24 (6)

Resolution Professional shall give notice of each meeting of CoC as per CIRP Regulation 19(2) even in case of adjournment of meeting where agenda modified | Reasons should be recorded in writing in case any reduction of notice time limit – Mr. Farooq Ali Khan v. Punjab National Bank – Karnataka High Court

In this case, on 11-02-2020 at 12.20 pm an e-mail is sent communicating that the second meeting of 19th CoC which was sought to be adjourned on 10-02-2020 is scheduled on the same day i.e., 11-02-2020 at 3.00 p.m.

Hon’ble High Court held that:
(i) Section 24(3) mandates that the Resolution professional shall give notice of each meeting of the CoC. The section does not depict the manner in which notice should be given. It only indicates that notice shall be given of each meeting to the CoC. In the considered view of this Court, ‘each’ would mean each and every.
(ii) The time limit for issuance of notice of meeting was reducible to 24 hours. This should be in the considered view of the Court, for reasons to be recorded in writing, as the words used are ‘as it deems fit’.
(iii) This Court, in exercise of its jurisdiction under Article 226 of the Constitution of India would not enter into venturing a fact finding enquiry to examine whether the resolution professional has acted in accordance with the duties and responsibilities under the Act.
(iv) Reserve liberty to the petitioner to submit a representation/complaint before the Board within a fortnight from the date of receipt of the copy of this order and if such a complaint is received, the Board would decide the issue, in accordance with law.
(v) The CoC shall reconsider the restructuring proposal submitted on behalf of the petitioner in terms of Section 12A of the Code.

Resolution Professional shall give notice of each meeting of CoC as per CIRP Regulation 19(2) even in case of adjournment of meeting where agenda modified | Reasons should be recorded in writing in case any reduction of notice time limit – Mr. Farooq Ali Khan v. Punjab National Bank – Karnataka High Court Read Post »

CoC constituted on the basis of provisional list of claims and exclusion/delayed inclusion of a Financial Creditor from/on the CoC is prejudicial to the best interests of the Corporate Debtor – Edelweiss Asset Reconstruction Company Ltd. Vs. Mohit Goyal – NCLAT New Delhi

NCLAT held that Section 21(1) of the IBC imposes a pre-condition that the IRP shall only after collation of all claims received against the Corporate Debtor and after determination of the financial position of the Corporate Debtor constitute a CoC. The word “collation” ordinarily means verification of claim. The procedure for verification of claims is outlined in Regulation 13. It is also important to note that Section 24(6) provides that each creditor shall vote by the voting share assigned to him based on financial debts owed to such creditor. A duty is also imposed on the Resolution Professional to determine the voting share assigned to each creditor. While it is true that the claims were not submitted by the Appellant before the last date, it cannot be discounted that he had in clear terms stated that he was in the process of submitting his claims as a financial lender. However, in the same breath, we must add that while it is a well settled proposition that time is of essence under IBC, overzeal shown as in the present case, carries with it the risk of stifling the basic canons of fairness and justice, which must be obviated.

CoC constituted on the basis of provisional list of claims and exclusion/delayed inclusion of a Financial Creditor from/on the CoC is prejudicial to the best interests of the Corporate Debtor – Edelweiss Asset Reconstruction Company Ltd. Vs. Mohit Goyal – NCLAT New Delhi Read Post »

Court should not go into the academic issues and seek to interpret the provisions of law when it is not necessary for deciding the issues in the appeal(s) – K.N. Rajakumar Vs. V. Nagarajan & Ors. – Supreme Court

Hon’ble Supreme Court held that it is a settled principle of law that the Court should not go into the academic issues and seek to interpret the provisions of law when it is not necessary for deciding the issues in the appeal(s). Reference in this regard could be made to the judgments of this Court in the cases of Vidya Charan Shukla v. Purshottam Lal Kaushik (1981) 2 SCC 84 and K.I. Shephard and others v. Union of India and others (1987) 4 SCC 431.(p11). Further, it held that it could thus be seen that one of the principal objects of the IBC is providing for revival of the Corporate Debtor and to make it a going concern. Every attempt has to be first made to revive the concern and make it a going concern, liquidation being the last resort.(p16)

Court should not go into the academic issues and seek to interpret the provisions of law when it is not necessary for deciding the issues in the appeal(s) – K.N. Rajakumar Vs. V. Nagarajan & Ors. – Supreme Court Read Post »

Only those Financial Creditors that are related parties in praesenti would be debarred from CoC under the first proviso to Section 21(2), those related party Financial Creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder – Phoenix Arc Pvt. Ltd. Vs. Spade Financial Services Ltd. and Ors. – Supreme Court

An issue of interpretation in relation to the first proviso of Section 21(2) is whether the disqualification under the proviso would attach to a financial creditor only in praesenti, or if the disqualification also extends to those financial creditors who were related to the corporate debtor at the time of acquiring the debt. Thus, facially, it would appear that the use of the simple present tense in the first proviso to Section 21(2) indicates that the disqualification applies in praesenti. Furthermore, this interpretation would also be supported by a reading of the first proviso to Section 21(2), in light of the definition of ‘related party’ under Section 5(24), which uses phrases such as ‘is accustomed to act’ or ‘is associated’ to define a related party in the present tense.(p82 & 84).

While the default rule under the first proviso to Section 21(2) is that only those financial creditors that are related parties in praesenti would be debarred from the CoC, those related party financial creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder. Mr Kaul has argued, correctly in our opinion, that if this interpretation is not given to the first proviso of Section 21(2), then a related party financial creditor can devise a mechanism to remove its label of a ‘related party’ before the Corporate Debtor undergoes CIRP, so as to be able to enter the CoC and influence its decision making at the cost of other financial creditors. (p95)

Only those Financial Creditors that are related parties in praesenti would be debarred from CoC under the first proviso to Section 21(2), those related party Financial Creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder – Phoenix Arc Pvt. Ltd. Vs. Spade Financial Services Ltd. and Ors. – Supreme Court Read Post »

The application under Section 21(3) or 24(6) & (7) were not maintainable for any direction on the Resolution Professional or for setting aside the order passed by the Resolution Professional nor such application under Section 52 or 53 of the IBC – State Bank of India & Anr. Vs. M/s. Scotts Garments Ltd. & ors. – NCLAT New Delhi

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The application under Section 21(3) or 24(6) & (7) were not maintainable for any direction on the Resolution Professional or for setting aside the order passed by the Resolution Professional nor such application under Section 52 or 53 of the IBC – State Bank of India & Anr. Vs. M/s. Scotts Garments Ltd. & ors. – NCLAT New Delhi Read Post »

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