07/02/2024

RBI Master Circular on Wilful Defaulters does not contain any requirement that the order passed by First Level Committee should disclose the constitution of the First Level Committee | Decision of First Level Committee does not attain finality till it is confirmed by Review Committee – Mr. Dumpala Madhusudhana Reddy Vs. REC Ltd. – Telangana High Court

/ 12 minutes of reading

The batch of 3 Writ Appeals were preferred by the suspended Board of Directors of M/s. Ind Bharath Power (Madras) Limited challenging the order passed by the Ld. Single Judge Bench upholding the decision/order of the First Level Committee of REC Limited in declaring the Appellants as wilful defaulters.

The Appellants alleged that the First Level Committee has acted in contrary to the procedure laid down in the RBI Master Circular dated 01.07.2015, as firstly the Appellants have not been informed about the constitution of First Level Committee and, secondly, there has been delegation of power as the decision of the First Level Committee was communicated to the Appellants by a member of the Committee.
Thereupon, the Sr. Advocate for Appellants relied upon the landmark judgment of ‘Jah Developers’ highlighting that declaration of Appellants as wilful defaulter is a direct violation of fundamental rights.

The Sr. Advocate representing the Respondent outrightly highlighted that the decision of the First Level Committee is well within the guidelines of the RBI Master Circular and that the order of the First Level Committee would attain finality only when it is confirmed by the review committee. Thus, the Appellants have preferred the Writ Appeal at a very premature stage and hence deserves no indulgence by the Hon’ble Division Bench of the Telangana High Court presided by the Chief Justice.

The Hon’ble Court after hearing the submissions of the parties and considering the guidelines of RBI Master Circular asserted that the Master Circular does not contain any requirement that the order passed by the First Level Committee should disclose the constitution of the First Level Committee and further held that till the time the provisional order of First Level Committee is not confirmed by the review committee, it is not possible to infer that any rights of the Appellants have been violated. Moreover, the Hon’ble Court also held that the case of Jah Developers is of no assistance in facts and circumstances of the case at hand. Thereby, the Division Bench upheld the order of the Ld. Single Bench and while disposing off the Appeals, granted liberty to the Appellants to approach the review committee within a period of 3 weeks from the date of receipt of the order.

RBI Master Circular on Wilful Defaulters does not contain any requirement that the order passed by First Level Committee should disclose the constitution of the First Level Committee | Decision of First Level Committee does not attain finality till it is confirmed by Review Committee – Mr. Dumpala Madhusudhana Reddy Vs. REC Ltd. – Telangana High Court Read Post »

If demand notice u/s 138 of NI Act, 1881 is issued before moratorium sets in or winding up proceedings are initiated and cognizance of the offence is taken subsequent to the moratorium or winding up proceedings kicking in, the prosecution against Corporate Debtor and its Directors cannot be allowed to be continued – Re- Catmoss Retail Pvt. Ltd. – Delhi High Court

/ 15 minutes of reading

In this important judgment, Hon’ble High Court of Delhi holds that:
(i) It has been a consistent legal proposition that if the demand notice and the cognizance of complaint under Section 138 of the NI Act is taken after initiation of winding up proceedings and/or IBC proceedings, the proceedings under Section 138 of the NI Act cannot continue not only against the corporate debtor but also its directors.
(ii) This Court in an earlier case titled Govind Prasad Todi & Another v. Govt. of NCT of Delhi rightly distinguished the aspect in the case P. Mohanraj & Ors. v. Shah Brothers Ispat Pvt. Ltd. (2021) ibclaw.in 24 SC, wherein 51 cheques were issued by the company in favour of the respondent towards the amounts payable from 21.09.2015 to 11.11.2016 and it was a case where statutory notice of demand under Section 138 read with Section 141 of the NI Act was issued on 21.03.2017 while the commencement of CIRP under Section 14 of the IBC came to be enforced on 06.06.2017. It was a case where the cheques had got dishonoured and even demand notices were issued prior to the moratorium kicking in.
(iii) In other words, if the statutory demand notice is issued before the moratorium sets in or winding up proceedings are initiated and cognizance of the offence is taken subsequent to the moratorium or winding up proceedings kicking in, the prosecution against the corporate debtor and its directors cannot be allowed to be continued.

If demand notice u/s 138 of NI Act, 1881 is issued before moratorium sets in or winding up proceedings are initiated and cognizance of the offence is taken subsequent to the moratorium or winding up proceedings kicking in, the prosecution against Corporate Debtor and its Directors cannot be allowed to be continued – Re- Catmoss Retail Pvt. Ltd. – Delhi High Court Read Post »

Right to visit Project Site to Homebuyers/Allottees during Corporate Insolvency of a Real Estate Project – Mr. Satish Kumar and 47 Ors. Vs. Mr. Vikram Bajaj RP – NCLT New Delhi Bench

/ 3 minutes of reading

In this case, IAs filed by Homebuyers to allow access to units purchased, to commence commercial activity from their units, to obtain electrical connections and carry out necessary alterations in the units etc.

Hon’ble NCLT New Delhi Bench holds that:
(i) After initiation of the CIRP, it is the duty of the Resolution Professional to protect, preserve and maintain the status quo of the value of the assets of the Corporate Debtor in toto.
(ii) The Conduct of Resolution Professional to not allow free Ingress and Egress to the Applicants/Homebuyers is not good in law.
(iii) Directs the Resolution Professional to restore the right to visit the Project Site to the Applicants/Homebuyers.
(iv) Once the Resolution Plan has been approved by the CoC, the Adjudicating Authority can’t go back to look into the nittygritty’s involved in the CIRP of the Corporate Debtor.

Right to visit Project Site to Homebuyers/Allottees during Corporate Insolvency of a Real Estate Project – Mr. Satish Kumar and 47 Ors. Vs. Mr. Vikram Bajaj RP – NCLT New Delhi Bench Read Post »

Post facto approval under Section 33(5) of IBC against Section 7 CIRP proceedings initiated by Liquidator without prior approval of NCLT – Mr. Jigar Bhatt, Liquidator RMOL Engineering and Offshore Ltd. – NCLT Ahmedabad Bench

/ 2 minutes of reading

In terms of Section 33(5) of the IBC, 2016, no prior permission was taken from this Tribunal before initiation of Section 7 proceedings against the 5 entities (bond issuer).
In this IA, the liquidator seeks post facto approval for the institution and continuation of legal proceedings under Section 7 of IBC, 2016 against 5 bond issuer companies i.e. the liquidator seeks post facto approval of the action already initiated by the liquidator.

Post facto approval under Section 33(5) of IBC against Section 7 CIRP proceedings initiated by Liquidator without prior approval of NCLT – Mr. Jigar Bhatt, Liquidator RMOL Engineering and Offshore Ltd. – NCLT Ahmedabad Bench Read Post »

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