBC – Authum Investment and Infrastructure Ltd. Vs. Rajneesh Sharma Administrator of SREI Equipment Finance Ltd. and SREI Infrastructure Finance Ltd. and Ors. – NCLAT New Delhi Read Post »

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