High Court-Bombay

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 »

Suspension of authorisation for assignment (AFA) pending consideration of show cause notices issued under Section 219 of IBC is not contrary to law | Clause 23A of Model Bye-Laws and Governing Board of IPAs Regulations, 2016 cannot be held to be ultra vires – Kairav Anil Trivedi Vs. Insolvency & Bankruptcy Board of India (IBBI) and Ors. – Bombay High Court

The Hon’ble Bombay High Court (Division Bench) did not find that Clause 23A of the Schedule of IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 travel beyond what has been empowered to be done under the Code.

The Bench also considered the office noting placed on record which indicates that DGM (IBBI) was directed to undertake investigation and held that it cannot be said that the Investigating Authority in the absence of any order in writing proceeded to conduct an investigation in terms of Section 218(1) of the Code.

The Court referring the decision in CA V. Venkata Sivakumar Vs. IBBI and Ors. (2024) ibclaw.in 59 HC did not find that the suspension of AFA pending consideration of the show cause notices is in any manner contrary to law or unwarranted in the facts of the present case.

Suspension of authorisation for assignment (AFA) pending consideration of show cause notices issued under Section 219 of IBC is not contrary to law | Clause 23A of Model Bye-Laws and Governing Board of IPAs Regulations, 2016 cannot be held to be ultra vires – Kairav Anil Trivedi Vs. Insolvency & Bankruptcy Board of India (IBBI) and Ors. – Bombay High Court Read Post »

The phrase “may” used in Section 233(5) of the Companies Act, 2013 will have to be construed as mandatory | It is mandatory for the Central Government to make an application before the Tribunal/NCLT and get adjudication if Merger or Amalgamation Scheme is not in public interest or in the interest of the Creditors – Asset Auto India Pvt. Ltd. and Ors. Vs. The Union of India and Ors. – Bombay High Court

Hon’ble Bombay High Court (Division Bench) interprets that on a conjoint reading of sub-sections (2), (3), (4) and (5), the phrase “may” used in sub-section (5) of Section 233 of the Companies Act, 2013 will have to be construed as mandatory. Because if the Government is of the view that the scheme is not in the public interest or in the interest of the creditors then same is to be decided by the Tribunal. If the phrase “may” in sub-section (5) is used as optional then company involved in the amalgamation scheme would be at the mercy of the Central Government if the scheme is rejected without any adjudication. It is, therefore, mandatory for the Central Government to make an application before the Tribunal and get adjudication on said issue.

The phrase “may” used in Section 233(5) of the Companies Act, 2013 will have to be construed as mandatory | It is mandatory for the Central Government to make an application before the Tribunal/NCLT and get adjudication if Merger or Amalgamation Scheme is not in public interest or in the interest of the Creditors – Asset Auto India Pvt. Ltd. and Ors. Vs. The Union of India and Ors. – Bombay High Court Read Post »

Para 2.1 “Amount realized” and Para 2.5 “Period for calculation of fee” of IBBI Circular dated 28.09.2023 are struck down as being ultra vires the Liquidation Process Regulations and the IBC | Para 2.2 “other liquidation cost”, Para 2.3 “Amount distributed to stakeholders” and Para 2.4 “Amount of Realisation/Distribution” are upheld – Amit Gupta Vs. Insolvency and Bankruptcy Board of India and Anr. – Bombay High Court

In this landmark judgment, a division bench of the Hon’ble High Court of Bombay interpreted all five paras of the IBBI Circular issued on 28.09.2023.

The Hon’ble Bench also held that the very issuance of a show cause notice has the effect of stopping the IP from taking up new work by reason of Bye-Law 23A in the Model Bye-Laws that are statutorily specified in the Schedule. The Court takes judicial notice of the serious repercussions on IPs when the IBBI issues a show cause notice. The moment disciplinary proceedings are initiated, the IP’s authorisation to conduct his assignments stands suspended. Such a position enabled by subordinate law can have serious implications for IPs. This position may also have the effect making the IBBI reticent to issue show cause notices, considering the debilitating impact it can have on any IP. This situation deserves to be reviewed by the IBBI.

Para 2.1 “Amount realized” and Para 2.5 “Period for calculation of fee” of IBBI Circular dated 28.09.2023 are struck down as being ultra vires the Liquidation Process Regulations and the IBC | Para 2.2 “other liquidation cost”, Para 2.3 “Amount distributed to stakeholders” and Para 2.4 “Amount of Realisation/Distribution” are upheld – Amit Gupta Vs. Insolvency and Bankruptcy Board of India and Anr. – Bombay High Court Read Post »

Rajiv Sharma Vs. Registrar of Companies, Mumbai and Ors. – Bombay High Court

Hon’ble High Court held that on a plain reading of the Section 168 of the Companies Act, 2013, it is clear that sub-section (1) provides for the procedure which would be required to be adopted, when the director of the company resigns. What is significant is that sub-section (2) thereof provides that the resignation of a director shall take effect from the date on which the resignation notice is issued by the company or “the date, if any”, specified by the director, in the notice whichever is later, however, with a proviso that the director who has resigned shall be liable even after his resignation for the offences which may have occurred during his tenure, which is not attracted in the present case.

Rajiv Sharma Vs. Registrar of Companies, Mumbai and Ors. – Bombay High Court Read Post »

Whether NCLT has the jurisdiction to direct the Directorate of Enforcement (ED) to release the attached properties, invoking Section 32A of IBC, 2016 once a Resolution Plan that qualifies for immunity under Section 32A was approved – Mr. Shiv Charan and ors. Vs. Adjudicating Authority and Anr. – Bombay High Court

In this landmark judgment a division bench of Hon’ble Bombay High Court held that:
(i) Whilst passing any order under Section 31, the NCLT not only must follow the provisions of the IBC, 2016 but also make sure that the resolution plan approved by it can be effectively implemented.
(ii) It is it is wholly untenable to contend that the NCLT, and which is the Adjudicating Authority constituted under the IBC, 2016, is incompetent and/or powerless to either interpret or to give effect to the provisions of the very Act under which it was constituted.
(iii) The NCLT had all powers to direct the ED to raise its attachment in relation to the attached properties of the corporate debtor once a resolution plan that qualifies for immunity under Section 32A was approved, and those very properties were the subject matter of the resolution plan.
(iv) Whether the jurisdictional facts necessary to attract the immunity under Section 32A exist, is a mixed question of fact and law that the NCLT was entitled to entertain and dispose of. Once the jurisdictional facts are found to exist, whether the immunity becomes available is a question of law which is clearly within the domain of the NCLT’s jurisdiction.
(v) When a resolution plan approved, quasi-judicial authorities including the Adjudicating Authority under the PMLA, 2002 must release their attachment on their own.
(vi) The ED would not be a creditor at all, and no debt would be owed by the corporate debtor to the ED.

Whether NCLT has the jurisdiction to direct the Directorate of Enforcement (ED) to release the attached properties, invoking Section 32A of IBC, 2016 once a Resolution Plan that qualifies for immunity under Section 32A was approved – Mr. Shiv Charan and ors. Vs. Adjudicating Authority and Anr. – Bombay High Court Read Post »

Section 14(1)(a) of IBC only prohibits the institution of suits or continuation of pending suits or proceedings “against” Corporate Debtor, it does not prohibit any proceedings by Corporate Debtor – Imperial Consultants and Securities Ltd. Vs. Assistant Commissioner of Income Tax, Circle5(1), Mumbai – Bombay High Court

Hon’ble Bombay High Court holds that:

(i) Section 14(1)(a) of the IBC, 2016 only prohibits the institution of suits or continuation of pending suits or proceedings “against” the corporate debtor including execution of any judgment, decree or order in any Court of law, Tribunal, Arbitration Panel or other authority. It does not prohibit any proceedings by the corporate debtor.
(ii) The Tribunal was not correct in dismissing the appeal filed by Petitioner. The Tribunal, however, was correct to say that on admission of the insolvency petition filed by the financial creditor under Section 7 of the IBC, the Directors of Petitioner have become functus officio. The Tribunal gave liberty to the IRP or the RP, as the case may be, to pursue all litigations pertaining to Assessee Company in consultation with the Committee of Creditors. It also gave liberty to the IRP/RP to apply for recall of the impugned order. The Tribunal has missed the fact that the appeal itself has been filed through the Resolution Professional.

Section 14(1)(a) of IBC only prohibits the institution of suits or continuation of pending suits or proceedings “against” Corporate Debtor, it does not prohibit any proceedings by Corporate Debtor – Imperial Consultants and Securities Ltd. Vs. Assistant Commissioner of Income Tax, Circle5(1), Mumbai – Bombay High Court Read Post »

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