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Resolution Professional is ‘Occupier’ of Corporate Debtor’s factory as defined under Section 2(n) of the Factories Act, 1948 | For the violation or omission in the factory premises, Resolution Professional is responsible for the proceedings if any, initiated against Resolution Professional under Factories Act in his capacity as Occupier | The said proceedings will not be covered under Sec. 14 or 233 of IBC – Subrata Monindranath Maity v. The State – Madras High Court

In this landmark judgment, Hon’ble Madras High Court has held that:
(i) The protection to the resolution professional given under Section 233 of IBC is obviously only in respect of act done or intended to be done in good faith under the code. The failure or omission to provide safety measures in the factory cannot be stretched to inaction.
(ii) The resolution professional is the occupier of the factory (as defined under Section 2(n) of the Factories Act, 1948) and he cannot abdicate his duties and responsibility of providing necessary safety measures in the factory as mandated in the Factories Act.
(iii) The expression used in section 17 of the Code explicitly say that the resolution professional is the person who is vested with absolute control of the Corporate Debtor company. While so, for the violation or omission in the factory premises, Resolution Professional is responsible for the Proceedings if any, initiated against Resolution Professional under the Factories Act in his capacity as occupier. The said proceedings will not be covered under section 14 or 233 of the Code.

Resolution Professional is ‘Occupier’ of Corporate Debtor’s factory as defined under Section 2(n) of the Factories Act, 1948 | For the violation or omission in the factory premises, Resolution Professional is responsible for the proceedings if any, initiated against Resolution Professional under Factories Act in his capacity as Occupier | The said proceedings will not be covered under Sec. 14 or 233 of IBC – Subrata Monindranath Maity v. The State – Madras High Court Read Post »

Neither Promoters/Ex-Directors nor the Resolution Professional/CoC are empowered under the IBC 2016 to obtain an MSME Certificate post-commencement of CIRP with the sole purpose of opening or enabling a back door entry to the defaulting promoters, who are otherwise barred under Section 29A of IBC, 2016 to submit Resolution Plan – Deutsche Bank A.G Vs. Mr. Devendra Umrao RP of Overnite Express Ltd. – NCLT New Delhi Bench Court-II

NCLT New Delhi Bench Court-II held that:
(i) An MSME Certificate obtained by Promoter(s)/Ex-Director(s) post-commencement of the CIRP is invalid and it will not make them eligible to submit an EOI or the Resolution Plan by taking benefit of Section 240A of IBC 2016.
(ii) The RP/CoC by obtaining an MSME Certificate on their initiative, opened the doors, that were otherwise shut, to the Defaulter Promoter(s)/ Suspended Board of Director(s)/ ExManagement just to enable them to submit EOI/Resolution Plan to regain entry and control/management over the Corporate Debtor through the backdoor.
(iii) Neither there is any explicit provision under Section 25 of IBC 2016 enabling an RP to obtain an MSME Certificate nor such is the intention behind the insertion of Section 29A in the Code as observed by the Hon’ble Supreme Court in the Judgement (ibid). Further, under the garb of fixing the criteria for the intending Prospective Resolution Applicants, the RP cannot assume the role of a “Facilitator” to enable the Defaulter Promoter(s)/ Suspended Board of Director(s)/ Ex-Management to submit the EOI/Resolution Plan by abusing the provisions contained under Section 240A of IBC 2016.
(iv) Neither Section 25 nor Section 28 of IBC 2016 empowers the RP or the CoC to obtain an MSME Certificate to enable the back door entry of the defaulting promoter(s) into the Corporate Debtor.
(v) The benefit of Section 240A of IBC 2016 can only be availed by a genuine MSME Enterprise, whose registration or MSME Certification is done prior to the commencement of CIRP of a Corporate Debtor.
NCLT conclude that neither the Promoters/Ex-Directors nor the RP/COC are empowered under the IBC 2016 to obtain an MSME Certificate post-commencement of CIRP with the sole purpose of opening or enabling a back door entry to the defaulting promoters, who are otherwise barred under Section 29A of IBC, 2016 to submit the EOI/Resolution Plan.

Neither Promoters/Ex-Directors nor the Resolution Professional/CoC are empowered under the IBC 2016 to obtain an MSME Certificate post-commencement of CIRP with the sole purpose of opening or enabling a back door entry to the defaulting promoters, who are otherwise barred under Section 29A of IBC, 2016 to submit Resolution Plan – Deutsche Bank A.G Vs. Mr. Devendra Umrao RP of Overnite Express Ltd. – NCLT New Delhi Bench Court-II Read Post »

In case cheque issued prior to admission of CIRP and presented for encashment after admission of or during CIRP, Promoters/Directors of Corporate Debtor being natural persons, cannot be prosecuted under Section 138 of NI Act and P. Mohanraj & Others v. Shah Brothers Ispat does not apply – Govind Prasad Todi and Anr. Vs. Govt. of NCT of Delhi and Anr. – Delhi High Court

Hon’ble High Court holds that in P. Mohanraj, 51 cheques were issued by the company in favour of the respondent towards amounts payable from 21.09.2015 to 11.11.2016. On 31.03.2017, the respondent issued a statutory demand notice under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The order admitting the application was passed on 06.06.2017 by the Adjudicating Authority directing commencement of the CIRP with respect to the company and putting a moratorium in terms of Section 14 of the IBC. Hence in judgment of P.Mohanraj, the moratorium commenced from 06.06.2017. Prior to that not only the cheques had bounced but demand notices were also issued. In the present case, prior to presentation of cheques, not only the mortarium kicked in but the IRP had also sent the effective letter. As a result, the cheques became incapable of encashment.

In case cheque issued prior to admission of CIRP and presented for encashment after admission of or during CIRP, Promoters/Directors of Corporate Debtor being natural persons, cannot be prosecuted under Section 138 of NI Act and P. Mohanraj & Others v. Shah Brothers Ispat does not apply – Govind Prasad Todi and Anr. Vs. Govt. of NCT of Delhi and Anr. – Delhi High Court Read Post »

Ritu Rastogi RP for Eon Electric Ltd. Vs. Mr. Surinder K. Bansal and Co. LLP – NCLT Chandigarh Bench

In the present case, the applicant/RP has sought directions against the statutory auditors of the corporate debtor to provide the audit report and audited financial statements for FY 2019-20. The respondent has also not provided the resignation letter as sought by the applicant by Email dated 20.04.2021 and no audit report and financial statements for the FY 2019-20 has been provided by the statutory auditor. Section 17(2)(e) of the Code casts a duty upon the Resolution Professional for complying with the requirements under any law for the time being in force on behalf of the corporate debtor which includes getting the balance sheets and financial statements of the corporate debtor prepared as stipulated under the law.

Ritu Rastogi RP for Eon Electric Ltd. Vs. Mr. Surinder K. Bansal and Co. LLP – NCLT Chandigarh Bench Read Post »

Section 203 of the Companies Act, 2013 as required in terms of Section 17(2)(e) of the Insolvency and Bankruptcy Code, 2016, is mandatory requirement of the statute, which Resolution Professional is required to adhere and comply with – Mr. Sanyam Goel, RP for Haryana Telecom Ltd. Vs. Registrar of Companies – NCLT Chandigarh Bench

The Adjudicating Authority noted that respondent-Registrar of Companies has admitted that the record of resignation of CFO has been approved on 14.08.2020. As far as the exemption to the applicant in terms of Section 203 of the Companies Act, 2013 read with Rule 8 and 8A of the Companies(Appointment and Remuneration of Managerial Personnel) Rules, 2014 as required in terms of Section 17(2)(e) of the Insolvency and Bankruptcy Code, 2016, is mandatory requirement of the statute, which the applicant-Resolution Professional is required to adhere and comply with. Therefore, the present application is dismissed accordingly.

Section 203 of the Companies Act, 2013 as required in terms of Section 17(2)(e) of the Insolvency and Bankruptcy Code, 2016, is mandatory requirement of the statute, which Resolution Professional is required to adhere and comply with – Mr. Sanyam Goel, RP for Haryana Telecom Ltd. Vs. Registrar of Companies – NCLT Chandigarh Bench Read Post »

Once RP in compliance with the conditions mentioned in Section 33(2) of IBC with a prayer to liquidate Corporate Debtor, the Adjudicating Authority has no option but to pass an order for liquidation and Once liquidation proceeding is initiated u/s 33(2) of IBC, officers/employees and workmen of the Corporate Debtor shall be deemed to be under discharge notice – Rakesh Gupta Vs. Mr Nitin Narang, Liquidator of M/s Gupta Marriage Halls Pvt. Ltd. – NCLAT New Delhi

NCLAT held on bare perusal of Section 33(2) of the IBC once Resolution Professional in compliance with the conditions mentioned in sub-section (2) with a prayer to liquidate Corporate Debtor, the Adjudicating Authority has no option but to pass an order for liquidation. The word “shall” in sub-section (2) has been inserted and as such on being intimated by the RP, in the present case, the COC has resolved for liquidation in terms of sub-section (2) of Section 33 and as such the Adjudicating Authority was having no option but to pass order for initiation of the liquidation proceeding. After initiation of liquidation proceeding under Section 33(2) of IBC the status of appellant may not be maintained as suspended directors. The suspension of director of a Corporate Debtor comes to an end after conclusion of proceeding initiated either under Section 7 and Section 9 of IBC. Once liquidation proceeding is initiated under Section 33(2) of IBC, officers/employees and workmen of the Corporate Debtor shall be deemed to be under discharge notice.

Once RP in compliance with the conditions mentioned in Section 33(2) of IBC with a prayer to liquidate Corporate Debtor, the Adjudicating Authority has no option but to pass an order for liquidation and Once liquidation proceeding is initiated u/s 33(2) of IBC, officers/employees and workmen of the Corporate Debtor shall be deemed to be under discharge notice – Rakesh Gupta Vs. Mr Nitin Narang, Liquidator of M/s Gupta Marriage Halls Pvt. Ltd. – NCLAT New Delhi Read Post »

NCLT imposes Rs. 1 Crore penalty on the Wave Megacity Centre Pvt. Ltd. on filing CIRP under Section 10 of IBC, 2016 to play fraud on thousands of Home Buyers, Noida Authority, Government Authorities etc. and directs the Central Government to make necessary investigation into the affairs of the Corporate Debtor – Mr. Rakesh Taneja & Others Vs. Wave Megacity Centre Pvt. Ltd. – NCLT Principal Bench

The Adjudicating Authority held that the Application filed under Section 10 of IBC, 2016 was an attempt on the part of the Corporate Debtor to play fraud on thousands of Home Buyers, Noida Authority, Government Authorities etc. Further great prejudice must have caused to them if the CIRP was triggered. Therefore, we are imposing Rs. 1 Crore penalty on the Corporate Debtor which shall be deposited in Prime Minister’s Relief fund within 15 days from today. That we have observed serious allegations against the Corporate Debtor with respect to siphoning off the money collected from Home Buyers. Furthers there is evidence produced by the Home Buyers that the Corporate Debtor was taking huge amount of cash from the Home Buyers. It is surprising to note that despite receiving the entire amount from the Home Buyers the Corporate Debtor failed to either give possession or returned the money. Therefore, we are of the view that the affairs of the Corporate Debtor were conducted with the intent to play fraud on the creditors of the Corporate Debtor. In light of above circumstances, we direct the Central Government to make necessary investigation into the affairs of the Corporate Debtor.

NCLT imposes Rs. 1 Crore penalty on the Wave Megacity Centre Pvt. Ltd. on filing CIRP under Section 10 of IBC, 2016 to play fraud on thousands of Home Buyers, Noida Authority, Government Authorities etc. and directs the Central Government to make necessary investigation into the affairs of the Corporate Debtor – Mr. Rakesh Taneja & Others Vs. Wave Megacity Centre Pvt. Ltd. – NCLT Principal Bench Read Post »

After the admission of the Corporate Debtor into CIRP, the limited function to assisting and cooperating with IRP/RP does not bar the suspended Board of Directors to object the act of the Resolution Professional if the act of the Resolution Professional is prejudicial to the Corporate Debtor, or is in violation of any law or procedural requirement – Anand Kariwala Vs. Mr. Partha Pratim Ghosh, Resolution Professional – NCLT Kolkata Bench

The Bench held that after the admission of the Corporate Debtor into CIRP, the Board of Directors of the Corporate Debtor are suspended and their powers are transferred to the Interim Resolution Professional as envisaged in section 17(1)(b) of the Code. Thereafter, the Interim Resolution Professional/Resolution Professional takes over the reins of the Corporate Debtor and manages the Corporate Debtor for its benefit. The function of the suspended Board of Directors is limited to assisting and cooperating with the Interim Resolution Professional/Resolution Professional for the smooth resolution of the Corporate Debtor. But this limited function does not bar the suspended Board of Directors to object the act of the Resolution Professional if the act of the Resolution Professional is prejudicial to the Corporate Debtor, or is in violation of any law or procedural requirement. Hence, when a Resolution Plan has been submitted to revive the Corporate Debtor as a going concern and is in compliance of the Code, there is no reason to reject the same, and certainly it cannot be done on the basis of a perceived grievance by a member of the Suspended Board who has not taken any positive step to participate in the meetings of the CoC.

After the admission of the Corporate Debtor into CIRP, the limited function to assisting and cooperating with IRP/RP does not bar the suspended Board of Directors to object the act of the Resolution Professional if the act of the Resolution Professional is prejudicial to the Corporate Debtor, or is in violation of any law or procedural requirement – Anand Kariwala Vs. Mr. Partha Pratim Ghosh, Resolution Professional – NCLT Kolkata Bench Read Post »

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