Other Laws-Arbitration Vs. IBC-Award under MSMED Act, 2006

Supreme Court permits to file a writ petition before the High Court to challenge the MSME registration certificate obtained after admission of CIRP – Central Bank of India Vs. Ramesh Shah in Consortium with Masitia Capital Services Pvt. Ltd. and Ors. – Supreme Court

During the pendency of CIRP, the Resolution Professional instructed an employee of the Corporate Debtor to make an application for registration of the Corporate Debtor as a MSME under the Micro, Small and Medium Enterprises Development Act, 2006 and certificate dated 23.10.2020 was issued.
The Hon’ble Supreme Court held that we are hearing an appeal in terms of Section 62 of the IBC and within its limited confines, we cannot go into the question of the validity of the registration certificate dated 23.10.2020. At the same time, the certificate having been placed on record, Section 29A read with Section 240A of the IBC would come into play and would affect the interests of the secured creditors, including the appellant, Central Bank of India.
The Hon’ble Court would permit the appellant, Central Bank of India, to file a writ petition before the jurisdictional High Court challenging the issuance of the MSME Registration Certificate dated 23.10.2020.

Supreme Court permits to file a writ petition before the High Court to challenge the MSME registration certificate obtained after admission of CIRP – Central Bank of India Vs. Ramesh Shah in Consortium with Masitia Capital Services Pvt. Ltd. and Ors. – Supreme Court Read Post »

Whether a Suspended Director/Promoter of Corporate Debtor who is also a Resolution Applicant (a dual role) is entitled to access Resolution Plans submitted by others Resolution Applicants, as per Vijay Kumar Jain Vs. Standard Chartered Bank judgment – Prasada Raju M.R.V Vs. Sri. Vamsi Kambhammettu, RP of Mantena Laboratories Ltd. – NCLT Hyderabad Bench

In this important judgment, Hon’ble NCLT Hyderabad Bench holds that:

(i) A Resolution Applicant can attend CoC meeting only in respect of the plan that was submitted by him, and will have no access to the Resolution Plans submitted by others.
(ii) The cited caselaw of Vijay Kumar Jain Vs. Standard Chartered Bank (2019) ibclaw.in 24 SC also does not support the Applicant’s argument.
(iii) In the present case, not only the Applicant is related to the CD, being a promoter/director, he is also a Resolution Applicant. The CD being the MSME, he was permitted to submit a Resolution Plan. However, he was rightly kept out by the CoC from the proceedings of examination and evaluation of the Resolution Plans submitted by other Resolution Applicants.
(iv) The ‘conflict of interest’ for the Applicant, who was part of the CoC in the dual capacity did not end with him being rejected as Resolution Applicant. His capacity to be an impartial observer of the CoC’s deliberations was compromised and his views on the Resolution Plan submitted by any other Resolution Applicant would necessarily have a potential of bias even after he was out of the race.

Whether a Suspended Director/Promoter of Corporate Debtor who is also a Resolution Applicant (a dual role) is entitled to access Resolution Plans submitted by others Resolution Applicants, as per Vijay Kumar Jain Vs. Standard Chartered Bank judgment – Prasada Raju M.R.V Vs. Sri. Vamsi Kambhammettu, RP of Mantena Laboratories Ltd. – NCLT Hyderabad Bench Read Post »

Treatment of interest levied as per MSMED Act, 2006 on arbitral award amount passed by Arbitral Tribunal in favour of Operational Creditor, in Resolution Plan under IBC – Proton Steels Ltd. v. Anuj Jain, RP of McNally Bharat Engineering Company Ltd. – NCLT Kolkata Bench

In this case, award is under challenged under Sec. 34 of Arbitration Act, RP has admitted the claim of award amount, however, the interest was not admitted as an application challenging the arbitral award was still pending before the Calcutta High Court. Therefore, the interest amount has been admitted as a contingent claim with a notional value of Rs.1/-.
NCLT Kolkata Bench held that the amount claimed has been categorised as a contingent liability, pending the final decision in the matter of challenge. The acceptance of the principal as a contingent liability is therefore merely for the accounting purpose following the principle of Complete disclosure. By the very definition of the contingent liability, if the condition precedent for confirming the entry as an expense is fulfilled, a reverse entry is made to treat the liability as an expense, otherwise the same is reversed. Thus, making a mere accounting entry, which is not irreversible, of the principal claim as a liability does not mean the acceptance of the claim. Since the matter is receiving consideration of the Hon’ble High court, it would be premature to make a confirmed entry towards the claim or reverse it, as the case may be.

Treatment of interest levied as per MSMED Act, 2006 on arbitral award amount passed by Arbitral Tribunal in favour of Operational Creditor, in Resolution Plan under IBC – Proton Steels Ltd. v. Anuj Jain, RP of McNally Bharat Engineering Company Ltd. – NCLT Kolkata Bench Read Post »

Once dispute has been adjudicated by Arbitrator and award has been passed in favour of  Operational Creditor, the Operational Creditor cannot be allowed to go for forum shopping and rake up the issue for making a case for alleged default against the Corporate Debtor u/s 9 of the Code – SRV Techno Engineering Pvt. Ltd. Vs. Purvanchal Vidyut Vitran Nigam Ltd. – NCLT Allahabad Bench

In this case, during CIRP pending for admission, an arbitration award passed u/s 18 of MSMED Act, 2006.

NCLT Allahabad Bench held that:
(i) Once a dispute exists, the Adjudicating Authority under the Code, 2016 is not required to examine the merit of dispute.
(ii) After the Operational Creditor has approached the grievances committee of MSME tribunal resulting into referring the dispute to the Arbitrator as per the scheme envisaged under the MSME Act/ Rules, and the arbitrator thus has finally decided the dues of the Operational Creditor as against the Corporate Debtor, the process of determination of the dues has thus already gone into.
(iii) Once, the dispute has been adjudicated by the Arbitrator and award has been passed in favour of the Operational Creditor to the extent of the amount mentioned in the award itself, the Operational Creditor cannot be allowed to go for forum shopping and rake up the issue for making a case for alleged default against the Corporate Debtor U/s 9 of the Code for remaining amount if any.
(iv) Moreover, the Corporate Debtor has been found to be a solvent company. It has been held in catena of judgments by the Hon’ble NCLAT as well Hon’ble Supreme Court that IBC is not meant to be used as a means to recover the disputed dues against a solvent company.

Once dispute has been adjudicated by Arbitrator and award has been passed in favour of  Operational Creditor, the Operational Creditor cannot be allowed to go for forum shopping and rake up the issue for making a case for alleged default against the Corporate Debtor u/s 9 of the Code – SRV Techno Engineering Pvt. Ltd. Vs. Purvanchal Vidyut Vitran Nigam Ltd. – NCLT Allahabad Bench Read Post »

Pursuing the matter before MSME facilitation Council under MSME Act, 2006 is not a bar for filing a petition u/s 9 of IBC, the proceedings before Council are not in nature of dispute – LBF Publications Pvt. Ltd. Vs. A & A Business Consulting Pvt. Ltd. – NCLT Mumbai Bench

NCLT held that in the case of M/s Consolidated Construction Consortium Ltd. v. M/s Hitro Energy Solutions (P) Ltd. (2022) ibclaw.in 09 SC, the Hon’ble Supreme Court held that debt arising out of advance payment for supply of goods and services is an operational debt. Accordingly, we find no substance in the agreement that the amount of advance cannot said to be an Operational Debt. Further, pursuing the matter before MSME facilitation Council under MSME Act is not a bar for filing a petition u/s 9 of the Code, the proceedings before Council are not in nature of dispute. Further the plea of bar u/s. 10A also does not have any merit, as section 10A bars filing of petitions arising from defaults occurring during the period specified therein, and the default arises when a debtor face to pay the debt to the Creditor on the date on which it falls due. The date of post-dated cheques does not result into any default, hence, such cheques issued for presentation during 10A period cannot bar filing of an application.

Pursuing the matter before MSME facilitation Council under MSME Act, 2006 is not a bar for filing a petition u/s 9 of IBC, the proceedings before Council are not in nature of dispute – LBF Publications Pvt. Ltd. Vs. A & A Business Consulting Pvt. Ltd. – NCLT Mumbai Bench Read Post »

Moratorium u/s 14 of IBC does not impose any restriction on charging of any interest/Penal Interest during the CIRP period and it is not in the domain of the IBC, 2016 to decide any contractual interest liability – Mr. Arun Kumar Vs. Ms. Sripriya Kumar – NCLAT Chennai

In this important judgment, NCLAT held that:
(i) A simple and purposive reading of this Section 14 does not specify any ‘interest waiver’ during the period of moratorium.
(ii) The role of the RP under IBC, 2016 is only to collate the Claims and that he does not have any adjudicatory powers. The Claim of the Creditors does not stop on initiation of CIRP.
(iii) It is not in the domain of the IBC, 2016, even to decide any contractual interest liability. Section 14 does not impose any restriction on charging of any interest till the amount is paid. It is the commercial wisdom of the CoC with respect to the quantum of amounts to be paid to the Creditors within the Provisions of the Code.
(iv) There is no provision in the Code that enables the Corporate Debtor or a Guarantor to seek remission in the interest claims from the Financial Creditors solely on the basis that there is a Resolution Plan.
(v) Having not challenged the decision of the CoC in not qualifying him as a Prospective Resolution Applicant, the Promotor cannot now at the belated stage after the approval of the Plan by the Adjudicating Authority states that he is interested in offering a viable solution.
(vi)The Promotor being an MSME is given an opportunity under the Provisions of the Code to present a Plan. At the same time, the Code does not contemplate any kind of preference to be given to an MSME Promotor by the CoC while accepting a Resolution Plan.

Moratorium u/s 14 of IBC does not impose any restriction on charging of any interest/Penal Interest during the CIRP period and it is not in the domain of the IBC, 2016 to decide any contractual interest liability – Mr. Arun Kumar Vs. Ms. Sripriya Kumar – NCLAT Chennai Read Post »

Whether an Award of MSME can give a fresh lease of life to a belated claim? – Pan Pacific Engineering Services Pvt. Ltd. Vs. Ayyappa Hydro Power Ltd. – NCLT Kolkata Bench

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Whether an Award of MSME can give a fresh lease of life to a belated claim? – Pan Pacific Engineering Services Pvt. Ltd. Vs. Ayyappa Hydro Power Ltd. – NCLT Kolkata Bench Read Post »

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