Judgments follow Vidarbha Industries Power Case [AA discretion u/s 7(5)(a)]

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 »

Number of Allottees has to be seen on date of IBC Section 7 petition filing and subsequent withdrawal of certain allottees in view of the settlement arose would not affect the maintainability of the petition | Home buyers approached RERA or NCDRC before approaching NCLT remain Financial Creditors under Section 5(8)(f) of IBC – Tarun Ahuja and Ors. Vs. Puri Construction Pvt. Ltd. – NCLT New Delhi Bench

In this important judgment in Real Estate Insolvency, Hon’ble NCLT New Delhi Bench holds that:
(i) In view of Vishal Chelani & Ors. Vs Debashis Nanda, (2023) ibclaw.in 117 SC judgment of the Hon’ble Supreme Court, it is concluded that irrespective of the fact that the home buyer allottees approached RERA or NCDRC before approaching this Adjudicating Authority, the status of the home buyers being ‘financial creditors’ under Section 5(8)(f) of the Code remains intact. Hence, the averment of the corporate Debtor that the allottees who approached RERA or NCDRC ceases to be considered as ‘financial creditors’ under Section 5(8)(f) of the Code does not hold any ground.
(ii) In view of the Judgment of the Hon’ble Supreme Court in the Manish Kumar Vs Union of India (2021) ibclaw.in 16 SC, the number of allottees has to be seen on the date of the filing of the petition and subsequent withdrawal of certain allottees in view of the settlement arose between settled allottees and the Corporate Debtor would not affect the maintainability of the present petition.
(iii) The Hon’ble Supreme Court in the case of Pioneer Urban Land and Infrastructure Ltd. & Anr. Vs Union of India & Ors. (2019) ibclaw.in 13 SC has upheld the status of allottees of a real estate project as financial creditors provided “the allottees are interested in completion of the project”, however, such is not the position in the present case. In the present case, the homebuyers are concerned only with seeking refund of the money and have no longer interest in taking over the possession of the Flats.

Number of Allottees has to be seen on date of IBC Section 7 petition filing and subsequent withdrawal of certain allottees in view of the settlement arose would not affect the maintainability of the petition | Home buyers approached RERA or NCDRC before approaching NCLT remain Financial Creditors under Section 5(8)(f) of IBC – Tarun Ahuja and Ors. Vs. Puri Construction Pvt. Ltd. – NCLT New Delhi Bench 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 »

The moment Adjudicating Authority is satisfied that a default has occurred, Section 7 application must be admitted unless it is incomplete – Narendrabhai Vs. PNB Housing Finance Ltd. and Anr. – NCLAT New Delhi

Hon’ble NCLAT held that under the ambit of Section 7 of the Code, the Adjudicating Authority is to only determine whether a ‘default’ has occurred and whether the ‘debt’, which may still be disputed, was due and remained unpaid. A debt may not be due if it is not payable in law or in fact. The moment the Adjudicating Authority is satisfied that a default has occurred, the Application must be admitted unless it is incomplete.

The moment Adjudicating Authority is satisfied that a default has occurred, Section 7 application must be admitted unless it is incomplete – Narendrabhai Vs. PNB Housing Finance Ltd. and Anr. – 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 »

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