CIRP-I Initiation-Default & Threshold Limit [Sec. 4 & 3(12)]

Date of default in case of an application under Section 7 filed on based of a Consent Decree passed by the DRT – Jubin Kishore Thakkar, Suspended Directors of KLT Automotive & Tubular Products Ltd. Vs. Phoenix ARC Pvt. Ltd. and Anr. – NCLAT New Delhi

Hon’ble NCLAT held that Section 7 Application having been founded on the basis of default committed after Consent Decree dated 29.08.2022 was passed, Default cannot be pegged on 10A period when Application under Section 7 is founded on the basis of Consent Decree dated 29.08.2022.

Date of default in case of an application under Section 7 filed on based of a Consent Decree passed by the DRT – Jubin Kishore Thakkar, Suspended Directors of KLT Automotive & Tubular Products Ltd. Vs. Phoenix ARC Pvt. Ltd. and Anr. – NCLAT New Delhi Read Post »

The date of default in case of Personal Guarantor can be different for Corporate Debtor | Liability of a Personal Guarantor would be taken to be effective from the service of notice Form B under Rule 7(1) – UCO Bank Vs. Mr. Akhilesh Pandey – NCLT Kolkata Bench

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The date of default in case of Personal Guarantor can be different for Corporate Debtor | Liability of a Personal Guarantor would be taken to be effective from the service of notice Form B under Rule 7(1) – UCO Bank Vs. Mr. Akhilesh Pandey – NCLT Kolkata Bench Read Post »

The date of default cannot be shifted by a recall notice issued by the Financial Creditor – Sandip Narendrakumar Patel (Promotor/Ex-Director) Yours Ethnic Foods Pvt. Ltd. Vs. Svakarma Finance Pvt. Ltd. and Anr. – NCLAT New Delhi

Hon’ble NCLAT held that the Corporate Debtor cannot be permitted to take advantage of the fact that the Financial Creditor had issued a notice of recall dated 06.11.2020, giving 15 days time, to the Corporate Debtor to pay the same and to calculate the date of default as 21.11.2020 which falls within the cut off period of Section 10A because issuance of recall notice, in pursuance of the clause 10.3 of the agreement, was on the occurrence of any of the events of default, which had already occurred in the month of January or at the most February.

The date of default cannot be shifted by a recall notice issued by the Financial Creditor – Sandip Narendrakumar Patel (Promotor/Ex-Director) Yours Ethnic Foods Pvt. Ltd. Vs. Svakarma Finance Pvt. Ltd. and Anr. – NCLAT New Delhi Read Post »

Can CIRP be initiated against a Stock Broker Company, which is a Financial Service Provider under Section 3(16)(e), if, at the time of initiation of CIRP, the Stock Broker is not engaged in providing financial services due to SEBI restrictions prohibiting it from accepting new clients for its stockbroking activities? – Kapston Facilities Management Ltd. Vs. Karvy Stock Broking Ltd. – NCLT Hyderabad Bench

In this case, Operational Creditor submitted that the Corporate Debtor was not dealing in the business of providing financial services at the time of initiation of the present petition in view of ad-interim ex-parte order issued by SEBI, which prohibited the CD from accepting new clients for its stockbroking activities.

The Hon’ble NCLT held that this contention of the Applicant is meritless because SEBI’s restrictions were limited to prohibiting the CD from taking on new clients for stockbroking activities. As per the Certificate of Registration issued by SEBI, it is explicitly stated that the Certificate remains valid unless it is suspended or cancelled in accordance with the regulations.

Can CIRP be initiated against a Stock Broker Company, which is a Financial Service Provider under Section 3(16)(e), if, at the time of initiation of CIRP, the Stock Broker is not engaged in providing financial services due to SEBI restrictions prohibiting it from accepting new clients for its stockbroking activities? – Kapston Facilities Management Ltd. Vs. Karvy Stock Broking Ltd. – NCLT Hyderabad Bench Read Post »

An OTS agreement cannot extend the date of default – Samrat Restaurant Vs. Brewcrafts Microbrewing Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) The date of default and acknowledgment are two different events. The date of default is not dependent on the date of acknowledgement
(ii) The purpose of Section 10A was to prevent companies from being pushed into insolvency due to temporary financial distress caused by the COVID-19 pandemic.
(iii) The Appellant’s interpretation that subsequent agreements should nullify the protection offered by Section 10A would undermine the legislative intent and open the door for Creditors to circumvent the protections offered by law.

An OTS agreement cannot extend the date of default – Samrat Restaurant Vs. Brewcrafts Microbrewing Pvt. Ltd. – NCLAT New Delhi Read Post »

Does TDS deduction on the interest payable constitute any acknowledgment of liability as outstanding claimed to be in default? | Can interest be clubbed along with the debt to cross threshold limit of Rs. 1 crore under Section 4 of IBC on the basis of interest clause mentioned in the invoices – Sudarshan Paper & Board Pvt. Ltd. Vs. Verges Properties LLP – NCLT Kolkata Bench

Hon’ble NCLT Kolkata Bench refers various judgments and held that interest clause in invoice is not good enough and has to be supported with agreement by the Corporate Debtor/buyers for payment of such interest. Debits notes issued on Interest are unilateral and the Corporate Debtor has never agreed to pay. TDS deduction on the interest payable does not constitute any acknowledgment of liability as outstanding claimed to be in default.

Does TDS deduction on the interest payable constitute any acknowledgment of liability as outstanding claimed to be in default? | Can interest be clubbed along with the debt to cross threshold limit of Rs. 1 crore under Section 4 of IBC on the basis of interest clause mentioned in the invoices – Sudarshan Paper & Board Pvt. Ltd. Vs. Verges Properties LLP – NCLT Kolkata Bench Read Post »

Vijay Kumar Singhania Vs. Bank of Baroda and Anr. – Supreme Court

Hon’ble Supreme Court has affirmed the decision of the NCLAT where NCLAT held that IU Regulation 20 although has been amended w.e.f 14.06.2022 but there is no amendment either in Section 7 of the IBC which empowers Financial Creditor to file record of the default recorded in the information utility or such other record and default as may be specified or in Rules 2016 or CIRP Regulations 2016. The statutory scheme, thus, contemplates furnishing record of default by the financial creditor as recorded with the information utility or such other record or evidence of default as may be specified.
The record of default for purposes of Section 7(3)(a) has been specified by Regulation 2A of the CIRP Regulations, 2016. Thus, record of default recorded with the information utility is not the only document which has to be furnished by financial creditor. Financial creditor is at liberty to submit such other record of default as may be specified which is a statutory provision contained in Section 7. Even after amendment of IU Regulation 20 by insertion of Regulation 20(1A) w.e.f 14.06.2022, Financial Creditor is entitled to file evidence of record of default as contemplated by CIRP Regulation 2A r/w Rule 4 of the AAA Rules, 2016.

Vijay Kumar Singhania Vs. Bank of Baroda and Anr. – Supreme Court Read Post »

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