17 (1)

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 »

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 »

Whether the prosecution under Section 138 of the Negotiable Instruments Act initiated against the company and directors maintainable in view of the moratorium under IBC – Mr. A.R. Asaithambhee Vs. S. Thangavel – Madras High Court

The Hon’ble High Court holds that the question herein is whether the prosecution initiated against the company and directors maintainable in view of the above moratorium.

As per the decision of the Apex Court in a judgment reported in P. Mohanraj and Others vs. Shah Brothers Ispat Pvt. Ltd. (2021) ibclaw.in 24 SC, the petitioners being the directors of the company, have to be prosecuted. The Court also refers the Apex Court judgment in Bir Singh vs. Mukesh Kumar [Crl.A.No.230-231 of 2019 dated 06.02.2019 – Supreme Court].

It holds that in such a view of the matter, when the petitioners themselves have admitted before this Court that the cheques were issued in the year 2016, merely because the different date is mentioned in the complaint, it is the matter of evidence. In such a view of the prosecution initiated by the respondent cannot be quashed. The Petition is liable to be dismissed. In view of the same, the Criminal Original Petition is dismissed. Consequently connected Miscellaneous Petitions are closed.

Whether the prosecution under Section 138 of the Negotiable Instruments Act initiated against the company and directors maintainable in view of the moratorium under IBC – Mr. A.R. Asaithambhee Vs. S. Thangavel – Madras High Court Read Post »

Is there a difference between the Supersession of Directors under the RBI Act and the Suspension of Directors under the Code? and Whether a Superseded director, who had vacated office on supersession of Board under RBI Act, is entitled to the notice of CoC meeting and has the right to participate in the meeting of the CoC? – Dheeraj Wadhawan Vs. The Administrator Dewan Housing Finance Corporation Ltd. – NCLAT New Delhi

NCLAT holds that Superseded Directors are those Directors who have been removed or deemed to have demitted office and who are not holding the position of Director on the CIRP commencement date, cannot be considered a Director Simpliciter to benefit from participating in the meeting of CoC.A removed Director from the Board of Directors cannot interfere in the Company’s affairs per contra a suspended Director always remains on the Board. The Appellant, erstwhile Directors, who have vacated the offices are also not entitled to share any document. However, the copy of the Resolution Plan after approval from the Adjudicating Authority cannot be treated as a confidential document. Therefore, after final approval of the Resolution Plan, its certified copy may be issued as per Rules.

Is there a difference between the Supersession of Directors under the RBI Act and the Suspension of Directors under the Code? and Whether a Superseded director, who had vacated office on supersession of Board under RBI Act, is entitled to the notice of CoC meeting and has the right to participate in the meeting of the CoC? – Dheeraj Wadhawan Vs. The Administrator Dewan Housing Finance Corporation Ltd. – NCLAT New Delhi Read Post »

The phrase used in Section 17(1)(d) of the IBC that financial institution “shall act on the instructions of the IRP” does not mean that it authorises IRP/RP to compel the financial institution for maintaining the accounts of the Corporate Debtor to continue the Non-Fund Based Facility comforted by Bank Guarantee – Union Bank of India Vs. Mr Dinkar T. Venkatasubramanian RP of Amtek Auto Ltd.- NCLAT New Delhi

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The phrase used in Section 17(1)(d) of the IBC that financial institution “shall act on the instructions of the IRP” does not mean that it authorises IRP/RP to compel the financial institution for maintaining the accounts of the Corporate Debtor to continue the Non-Fund Based Facility comforted by Bank Guarantee – Union Bank of India Vs. Mr Dinkar T. Venkatasubramanian RP of Amtek Auto Ltd.- NCLAT New Delhi Read Post »

Section 3(31) of IBC which deals with definition of “Security Interest” apart from being inclusive definition does not merely deal with “charge” but also agreements or arrangements securing payment or performance of any obligation of any person – Concast Steel and Power Limited, (In Liquidation), Through the Liquidator Mr. Kshitiz Chhawchharia Vs. MSTC Limited – NCLAT New Delhi

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Section 3(31) of IBC which deals with definition of “Security Interest” apart from being inclusive definition does not merely deal with “charge” but also agreements or arrangements securing payment or performance of any obligation of any person – Concast Steel and Power Limited, (In Liquidation), Through the Liquidator Mr. Kshitiz Chhawchharia Vs. MSTC Limited – NCLAT New Delhi Read Post »

Merely because the Corporate Debtor had enough liquidity to run the Company as a going concern, the act of the Banks to adjust the credit balance in the Cash Credit Account towards the debit balance after CIRP commenced, cannot be justified – Bank of India Vs. Mr. Bhuban Madan RP of Ferroy Alloys Corporation Ltd. – NCLAT New Delhi

NCLAT held that merely because the Corporate Debtor had enough liquidity to run the Company as a going concern, the act of the Appellant Banks to adjust the credit balance in the Cash Credit Account towards the debit balance after CIRP commenced, cannot be justified. If the Appellant’s argument is accepted, then the act of recovering receivables, under the garb of normal course of business will change the status of all the claims which would be in complete violation of Section 14 of the Code. In another issue, release of the title deeds of the Immovable Properties of the Company which are in possession of Bank of India, NCLAT held that the debt has been legally extinguished and therefore withholding of the title deeds preventing the Company from being able to create security interest for securing the non-convertible Debentures issued to the Debenture Holders, in terms of the Plan, is unjustifiable and  directed the non-Applicants to release the title deeds for effective  implementation of the terms of the Resolution Plan as provided for under Section 31 of the Code.

Merely because the Corporate Debtor had enough liquidity to run the Company as a going concern, the act of the Banks to adjust the credit balance in the Cash Credit Account towards the debit balance after CIRP commenced, cannot be justified – Bank of India Vs. Mr. Bhuban Madan RP of Ferroy Alloys Corporation Ltd. – NCLAT New Delhi Read Post »

Steps taken against the Directors such as publication of their names in the list of Wilful Defaulters and the like, do not affect the CIRP at all, since the Directors have no truck with the company from the moment of inception of the CIRP – Ayan Mallick and another Vs. State Bank of India and others – Calcutta High Court

The Hon’ble Court held that it is clear from the Section 17(1), 18,20, 23 and 25 pf the IBC that the Directors are shut out from having any role in the functioning of the corporate debtor-company from the inception of the CIRP. As such, the present petitioners, in the capacity of Directors of the borrower company, cannot interfere in the functioning of the company at all. On the other hand, the steps taken against the Directors, even in their capacity as Directors, such as publication of their names in the list of Wilful Defaulters and the like, do not affect the CIRP at all, since the Directors have no truck with the company from the moment of inception of the CIRP.

Steps taken against the Directors such as publication of their names in the list of Wilful Defaulters and the like, do not affect the CIRP at all, since the Directors have no truck with the company from the moment of inception of the CIRP – Ayan Mallick and another Vs. State Bank of India and others – Calcutta High Court Read Post »

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