Liquidation-Distribution of Assets [Sec. 53]

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 »

Section 33 of the Madhya Pradesh Value Added Tax Act, 2002 (MPVAT Act) is not pari materia with Section 48 of Gujarat Value Added Tax Act, 2003 (GVAT Act) and Commercial Tax Dept. cannot be treated as secured creditors on the basis of the decision in Rainbow Papers – Commercial Tax Department Vs. Mrs. Teena Saraswat Pandey and Anr. – NCLAT New Delhi

In this judgment, Hon’ble NCLAT referring judgment in State Tax Officer (1) Vs. Rainbow Papers Ltd., (2022) ibclaw.in 107 SC and Department of State Tax Vs. Zicom Saas Pvt. Ltd. & Anr. (2023) ibclaw.in 109 NCLAT held that although it has also been held by the Hon’ble Supreme Court in the case of Paschimanchal Vidyut Vitran Nigam Ltd. Vs. Raman Ispat Pvt. Ltd. & Ors. (2023) ibclaw.in 81 SC that the decision in the case of Rainbow Papers (Supra) is a decision of the Court in the facts of the said case but without going into this aspect of the matter, argument of the Appellant would not cut any ice that Section 48 of the GVAT Act and Section 33 of the MPVAT Act are pari materia, therefore, the ratio laid down by the in Rainbow Papers (Supra) has to be applied rather the provisions of Section 37 of the MVAT Act and Section 33 of the MPVAT Act appears to be pari materia about which a decision has been taken by this court in the case of Zicom Saas (Supra) that both the provisions are not pari materia with Section 48 of the GVAT Act, therefore, no benefit can be given to the Appellant on the basis of the decision of the Rainbow Papers (Supra).

Section 33 of the Madhya Pradesh Value Added Tax Act, 2002 (MPVAT Act) is not pari materia with Section 48 of Gujarat Value Added Tax Act, 2003 (GVAT Act) and Commercial Tax Dept. cannot be treated as secured creditors on the basis of the decision in Rainbow Papers – Commercial Tax Department Vs. Mrs. Teena Saraswat Pandey and Anr. – NCLAT New Delhi Read Post »

Can invocation of Bank Guarantee issued by Corporate Debtor be treated as Preferential Transaction under Section 43 of IBC? – West Bengal State Electricity Distribution Company Ltd. (WBSEDCL) Vs. Punjab National Bank and Ors. – NCLT Kolkata Bench

Hon’ble Kolkata NCLT held that one of the necessary conditions for any transaction to be labelled as a Preferential transaction relates to the assets of the Corporate Debtor, so to say that any transaction done in the relevant time by the Corporate debtor would be eligible for being called so only if done by the Corporate debtor i.e. out is its assets. However, since the Bank guarantee is a separate contract and the encashment thereof is not relatable to the assets of the Corporate Debtor, the encashment cannot be termed as Preferential transaction.

Hon’ble Bench also held that Electricity Distribution Company/the applicant has the right to invoke Bank Guarantee and the Bank should not come in the way of invoking the same. It shall not amount to dual claim as the amount recovered by invoking such Bank Guarantee can be adjusted and the admitted claim shall be revised accordingly.

Can invocation of Bank Guarantee issued by Corporate Debtor be treated as Preferential Transaction under Section 43 of IBC? – West Bengal State Electricity Distribution Company Ltd. (WBSEDCL) Vs. Punjab National Bank and Ors. – NCLT Kolkata Bench Read Post »

Whether all dues of EPFO (Contribution u/s 7A, Interest u/s 7Q and Damages u/s 14 of the EPF Act) are to be treated outside Liquidation Estate under Section 36(4)(a)(iii) of IBC and Section 53(1) cannot be made applicable to such dues? – Mr. Anuj Bajpai Vs. Employee Provident Fund Organisation and Ors. – NCLAT New Delhi

In this case, Liquidator submitted that only contribution under Section 7A should have been treated as dues payable to the workers and employees under Section 36(4) of the Code and remaining amount should have been treated as other claims to be dealt in accordance with Section 53 Code.

Hon’ble NCLAT referred the judgment in Maharashtra State Cooperative Bank Vs. Assistant Provident Fund Commissioner & Ors. (2017) ibclaw.in 119 SC and held that interest payable by the employee under Section 7Q and the damages levied under Section 14B of the EPF Act will also be covered as dues from the employers for the purpose of Section 11(2) of the EPF Act.

The Hon’ble Bench also referred judgments in Sunil Kumar Jain and Ors. v. Sundaresh Bhatt and Ors. (2022) ibclaw.in 23 SC, Jet Aircraft Maintenance Engineers Welfare Association (2022) ibclaw.in 861 NCLAT and SBI v. Moser Baer Karamchari Union (2020) ibclaw.in 206 NCLAT and dismissed the appeal holding that the contention of the Liquidator is not tenable and stand rejected.

Whether all dues of EPFO (Contribution u/s 7A, Interest u/s 7Q and Damages u/s 14 of the EPF Act) are to be treated outside Liquidation Estate under Section 36(4)(a)(iii) of IBC and Section 53(1) cannot be made applicable to such dues? – Mr. Anuj Bajpai Vs. Employee Provident Fund Organisation and Ors. – NCLAT New Delhi Read Post »

There is no provision of the IBC, which mandates that the related party should be paid in parity with unrelated party – West Coast Paper Mills Ltd. Vs. Bijay Murmuria, RP of Fort Gloster Industries Ltd. and Ors. – NCLAT New Delhi

Hon’ble NCLAT held that there was no provision of the IBC, which mandates that the related party should be paid in parity with unrelated party. Any prohibition of differential payment to different class of creditors in the resolution plan is ultimately, subject to the commercial wisdom of CoC and no fault can be attached to the resolution plan merely for not making provisions for a related party, so long as provision of the IBC and CIRP regulations are met.

There is no provision of the IBC, which mandates that the related party should be paid in parity with unrelated party – West Coast Paper Mills Ltd. Vs. Bijay Murmuria, RP of Fort Gloster Industries Ltd. and Ors. – NCLAT New Delhi Read Post »

Financial loss cannot be a ground to enforce its claim because the IBC is a complete code – Kuttanad Coir and Rubber Products Vs. Kerala State Electricity Board Ltd. and Anr. – NCLT Kochi Bench

Section 53 of IBC establishes a clear differentiation in the treatment of payments owed to secured creditors and those owed to the government. This distinction in the law prominently reflects Parliament’s intention to handle government dues separately from the dues of secured creditors. Consequently, both secured and unsecured government dues fall under the purview of Section 53 of the Code, forming a distinct and separate class within the legislative framework.

Financial loss cannot be a ground to enforce its claim because the IBC is a complete code – Kuttanad Coir and Rubber Products Vs. Kerala State Electricity Board Ltd. and Anr. – NCLT Kochi Bench Read Post »

Section 53 of IBC, 2016 does not envisage any difference between Unsecured Operational Creditors and related party Unsecured Financial Creditors – Times Innovative Media Ltd. Vs. Pawan Kumar Aggarwal (Liquidator) and Anr. – NCLT Mumbai Bench

Hon’ble NCLT Mumbai Bench held that the constitutional validity of Section 53 of IBC has been upheld in Swiss Ribbons Pvt. Ltd. vs. Union of India & Ors. (2019) ibclaw.in 03 SC. Since Section 53 of the IB Code, 2016 does not envisage any difference between unsecured creditors and related party unsecured Financial Creditors, it cannot be successfully argued on behalf of the Operational Creditors that the Liquidator was wrong in placing Financial Creditor (who is related party) ahead of the Operational Creditors in the waterfall mechanism under Section 53 of IBC.

Section 53 of IBC, 2016 does not envisage any difference between Unsecured Operational Creditors and related party Unsecured Financial Creditors – Times Innovative Media Ltd. Vs. Pawan Kumar Aggarwal (Liquidator) and Anr. – NCLT Mumbai Bench Read Post »

Mere non filing of claim would not denude or deny the benefit of Section 36(4) of the IBC to the concerned department or the workmen – Liquidator of Empee Power Company India Ltd. Vs. Stakeholders Consultation Committee and Another – NCLT Chennai Bench

This application has been filed seeking permission to treat Rs. 47,73,270/- payable as PF and Gratuity to the workmen, irrespective of whether they have filed t heir claims or not, as per the books of the Corporate Debtor, as being outside the liquidation estate of the Corporate Debtor which may be distributed directly to the concerned workmen in priority and consequently permit the Applicant herein to distribute the remaining sums realized in the liquidation estate of the Corporate Debtor to the various stakeholders of the Corporate Debtor, in accordance with Section 53 of the Insolvency and Bankruptcy Code, 2016.

Mere non filing of claim would not denude or deny the benefit of Section 36(4) of the IBC to the concerned department or the workmen – Liquidator of Empee Power Company India Ltd. Vs. Stakeholders Consultation Committee and Another – NCLT Chennai Bench Read Post »

Scroll to Top