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Ministry of Coal cannot restrict New Management of Corporate Debtor from participating in Coal Mine Tenders/Auctions on the basis of dues/liabilities arising prior to approval of Resolution Plan – OCL Iron and Steel Ltd. Vs. Union of India – Delhi High Court

Hon’ble Delhi High Court held that Section 31(1) of IBC underscores that a resolution plan, once ratified by the Adjudicating Authority, must absolve the corporate debtor of past liabilities, enabling the Successful Resolution Applicant to commence operations unencumbered by previous debts. Thus, excluding the Petitioner from participating in tenders on the basis of prior dues attributable to the corporate debtor, contradicts the fundamental tenets of the IBC. Under the framework of the IBC, all claims against the corporate debtor must be clearly delineated and adjudicated by the Resolution Professional during the CIRP. It is beyond dispute that the resolution plan, once approved by the Adjudicating Authority, carries binding legal force on all stakeholders. This binding nature of the resolution plan is designed to establish finality and certainty to the insolvency process, thereby preventing any further disputes or claims that could undermine the successful revival of the corporate debtor as a going concern.

Ministry of Coal cannot restrict New Management of Corporate Debtor from participating in Coal Mine Tenders/Auctions on the basis of dues/liabilities arising prior to approval of Resolution Plan – OCL Iron and Steel Ltd. Vs. Union of India – Delhi High Court Read Post »

When Corporate Debtor creates mortgage to secure payment obligation of Debenture Issuer Company (a Third Party) without any disbursement of debt to itself, Debenture Trustee can only be described as indirect Secured Creditor and not as a Secured Financial Creditor – Vistra ITCL (India) Ltd. Vs. Mr. Vithal Madhukar Dahake, RP of Radius Estate Projects Pvt. Ltd. – NCLT Mumbai Bench

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When Corporate Debtor creates mortgage to secure payment obligation of Debenture Issuer Company (a Third Party) without any disbursement of debt to itself, Debenture Trustee can only be described as indirect Secured Creditor and not as a Secured Financial Creditor – Vistra ITCL (India) Ltd. Vs. Mr. Vithal Madhukar Dahake, RP of Radius Estate Projects Pvt. Ltd. – NCLT Mumbai Bench Read Post »

If no GST refund/ITC claim was included in the Section 8 Demand Notice or in Form 5 of Section 9 application by Operational Creditor, it cannot become a ground of default on which CIRP under IBC can be initiated – R.B. Singh and Anr. Vs. Rashmi Cement Ltd. and Anr. – NCLAT New Delhi

In this case, Corporate Debtor had made payment of the entire operational debt as claimed by Operational Creditor in Section 8 Demand Notice and debt as reflected in Form 5 of Section 9 application. OC had not sought any GST amount in the Section 8 demand notice or Section 9 application.

Hon’ble NCLAT held that when the dues in terms of Form 3 and Form 5 have been cleared by CD, endeavours on the part of OC to seek initiation of CIRP by raising claims which do not find place in Form 3 and Form 5 filed by them, clearly manifests the intention of the OC to invoke the provision of IBC to enforce recovery of debts against the Corporate Debtor. Allowing such claims which never formed part of the claim of operational debt before the Adjudicating Authority to be considered at the appeal stage is not tenable. This cannot be commended as it militates against the spirit and essence of IBC.

If no GST refund/ITC claim was included in the Section 8 Demand Notice or in Form 5 of Section 9 application by Operational Creditor, it cannot become a ground of default on which CIRP under IBC can be initiated – R.B. Singh and Anr. Vs. Rashmi Cement Ltd. and Anr. – NCLAT New Delhi Read Post »

The words “Due and Payable” used in definition of “default” in section 3(12) of IBC means that the default debt must be subsisting debt – JC Flowers Asset Reconstruction Pvt. Ltd. Vs. Laxmi Oil and Vanaspati Pvt. Ltd. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT held that:

(i) Bar on the filing of application for the commencement of CIRP during stipulated period u/s 10A of IBC does not extinguish the debt owed by the Corporate Debtor and creditors/lenders may continue to exercise their rights to pursue their legal remedies under Section 7,9 and 10.
(ii) Section 3(12) of IBC contains the word “Due and Payable” and not ‘Due or Payable’.
(iii) The words “Due and Payable” used in definition of “default” in section 3 (12) means that the default debt must be subsisting debt.
(iv) A creditor is not only required to establish the existence of a debt but is also required to prove that the corporate debtor has defaulted in payment of the debt and if he fails to establish the same, the CIRP cannot be initiated by the Adjudicating Authority
(v) The mere fact of a debt being due and payable is not adequate to justify the initiation of CIRP at the instance of the creditor, unless the default on the part of the Debtor is established.
(vi) The default is required to take place with reference to debt which is outstanding and become payable.

The words “Due and Payable” used in definition of “default” in section 3(12) of IBC means that the default debt must be subsisting debt – JC Flowers Asset Reconstruction Pvt. Ltd. Vs. Laxmi Oil and Vanaspati Pvt. Ltd. – NCLAT New Delhi Read Post »

Whether NPA classification date or loan recall notice date constitutes the date of default under the IBC, if Corporate Debtor made part payment between NPA classification date and loan recall notice date – Milind Kashiram Jadhav Vs. State Bank of India and Anr. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) There is no requirement to calculate and fix the exact amount of repayment.
(ii) The default has been persisting prior to 90 days of NPA declaration date.
(iii) The mere existence of partial payments does not absolve the Corporate Debtor from the default status. In the light of these incontrovertible facts, the argument put forth by the Appellant/Corporate Debtor holds no merit.

Whether NPA classification date or loan recall notice date constitutes the date of default under the IBC, if Corporate Debtor made part payment between NPA classification date and loan recall notice date – Milind Kashiram Jadhav Vs. State Bank of India and Anr. – NCLAT New Delhi Read Post »

While deciding the issue of whether a debt is a Financial Debt or an Operational Debt under IBC, it is necessary to ascertain what is the real nature of the transaction – Global Credit Capital Ltd. and Anr. Vs. Sach Marketing Pvt. Ltd. and Anr. – Supreme Court

In this landmark decision, Hon’ble Supreme Court ruled that:

(i) There cannot be a debt within the meaning of Section 3(11) of the IB Code unless there is a claim within the meaning of Section 3(6) of thereof;
(ii) The test to determine whether a debt is a financial debt within the meaning of Section 5(8) is the existence of a debt along with interest, if any, which is disbursed against the consideration for the time value of money. The cases covered by categories (a) to (i) of sub-section (8) must satisfy the said test laid down by the earlier part of Section 5(8);
(iii) While deciding the issue of whether a debt is a financial debt or an operational debt arising out of a transaction covered by an agreement or arrangement in writing, it is necessary to ascertain what is the real nature of the transaction reflected in the writing; and
(iv) Where one party owes a debt to another and when the creditor is claiming under a written agreement/ arrangement providing for rendering ‘service’, the debt is an operational debt only if the claim subject matter of the debt has some connection or co-relation with the ‘service’ subject matter of the transaction.

While deciding the issue of whether a debt is a Financial Debt or an Operational Debt under IBC, it is necessary to ascertain what is the real nature of the transaction – Global Credit Capital Ltd. and Anr. Vs. Sach Marketing Pvt. Ltd. and Anr. – Supreme Court Read Post »

Section 3(31) of IBC does not refer to any registration of charge under Section 77 of the Companies Act, 2013 – Unity Small Finance Bank Ltd. Vs. Sripatham Venkatasubramanian Ramkumar RP for Privilege Industries Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that it is true that Section 3(31) does not refer to any registration of charge under Section 77. I n Paschimanchal Vidyut Vitran Nigam Ltd. vs. Raman Ispat Pvt. Ltd. (2023) ibclaw.in 81 SC, Hon’ble Supreme Court did not consider it appropriate to rule on the submissions of the Liquidator, vis-à-vis the fact of non-registration of charges under Section 77 of the Companies Act. The question was thus left open.

Section 3(31) of IBC does not refer to any registration of charge under Section 77 of the Companies Act, 2013 – Unity Small Finance Bank Ltd. Vs. Sripatham Venkatasubramanian Ramkumar RP for Privilege Industries Ltd. – NCLAT New Delhi Read Post »

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