29A

Whether Operational Creditor has priority in payment in distribution under Section 53 of IBC over Unsecured Financial Creditor who is a related party of the Corporate Debtor? – Times Innovative Media Ltd. Vs. Pawan Kumar Aggarwal (Liquidator) and Anr. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) On plain reading of Section 53(1), it is clear that financial debts owed to unsecured creditors ranked higher than debt of operational creditor.
(ii) Scheme of Regulations 2016 does not indicate that related party is excluded from filing a claim.
(iii) Appellant cannot claim any priority in distribution of assets of the corporate debtor as compared to unsecured financial creditor.

Whether Operational Creditor has priority in payment in distribution under Section 53 of IBC over Unsecured Financial Creditor who is a related party of the Corporate Debtor? – Times Innovative Media Ltd. Vs. Pawan Kumar Aggarwal (Liquidator) and Anr. – NCLAT New Delhi Read Post »

Resolution Professional cannot exclude existing homebuyers/ past developers \ related/connected persons in EOI from submission of Rplan | RP/CoC can lay down additional criterion in Form G only having regard to the complexity and scale of operations of the business of the Corporate Debtor, as per Section 25(2)(h) of IBC – Mr. Dinesh Chaplot and Anr. Vs. Mr. Dinesh Kumar Deora, RP of Snehanjali and S.B. Developers Pvt. Ltd. – NCLT Mumbai Bench

Hon’ble NCLT Mumbai Bench held that:

(i) As per Section 25(2)(h) of the IBC, the duty of the RP to lay down the criteria for inviting prospective resolution applicants (PRAs) must be with the approval of the CoC and is not independent.
(ii) The duty of both RP and CoC is to lay down such criterion as is formulated only having regard to the complexity and scale of operations of the business of the CD and other conditions specified by the IBBI.
(iii) From a conjoint reading of Section 25(2)(h) and Regulation 36A (1), it can be presumed that the RP is not authorised to adjudicate as to the qualification or disqualification of PRAs.
(iv) An insolvency professional is duty bound to abide by all the laws at all times during the resolution process. An RP is the only person who would ensure compliance of all the laws in the processes under the IBC.
(v) Neither the CoC nor the RP has any inherent right to negate a statutory provision available to a person to submit EOI, if such a person is otherwise not ineligible within the meaning of Section 29A of the IBC.

Resolution Professional cannot exclude existing homebuyers/ past developers \ related/connected persons in EOI from submission of Rplan | RP/CoC can lay down additional criterion in Form G only having regard to the complexity and scale of operations of the business of the Corporate Debtor, as per Section 25(2)(h) of IBC – Mr. Dinesh Chaplot and Anr. Vs. Mr. Dinesh Kumar Deora, RP of Snehanjali and S.B. Developers Pvt. Ltd. – NCLT Mumbai Bench Read Post »

MSME promoter can be relaxed from net worth criterion for submitting its Resolution Plan but not be waived off from depositing Security Deposit and EMD – Mr. Manish Kumar, suspended director of Wearit Global Ltd. Vs. Rachna Jhunjunwala, RP and Anr. – NCLT Kolkata Bench

Hon’ble NCLT held that:
(i) As various relaxations have already been provided under Section 240A of the Code, further, relaxation to satisfy the financial solvency possessed by the MSME Promoter will not serve the object of the code.
(ii) As various exemptions and relaxations are catered to the MSME, including the exemption provided in Section 240A of the I&B Code to MSME sector, and furnishing EMD and Security Deposit, which is refundable in nature if the Plan of the Resolution Applicant including the MSME Promoter fails in the bid, denotes the seriousness and solemnity of the Resolution Applicant which indicates the affirmation that the Applicant is honestly interested in reviving the business of the Corporate Debtor but not merely participating as a probable attempt to regain the control over its business or vitiate the CIRP of the Corporate Debtor.
(iii) In the case in hand, the MSME promoter who has already defaulted and subsequently, its company has undergone into CIRP for its default, can be relaxed from the net worth criterion for submitting its plan but not be waived off from depositing the Security Deposit at time of submission of its EoI and the EMD at time of submission of its Resolution Plan.

MSME promoter can be relaxed from net worth criterion for submitting its Resolution Plan but not be waived off from depositing Security Deposit and EMD – Mr. Manish Kumar, suspended director of Wearit Global Ltd. Vs. Rachna Jhunjunwala, RP and Anr. – NCLT Kolkata Bench Read Post »

Explanation-I read with Section 29A(j) of IBC speaks about connected person to the Resolution Applicant and not to the Corporate Debtor – Mr. Narayanam Nageswara Rao Vs. Mr. K. Sivalingam, RP of NCS Sugars Ltd. and Anr. – NCLT Hyderabad Bench

Hon’ble NCLT Hyderabad Bench held that the from the Explanation-I read with Section 29A(j) of IBC, the same speaks about connected person to the Resolution Applicant and not to the Corporate Debtor. The Resolution Applicant herein, being an ex-director of the Corporate Debtor, contention of the respondent that the applicant is disqualified to submit resolution plan as CD is debarred by SEBI and that the applicant is a connected party to the CD is not maintainable. Further, legislature while passing the Bill, has given some special relaxation under Section 29A to MSME promoters so that they are allowed to participate in the resolution process of corporate debtor. Therefore, in the above backdrop, the impugned decision made by the Committee of Creditors in the 18th Meeting held on 07.03.2024 disqualifying the Applicant, needs our interference. The point is accordingly decided.

Explanation-I read with Section 29A(j) of IBC speaks about connected person to the Resolution Applicant and not to the Corporate Debtor – Mr. Narayanam Nageswara Rao Vs. Mr. K. Sivalingam, RP of NCS Sugars Ltd. and Anr. – NCLT Hyderabad Bench Read Post »

Resolution Applicant has no vested right that his Resolution Plan be considered and No challenge can be preferred to the Adjudicating Authority – Dheeraj Reddy Jinna Vs. Vijay Kumar V Iyer RP of Future Retail Ltd. – NCLT Mumbai Bench

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Resolution Applicant has no vested right that his Resolution Plan be considered and No challenge can be preferred to the Adjudicating Authority – Dheeraj Reddy Jinna Vs. Vijay Kumar V Iyer RP of Future Retail Ltd. – NCLT Mumbai Bench Read Post »

The exemption under Section 240A of IBC is not applicable to Section 29A(b) of IBC | MSME Promoters are exempted only from clauses (c) and (h) of Section 29A of IBC and other eligibility criteria as stipulated under section 29A will be applicable – Namdev Hindurao Patil Vs. Virendra Kumar Jain, Liquidator, Warana Dairy and Agro Industries Ltd. and Ors. – NCLAT New Delhi

In this important case, Hon’ble NCLAT interpreted Section 29A read with Section 240A that:

(i) In a way, Section 29A intends to give protection to the genuine creditors of the Corporate Debtor by preventing unscrupulous persons from rewarding themselves at the expenses of the creditors and undermine the process and object of the Code.
(ii) The Promoters of MSME are exempted only from clauses (c) and (h) of the Section 29A of the Code and other eligibility criteria as stipulated under section 29A of the Code will be applicable i.e., Section 29A(b) is not carved out.
(iii) The CoC has full powers to decide regarding approval or non-approval of the Resolution Plan. The CoC is also duty bound to consider the eligibility or ineligibility of the Resolution Applicant under section 29A of the Code.
(iv) The ineligibility for submission of the Resolution Plan, would be determinate w.r.t date on which the Resolution Applicant submits his Plan.

The exemption under Section 240A of IBC is not applicable to Section 29A(b) of IBC | MSME Promoters are exempted only from clauses (c) and (h) of Section 29A of IBC and other eligibility criteria as stipulated under section 29A will be applicable – Namdev Hindurao Patil Vs. Virendra Kumar Jain, Liquidator, Warana Dairy and Agro Industries Ltd. and Ors. – NCLAT New Delhi Read Post »

Eligibility of Resolution Applicant under Section 29A of IBC is required to be seen on the date of submission of afresh Resolution Plan where earlier/old Resolution Plan submitted but was never put up before CoC for consideration not ever opened/discussed or voted upon – Bank of India Vs. Mr. Vishal Ghisulal Jain and Ors. – NCLT Mumbai Bench

In this case, a Resolution Plan was submitted on 21.01.2021. This plan was never put up before CoC for consideration not ever opened/discussed or voted upon. The Resolution Applicant got declared willful defaulter on 30.10.2022. Thereafter, a fresh Plan was submitted by Resolution Applicant (R6) on 11.11.2022.

Hon’ble NCLT Mumbai Bench held that:
(i) It cannot by any stretch of imagination be stated to be a negotiated or revised Resolution Plan as the earlier plan was never considered at all.
(ii) Since it was a fresh plan submitted on 11.11.2022 the eligibility of the SRA /Resolution Applicant (R6) under Section 29A of IBC was required to be seen on the date of submission of Plan i.e. 11.11.2022.
(iii) It was incumbent upon Resolution Professional to verify the particulars submitted by the Resolution Applicant on the date of submission of the Resolution Plan, so as to ensure that the plan being submitted and being placed before the CoC is by a person who is competent to do so.

Eligibility of Resolution Applicant under Section 29A of IBC is required to be seen on the date of submission of afresh Resolution Plan where earlier/old Resolution Plan submitted but was never put up before CoC for consideration not ever opened/discussed or voted upon – Bank of India Vs. Mr. Vishal Ghisulal Jain and Ors. – NCLT Mumbai Bench Read Post »

By virtue of Section 29A in the Code, persons who have contributed to the defaults of the corporate debtor or are undesirable due to incapacities as specified in the section, are prevented from gaining control of the Corporate Debtor – Mr. Ritesh Prakash Adaitya, RP – NCLT Mumbai Bench

By virtue of Section 29A in the Code, persons who have contributed to the defaults of the corporate debtor or are undesirable due to incapacities as specified in the section, are prevented from gaining control of the Corporate Debtor. As the Resolution Applicants being the ex-directors/promoters of the Corporate Debtor have been rendered ineligible under sub clause (g) of Section 29A to submit a Resolution Plan under the Code in the light of the finding recorded in IA No. 2359 of 2022, the resolution plan submitted by such directors/promoters, is liable to be rejected. Accordingly, IA 2279 of 2022 praying for approval of the Resolution Plan is rejected.

By virtue of Section 29A in the Code, persons who have contributed to the defaults of the corporate debtor or are undesirable due to incapacities as specified in the section, are prevented from gaining control of the Corporate Debtor – Mr. Ritesh Prakash Adaitya, RP – NCLT Mumbai Bench Read Post »

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