07 (5)

The essential ingredients of Financial Debt in the context of IBC consists of disbursal accompanied by consideration for time value of money | Time value of money covers any other form of benefit or value accruing to the creditor as a return for providing money for a long duration – Arunkumar Jayantilal Muchhala Vs. Awaita Properties Pvt. Ltd. and Anr. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) When a Financial Creditor who has disbursed money to a Corporate Debtor against consideration for time value of money can trigger the insolvency resolution process against the Corporate Debtor.
(ii) The concept of time value of money has nowhere been defined in the IBC. Time value of money is not only a regular or timely return received for the duration for which the amount is disbursed as an amount in addition to the principal, but also covers any other form of benefit or value accruing to the creditor as a return for providing money for a long duration.
(iii) Once the Adjudicating Authority is subjectively satisfied that there is a debt and a default has been committed by the Corporate Debtor and the Section 7 application is complete in all respects, the Adjudicating Authority in the exercise of summary jurisdiction has to admit the Section 7 application. In our considered view, this is a case where all the pre-requisites for filing a Section 7 stood fulfilled and the Adjudicating Authority cannot be held to have committed an error in admitting the Corporate Debtor into CIRP for having defaulted in repaying a financial debt which was above the threshold limit.

The essential ingredients of Financial Debt in the context of IBC consists of disbursal accompanied by consideration for time value of money | Time value of money covers any other form of benefit or value accruing to the creditor as a return for providing money for a long duration – Arunkumar Jayantilal Muchhala Vs. Awaita Properties Pvt. Ltd. and Anr. – NCLAT New Delhi Read Post »

The judgment of Hon’ble Supreme Court in Vidarbha Industries was on its own facts – Prakash Kumar Raj (Suspended) Director. Mountain Edge Tours Vs. Shriram City Union Finance Ltd. and Anr. – NCLAT New Delhi

In this case, the Appellant placing reliance on the judgment of Hon’ble Supreme Court in Vidarbha Industries Power Ltd. vs. Axis Bank Ltd. (2022) ibclaw.in 91 SC submits that the Adjudicating Authority has discretionary power, which should have been used in rejecting the application.

Hon’ble NCLAT holds that the judgment of Hon’ble Supreme Court in Vidarbha was on its own facts and the said judgment does not apply in the present case.

The judgment of Hon’ble Supreme Court in Vidarbha Industries was on its own facts – Prakash Kumar Raj (Suspended) Director. Mountain Edge Tours Vs. Shriram City Union Finance Ltd. and Anr. – NCLAT New Delhi Read Post »

Optionally Convertible Debentures(OCDs) are Financial Debt within the meaning of Section 5(8)(c) of IBC – Santosh Kumar Vs. ASK Trusteeship Services Pvt. Ltd. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT observes that:
(i) In IFCI Limited vs. Sutanu Sinha & Ors. (2023) ibclaw.in 149 SC, the Hon’ble Supreme Court noticed Appellant have invested the amount as per compulsorily convertible debentures which has to be treated as equity. Issue was correctly determined that nowhere it is stipulated that investment as Compulsorily Convertible Debentures (CCDs) would partake the character of financial debt.
(ii) In MAIF Investments India Pte. Ltd. Vs. Ind-Barath Energy (Utkal) Ltd. (2019) ibclaw.in 307 NCLAT, this Tribunal held that OCDs are financial debt within the meaning of Section 5(8)(c).

Optionally Convertible Debentures(OCDs) are Financial Debt within the meaning of Section 5(8)(c) of IBC – Santosh Kumar Vs. ASK Trusteeship Services Pvt. Ltd. – NCLAT New Delhi Read Post »

NCLT dismisses application filed for defer or dismiss CIRP application on the basis of Vidarbha Judgement and levies a penalty of Rs. 1 lac – Simplex Infrastructures Ltd. Vs. Canara Bank – NCLT Kolkata Bench

Hon’ble NCLT Kolkata Bench held that:
(i) Two-Judge Bench of the Hon’ble Supreme Court in M. Suresh Kumar Reddy v. Canara Bank (2023) ibclaw.in 67 SC distinguished Vidarbha case on facts and noted that when the existence of debt and default had been proved, the NCLT is bound to admit the petition under Section 7 of the Code.
(ii) Vidarbha case could not be understood as taking a contrary position in law as opposed to Innoventive Industries [2017] ibclaw.in 02 SC case and also the case law rendered in E.S. Krishnamurthy (2021) ibclaw.in 173 SC by the Hon’ble Apex Court.
(iii) This application has been filed with an intent to derail this Tribunal from considering the Application filed by the Respondent under Section 7 of IBC This is in our view is an attempt to abuse the process of Tribunal and therefore levy a penalty of Rs. 1 Lac (Rs. One Lac only) in terms of Rule 11 of NCLT Rules 2016.

NCLT dismisses application filed for defer or dismiss CIRP application on the basis of Vidarbha Judgement and levies a penalty of Rs. 1 lac – Simplex Infrastructures Ltd. Vs. Canara Bank – NCLT Kolkata Bench Read Post »

Section 7(5)(a) of IBC provides that only upon Adjudicating Authority being satisfied that default on a debt had occurred and that the threshold for filing such an application had been met and that the application u/s 7(2) was complete, it may then only admit the Corporate Debtor into insolvency – Vijay Jain and Ors. Vs. Laxmi Foils Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:
(i) Section 7(5)(a) provides that only upon the Adjudicating Authority being satisfied that default on a debt had occurred and that the threshold for filing such an application had been met and that the application under Section 7(2) was complete, it may then only admit the Corporate Debtor into CIRP.
(ii) Upon the Adjudicating Authority being satisfied that a debt was due and that default had occurred, it was bound to commit the Corporate Debtor into insolvency.

Section 7(5)(a) of IBC provides that only upon Adjudicating Authority being satisfied that default on a debt had occurred and that the threshold for filing such an application had been met and that the application u/s 7(2) was complete, it may then only admit the Corporate Debtor into insolvency – Vijay Jain and Ors. Vs. Laxmi Foils Pvt. Ltd. – NCLAT New Delhi Read Post »

Mere institution of a civil suit or its pendency is not a situation similar to or that envisaged in para 88 of Vidarbha Industries Power Ltd. judgment – Canara Bank v. BBT Elevated Road Pvt. Ltd. – NCLT Kolkata Bench

NCLT Kolkata Bench held that though the word “example” has been used in the Vidarbha Industries Power Limited v. Axis Bank Limited (2022) ibclaw.in 91 SC, there has to be a situation/akin to award/decree in favour of the Corporate Debtor before the admission of an application under Section 7 of the Code can be considered to be kept in abeyance by the Adjudicating Authority. Mere institution of a civil suit or its pendency, in our opinion, is not a situation similar to or that envisaged in para 88 of the judgment of the Hon’ble Supreme Court as referred by the Corporate Debtor.

Mere institution of a civil suit or its pendency is not a situation similar to or that envisaged in para 88 of Vidarbha Industries Power Ltd. judgment – Canara Bank v. BBT Elevated Road Pvt. Ltd. – NCLT Kolkata Bench Read Post »

During hearing of CIRP application u/s 7 of IBC, NCLT cannot force Financial Creditor to settle its outstanding dues with Corporate Debtor – Avargreen Organic Foods Pvt. Ltd. Vs. Raghupati Construction Pvt. Ltd. – NCLT Allahabad Bench

NCLT Allahabad Bench observed that:
(i) Section 7(5) empowers Adjudicating Authority either to accept the application in lieu of section 7(5)(a) or to reject under section 7(5)(b). Therefore, no other order can be passed by the adjudicating authority in a petition under section 7.
(ii) Once Adjudicating Authority identify a default by the corporate debtor, then it is bounded by the statute (as per IBC) to admit the CIRP application under section 7. The Adjudicating Authority cannot pass any other order at this instance.
(iii) These are the only two courses of action which are open to the Adjudicating Authority in accordance with Section 7(5), either admit or reject an application, but the Adjudicating Authority cannot compel a party to the proceedings before it to settle a dispute.
(iii) Undoubtedly, settlements have to be encouraged because the ultimate purpose of the IBC is to facilitate the continuance and rehabilitation of a corporate debtor, as distinct from allowing it to go into liquidation.
(iv) Initiated CIRP u/s 7 of IBC against the Raghupati Construction Pvt. Ltd., Corporate Debtor.

During hearing of CIRP application u/s 7 of IBC, NCLT cannot force Financial Creditor to settle its outstanding dues with Corporate Debtor – Avargreen Organic Foods Pvt. Ltd. Vs. Raghupati Construction Pvt. Ltd. – NCLT Allahabad Bench Read Post »

Chairperson of Insolvency and Bankruptcy Board of India (IBBI) is a separate and distinct category from a Whole-Time Member and a Disciplinary Order passed by the Chairperson against Insolvency Professional is without jurisdiction – Poonam Basak Vs. Union of India & Ors. – Bombay High Court

This Writ Petition is filed challenging an Order passed by the Disciplinary Committee of the Insolvency and Bankruptcy Board of India (IBBI). The impugned order was not passed by any Whole Time Member but passed by the Chairperson of IBBI.
The Petitioner submitted that the members of the Disciplinary Committee shall consist of Whole Time Members of the IBBI only.
Hon’ble High Court referred the Section 189 of the IBC and held that the ‘Chairperson’ is a separate and distinct category from a ‘Whole-Time Member’ and the Order impugned in the present Petition was passed by an Authority which lacked jurisdiction.

Chairperson of Insolvency and Bankruptcy Board of India (IBBI) is a separate and distinct category from a Whole-Time Member and a Disciplinary Order passed by the Chairperson against Insolvency Professional is without jurisdiction – Poonam Basak Vs. Union of India & Ors. – Bombay High Court Read Post »

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