16/10/2023

Until and unless a notification is issued under the first proviso to Section 419(3) of the Companies Act, 2013 the single judicial member cannot take upon itself the jurisdiction to entertain an application – Suchi Paper Mills Ltd. & Ors. Vs. Ashish Gupta RP in the Matter of Anush Finlease and Construction Pvt. Ltd. & Ors. – NCLAT New Delhi

In this case, two unnumbered applications came to be filed one by the RP and other by the Resolution Applicant seeking approval of the resolution plan approved by the CoC of the Corporate Debtor with 77.54%. Both unnumbered applications have been allowed by the Adjudicating Authority on 01.04.2020 (during COVID period) by single bench.

NCLAT New Delhi held that:

(i) It is very much clear from the bare reading of Section 419(3) of the Act that the powers of the Tribunal shall be exercisable by Benches consisting of two Members out of whom one shall be a Judicial Member and the other shall be a Technical Member but still a single Judicial Member can exercise the powers of the Tribunal in respect of such class of cases or such matters pertaining to such class of cases, as the President may, by general or special order, specify.

(ii) Until and unless a notification is issued under the first proviso to Section 419(3) the single judicial member cannot take upon itself the jurisdiction to entertain an application such like the one in hand and decide the same, therefore, the impugned order has been passed by an authority having no jurisdiction.

Until and unless a notification is issued under the first proviso to Section 419(3) of the Companies Act, 2013 the single judicial member cannot take upon itself the jurisdiction to entertain an application – Suchi Paper Mills Ltd. & Ors. Vs. Ashish Gupta RP in the Matter of Anush Finlease and Construction Pvt. Ltd. & Ors. – NCLAT New Delhi Read Post »

Once a claim has been made by submitting Form-5, there is no provision in the Code, which enables the Operational Creditor to segregate the claims into valid and invalid claims during the proceedings and to plead that only valid claims may be considered for calculation of pecuniary threshold – Redpro Construction Pvt. Ltd. Vs. Skyline Infratech Pvt. Ltd. – NCLT New Delhi Bench Court-V

NCLT New Delhi Bench Court-V held that it is clear from the scheme of the Code that the operational creditor gets a chance to revise its claim based on the reply received from the Corporate Debtor before filing Form 5, but once a claim has been made by submitting the Form 5 with this Adjudicating Authority, there is no provision in the Code, which enables the operational creditor to segregate the claims into valid and invalid claims during the proceedings before the Adjudicating Authority and to plead that only valid claims may be considered for calculation of pecuniary threshold. This is so, because the proceedings under the IB Code, 2016 are not recovery proceedings which require determination of individual claims by the Adjudicating Authority.

Once a claim has been made by submitting Form-5, there is no provision in the Code, which enables the Operational Creditor to segregate the claims into valid and invalid claims during the proceedings and to plead that only valid claims may be considered for calculation of pecuniary threshold – Redpro Construction Pvt. Ltd. Vs. Skyline Infratech Pvt. Ltd. – NCLT New Delhi Bench Court-V Read Post »

Whether CoC is empowered to decide the distribution methodology where the Successful Resolution Applicant provided only Financial Package? Interpretation/meaning of the term ‘Business/Commercial Decision’ of CoC? – Devi Trading & Holding Pvt. Ltd. Vs. Mr. Ravi Shankar Devarakonda RP of Meenakshi Energy Ltd. – NCLAT Chennai

In this case, the Resolution Plan submitted by Successful Resolution Applicant provides that the CoC will decide the manner in which the total financial package would be distributed to Creditors.

In this important judgment, Hon’ble NCLAT interpretated the meaning of ‘commercial decision/business decision of CoC’ the term is also not defined in the Code, and held that:

(i) A deliberated ‘Business Decision’ of the CoC includes deliberations on the feasibility and viability, the financial and operational aspects of the Corporate Debtor, and therefore, the question of only ‘considering’ the proposal put forth by the Resolution Applicant cannot be viewed in a ‘rigid manner’.

(ii) The CoC is a pivotal decision-making body which decides all critical decision-making functions regarding Resolution Plans, Liquidation, Management etc., essential to the success of the CIRP.

(iii) Though the IBC does not have a specific provision that uses the term ‘Business Decision’ of the CoC, the Code contains several provisions that detail the powers and functions of the CoC, which encompass various decision-making responsibilities relating to the Insolvency Resolution Process, which definitely includes distribution methodology of the Resolution Plan.

(iv) The distribution/amount to be paid to different classes or sub-classes of Creditors in accordance with the provisions of the Code essentially lies within the domain of the commercial wisdom of the CoC.

(v) CoC in its commercial wisdom can propose, consider and decide on the distribution mechanism under the Resolution Plan, as long as it is within the domain of Section 30(2) of the Code.

Whether CoC is empowered to decide the distribution methodology where the Successful Resolution Applicant provided only Financial Package? Interpretation/meaning of the term ‘Business/Commercial Decision’ of CoC? – Devi Trading & Holding Pvt. Ltd. Vs. Mr. Ravi Shankar Devarakonda RP of Meenakshi Energy Ltd. – NCLAT Chennai Read Post »

Encashment of Bank Guarantee would not impact the assets of the Corporate Debtor, only difference will be that instead of Creditor, the claim against the said amount from the Corporate Debtor will be shifted and will have to be raised by Bank – The National Small Industries Corporation Ltd. Vs. Sh. Prabhakar Kumar Liquidator of Sh. Ganesh Equipment Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT referred the Sec. 14(3)(b) held that:

(i) The Moratorium was envisaged to ensure that the Corporate Debtor’s Assets are not liquidated or reduced till the CIRP is completed. The idea behind Moratorium was that no additional stress is brought on the business which is being rescued.
(ii) Since the assets of the surety (Bank) are separate from those of the Corporate Debtor, encashment of Bank Guarantee would not impact the Assets of the Corporate Debtor. Only difference will be that instead of the Appellant, the claim against the said amount from the Corporate Debtor will be shifted and will have to be raised by the Canara Bank.
(iii) In the instant case, the Appellant has raised the demand on the Bank for payment which was guaranteed by the Bank much prior to the initiation of the CIRP. No recovery is being made from the Corporate Debtor and therefore there is no threat immediately to the Assets of the Corporate Debtor.

Encashment of Bank Guarantee would not impact the assets of the Corporate Debtor, only difference will be that instead of Creditor, the claim against the said amount from the Corporate Debtor will be shifted and will have to be raised by Bank – The National Small Industries Corporation Ltd. Vs. Sh. Prabhakar Kumar Liquidator of Sh. Ganesh Equipment Pvt. Ltd. – NCLAT New Delhi Read Post »

Merely because a Financial Creditor has approached Debt Recovery Tribunal(DRT) for an appropriate relief, it cannot be said that, it cannot proceed under the IBC – Vidyasagar Parchuri Vs. State Bank of India – NCLAT New Delhi

Hon’ble NCLAT held that:
(i) It is not the property which is at the root of the Code and it is the cash liquidity which is the foundation for triggering the CIRP.
(ii) An application under Section 7 of the Code is not to be turned down by an Adjudicating Authority just on technical grounds. The reason for inability of a Corporate Debtor to pay its debt is not to be looked into by an Adjudicating Authority.
(iii) The situation/circumstances under which a Corporate Debtor could not repay the Financial Debt need not be taken as a defence in a proceeding under the Code.
(iv) The Adjudicating Authority/Tribunal need not wait for the determination to be made by the Debt Recovery Tribunal (DRT).

Merely because a Financial Creditor has approached Debt Recovery Tribunal(DRT) for an appropriate relief, it cannot be said that, it cannot proceed under the IBC – Vidyasagar Parchuri Vs. State Bank of India – NCLAT New Delhi Read Post »

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