05 (13) (c)

When Lessor was not in receipt of rent on CIRP commencement date and Arbitral Award was still under execution, the lease rental subsequent to the commencement of the CIRP cannot be treated as CIRP cost under CIRP Regulation 31(b) | This case does not fall under Section 14(1)(d) of the IBC, rather it is covered by Section 14(1)(a) – Mr. A. Guhan and Anr. Vs. Ms. Sunita Umesh Liquidator, Deltronix India Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) On the date when CIRP commenced, Appellant was not receiving any rent from the Corporate Debtor and claim of rent/damages and possession of the assets was under consideration in the Execution Proceedings.
(ii) After enforcement of Moratorium under Section 14 by virtue of Section 14(1)(a) the Appellant could not have prosecuted the Execution Proceeding against the Corporate Debtor. When the Appellant could not have proceeded with the execution of Arbitral Award, there was no occasion to recover the rent and assets from the Corporate Debtor.
(iii) The claim of Appellant as per Arbitral Award to receive damages and occupation from Corporate Debtor cannot be treated as Insolvency Resolution Process cost under Section 31(b).
(iv) The fact that plant and machineries are attached/available at the site cannot be read to mean that the premises were being used as a going concern by Corporate Debtor
(v) In the present case, when the Appellant was not in receipt of rent from December 2014, and Arbitral Award obtained by the Appellant was still under execution, the lease rental subsequent to the commencement of the CIRP cannot be treated as CIRP cost.

When Lessor was not in receipt of rent on CIRP commencement date and Arbitral Award was still under execution, the lease rental subsequent to the commencement of the CIRP cannot be treated as CIRP cost under CIRP Regulation 31(b) | This case does not fall under Section 14(1)(d) of the IBC, rather it is covered by Section 14(1)(a) – Mr. A. Guhan and Anr. Vs. Ms. Sunita Umesh Liquidator, Deltronix India Ltd. – NCLAT New Delhi Read Post »

Criteria to determine whether a cost incurred by Resolution Professional during CIRP qualifies as CIRP cost under Section 5(13)(c) of IBC read with CIRP Regulation 31 – Avil Menezes Liquidator of Sunil Hitech and Engineers Ltd. Vs. Abdul Qudduskhan and Anr. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT defined the criteria to determine whether a cost incurred by the Resolution Professional during CIRP qualifies as CIRP cost as:

(a) maintaining the Corporate Debtor as a going concern,
(b) payment to suppliers of essential goods and services, and
(c) direct relation to CIRP with approval from the Committee of Creditors (CoC).

And held that the Respondent’s claim should be classified as non-CIRP cost, falling under Section 53 of the Code for distribution during liquidation.

Criteria to determine whether a cost incurred by Resolution Professional during CIRP qualifies as CIRP cost under Section 5(13)(c) of IBC read with CIRP Regulation 31 – Avil Menezes Liquidator of Sunil Hitech and Engineers Ltd. Vs. Abdul Qudduskhan and Anr. – NCLAT New Delhi Read Post »

Whether CIRP cost determined by Resolution Professional is required any approval of CoC under Sec. 28 of IBC | The determination & payment of CIRP cost is an independent process from any recovery under avoidance applications | After approval of Resolution Plan, Adjudicating Authority is fully empowered to any direction or assign CoC to pursue avoidance applications under Sec. 43, 45, 49 & 66 of the Code – Mehul Parekh and Ors. v. Unimark Remedies and Ors. – NCLAT New Delhi

In this landmark judgment, Hon’ble NCLAT held that:
(i) When the Plan has been approved by the CoC, which included payment of the CIRP cost and it is not shown that CIRP cost determined by the Resolution Professional required any approval under Section 28, we fail to see any reason for redetermination of the CIRP cost by the CoC. The direction to CoC to redetermine the CIRP cost after approval of the Resolution Plan by the CoC is unsustainable.
(ii) The determination of CIRP cost and payment of CIRP cost to those who found entitled to receive the payments is an independent process from any recovery from Promoters/ KMPs, consequent to avoidance application filed by Resolution Professional under the provisions of the Code, including Section 66 of the Code.
(iii) After approval of the Resolution Plan, the Adjudicating Authority is fully empowered to issue any direction, as to how the avoidance applications has to be pursued and direction to pursue the avoidance applications by the CoC as issued therein is fully justifiable.

Whether CIRP cost determined by Resolution Professional is required any approval of CoC under Sec. 28 of IBC | The determination & payment of CIRP cost is an independent process from any recovery under avoidance applications | After approval of Resolution Plan, Adjudicating Authority is fully empowered to any direction or assign CoC to pursue avoidance applications under Sec. 43, 45, 49 & 66 of the Code – Mehul Parekh and Ors. v. Unimark Remedies and Ors. – NCLAT New Delhi Read Post »

Whether Gratuity is payable when no Gratuity fund is created? – Rakesh Sharma Vs. Mr. Sumat Gupta, RP of M/s International Mega Food Park Ltd. – NCLT Chandigarh Bench

In the instant matter, the Resolution Professional cannot be directed to make payment of gratuity to the applicant as there is no gratuity fund created by the corporate debtor. As regards the salary and leave encashment during the period of CIRP, the same pertains to the amounts payable to an employee for services rendered during the CIRP. In this connection, these expenses clearly fall within the definition of insolvency resolution process cost as defined in section 5(13)(c) of the IBC, 2016. In this case, a reference is made to the decision of the Hon’ble Supreme Court in the case of Sunil Kumar Jain and others Vs. Sundaresh Bhatt and others (2022) ibclaw.in 23 SC holding that the Wages/Salaries of the Workmen/Employees for the period during CIRP can only be included in the CIRP costs if it is established that the IRP/Resolution Professional managed the operations of the Corporate Debtor as a going concern during the CIRP and that the concerned workmen/employees actually worked during the CIRP. The Resolution Professional is mandated to make provisions to meet such expenses under the code.

Whether Gratuity is payable when no Gratuity fund is created? – Rakesh Sharma Vs. Mr. Sumat Gupta, RP of M/s International Mega Food Park Ltd. – NCLT Chandigarh Bench Read Post »

Question of CIRP cost and its approval lays in the domain of the CoC and are not to be examined by the Adjudicating Authority even before the CoC takes a decision – Bharat Hotels Ltd. Vs. Tapan Chakraborty RP of RDG Interior Decoration Exterior Architecture Pvt. Ltd. – NCLAT New Delhi

In the present case, the Appellant who is a minority shareholder in the CoC cannot resist the passing of the resolution. The Adjudicating Authority has rightly rejected the application filed under Section 18 of Code and Regulation 34A, which was not to be entertained. The Appellant asked Resolution Professional to disclose item wise insolvency resolution process costs in such manner as required by the IBBI. Question of cost and its approval lays in the domain of the CoC. The CoC may ratify, modify or set aside the cost claimed. These issued may be decided in the meeting of the CoC and are not to be examined by the Adjudicating Authority even before the CoC takes a decision. It shall be always open for the appellant to raise issue regarding the cost in the meeting of the Committee of Creditors. With reference to the grievance of the Appellant with regard to obtaining valuation report, it is always open to the Appellant to request the Liquidator to obtain a valuation report, if not already obtained.

Question of CIRP cost and its approval lays in the domain of the CoC and are not to be examined by the Adjudicating Authority even before the CoC takes a decision – Bharat Hotels Ltd. Vs. Tapan Chakraborty RP of RDG Interior Decoration Exterior Architecture Pvt. Ltd. – NCLAT New Delhi Read Post »

The Landlord cannot recover the possession of its premises in view of imposition of moratorium – S. Rajendran RP of M/s. Vasan Health Care Pvt. Ltd. Vs. B.M Anand (HUF) – NCLAT Chennai

NCLAT held that after admitting the Application, the Adjudicating Authority would declare moratorium as per Section 14 of the Code, 2016. In pursuance of clause (d) of Sub- Section 1 of Section 14, which provides that during the moratorium period the lesser or an owner of the property cannot recover the possession of the property from the Corporate Debtor. In view of the law, the Corporate Debtor continuing its business in the premises leased to it. For the aforesaid reason the Learned Adjudicating Authority rejected the prayer of the Respondents seeking handing over of vacant possession of the premises. Hence, no interference is called for

The Landlord cannot recover the possession of its premises in view of imposition of moratorium – S. Rajendran RP of M/s. Vasan Health Care Pvt. Ltd. Vs. B.M Anand (HUF) – NCLAT Chennai 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 »

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