CIRP/Liquidation- Liquidated Damage

Claim pertains to a breach of contract/ a claim for liquidated damages requires adjudication before a competent civil court and can not be pursued under the insolvency resolution process – Akshay Kumar Bhatia Vs. Cue Learn Pvt. Ltd. – NCLT New Delhi Bench

In this case, Akshay Kumar Bhatia, an actor in the Indian film industry, file Section 9 application under Insolvency and Bankruptcy Code, 2016 (IBC) against M/s. Cue Learn Pvt. Ltd. (Corporate Debtor), for default amount of Rs. 4,83,24,201/-
The Hon’ble NCLT New Delhi Bench has rejected the application holding that claims for damages, however, do not fall within the ambit of operational debt as defined under the IBC. While there may exist a claim for a monetary amount due to the Respondent’s alleged default, this claim does not qualify as operational debt under the provisions of the IBC. The claim pertains to a breach of contract and is, at best, a claim for liquidated damages as provided under Clause 7.2(c) of the Agreement. Such claims require adjudication before a competent civil court and do not constitute crystallized debts that can be pursued under the insolvency resolution process.

Claim pertains to a breach of contract/ a claim for liquidated damages requires adjudication before a competent civil court and can not be pursued under the insolvency resolution process – Akshay Kumar Bhatia Vs. Cue Learn Pvt. Ltd. – NCLT New Delhi Bench Read Post »

Claims for damages arising from a non-performance of a contract cannot be adjudicated by Resolution Professional (RP) | Claims for damages require consideration by a Court of competent authority for the claims to crystallise | Unadjudicated claims for damages cannot be said to be crystallised claims – CSA Corporation Pvt. Ltd. Vs. Mr. Rajiv Bhatnagar RP UM Green Lighting Pvt. Ltd. – NCLAT New Delhi

The Hon’ble NCLAT held that:
(i) IBC is a time bound process and the RP cannot be blamed for dealing with the claim within three days as the prescribed outer time-period to decide on the claims is only seven days.
(ii) The claims are in respect of damages arising out of non-performance of contract which claims could not have been adjudicated upon by the RP at his level given the limited jurisdiction conferred on the RP by the IBC.
(iii) In terms of CIRP Regulations 13(1)(B), claims received up to seven days before the date of meeting of creditors for voting on the resolution plan, the RP is to verify all such claims and categorise them as acceptable or non-acceptable for collation.

Claims for damages arising from a non-performance of a contract cannot be adjudicated by Resolution Professional (RP) | Claims for damages require consideration by a Court of competent authority for the claims to crystallise | Unadjudicated claims for damages cannot be said to be crystallised claims – CSA Corporation Pvt. Ltd. Vs. Mr. Rajiv Bhatnagar RP UM Green Lighting Pvt. Ltd. – NCLAT New Delhi Read Post »

First duty is cast upon Liquidator to provide exact information to the bidder about the auction property | Whether NCLT has jurisdiction to impose damages under the IBC, 2016? – D.D. International Pvt. Ltd. and Anr. Vs. Rajesh Kumar Agarwal Liquidator, Divine Alloys & Power Company Ltd. and Ors. – NCLAT New Delhi

The Hon’ble NCLAT held that:
(i) The Liquidator/ Respondent was duty bound, being the custodian of the record of the Corporate Debtor, to give the exact details of the property which was put to sale by e-auction
(ii) In the Code, there is no procedure for imposing damages. Even if, for the sake of argument, it is presumed that the Tribunal has the jurisdiction to impose damages as well, it is incumbent upon the Tribunal to first quantify as to how much damages has been caused to the CD and how the said damages have to be compensated.

First duty is cast upon Liquidator to provide exact information to the bidder about the auction property | Whether NCLT has jurisdiction to impose damages under the IBC, 2016? – D.D. International Pvt. Ltd. and Anr. Vs. Rajesh Kumar Agarwal Liquidator, Divine Alloys & Power Company Ltd. and Ors. – NCLAT New Delhi Read Post »

When Lessor was not in receipt of rent on CIRP commencement date and Arbitral Award was still under execution, the lease rental subsequent to the commencement of the CIRP cannot be treated as CIRP cost under CIRP Regulation 31(b) | This case does not fall under Section 14(1)(d) of the IBC, rather it is covered by Section 14(1)(a) – Mr. A. Guhan and Anr. Vs. Ms. Sunita Umesh Liquidator, Deltronix India Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:

(i) On the date when CIRP commenced, Appellant was not receiving any rent from the Corporate Debtor and claim of rent/damages and possession of the assets was under consideration in the Execution Proceedings.
(ii) After enforcement of Moratorium under Section 14 by virtue of Section 14(1)(a) the Appellant could not have prosecuted the Execution Proceeding against the Corporate Debtor. When the Appellant could not have proceeded with the execution of Arbitral Award, there was no occasion to recover the rent and assets from the Corporate Debtor.
(iii) The claim of Appellant as per Arbitral Award to receive damages and occupation from Corporate Debtor cannot be treated as Insolvency Resolution Process cost under Section 31(b).
(iv) The fact that plant and machineries are attached/available at the site cannot be read to mean that the premises were being used as a going concern by Corporate Debtor
(v) In the present case, when the Appellant was not in receipt of rent from December 2014, and Arbitral Award obtained by the Appellant was still under execution, the lease rental subsequent to the commencement of the CIRP cannot be treated as CIRP cost.

When Lessor was not in receipt of rent on CIRP commencement date and Arbitral Award was still under execution, the lease rental subsequent to the commencement of the CIRP cannot be treated as CIRP cost under CIRP Regulation 31(b) | This case does not fall under Section 14(1)(d) of the IBC, rather it is covered by Section 14(1)(a) – Mr. A. Guhan and Anr. Vs. Ms. Sunita Umesh Liquidator, Deltronix India Ltd. – NCLAT New Delhi Read Post »

Right to Payment or the right to remedy for breach of contract would give rise to a debt and Liquidator has to admit the claim against the same – Meja Urja Nigam Pvt. Ltd. Vs. Mr. Sutanu Sinha, Liquidator of IVRCL Ltd. – NCLT Hyderabad Bench

Hon’ble NCLT Hyderabad Bench held that:

(i) The right to payment or the right to remedy for breach of contract would give rise to a debt, existence of which once established, result in a claim that the liquidator has to admit the same.
(ii) This discretion contrasts with the more limited authority granted to the Resolution Professional (RP) during the verification of claims in CIRP proceedings.

Right to Payment or the right to remedy for breach of contract would give rise to a debt and Liquidator has to admit the claim against the same – Meja Urja Nigam Pvt. Ltd. Vs. Mr. Sutanu Sinha, Liquidator of IVRCL Ltd. – NCLT Hyderabad Bench Read Post »

A company which is solvent and has the ability to pay its debts cannot be dragged into insolvency | IBC Petition for claim of damages is not maintainable | An affidavit Section 9(3)(b) of IBC stating that no notice of dispute was given by Corporate Debtor is a mandatory requirement for Section 9 application – Identity Science Co. Ltd. Vs. Soanl Plasrub Industries Pvt. Ltd. – NCLT Mumbai Bench

Hon’ble NCLT Mumbai Bench held that:

(i) Even otherwise claim under IBC can only be filed with respect to debt amount which stands crystallized. The damages being claimed have also neither been adjudicated nor crystallized. Hence the petition under IBC claim of damages is not maintainable.
(ii) The Operational Creditor did not file an affidavit stating that no notice of dispute was given by the Corporate Debtor regarding the unpaid operational debt, which is a mandatory requirement for a petition under Section 9 of the IBC.
(iii) The insolvency process is meant for companies that are in financial distress and cannot meet their financial obligations, not for solvent companies with disputed claims.

A company which is solvent and has the ability to pay its debts cannot be dragged into insolvency | IBC Petition for claim of damages is not maintainable | An affidavit Section 9(3)(b) of IBC stating that no notice of dispute was given by Corporate Debtor is a mandatory requirement for Section 9 application – Identity Science Co. Ltd. Vs. Soanl Plasrub Industries Pvt. Ltd. – NCLT Mumbai Bench Read Post »

Whether Operational Debt includes penalty or liquidated damages – Mr. Satish Chinnadurai Director of DB Group India Pvt. Ltd. Vs. Mr. Ravindra Hirasingh Rawat – NCLAT New Delhi

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Whether Operational Debt includes penalty or liquidated damages – Mr. Satish Chinnadurai Director of DB Group India Pvt. Ltd. Vs. Mr. Ravindra Hirasingh Rawat – NCLAT New Delhi Read Post »

A Trading Member of National Stock Exchange is a Financial Service Provider in terms of Section 3(17) of IBC 2016, CIRP u/s 7, 9 & 10 cannot be initiated – Globe Capital Market Ltd. Vs. Narayan Securities Ltd. – NCLT New Delhi Bench Court-II

In this important judgment, the Adjudicating Authority held that mere holding of a Decree/Award per se by an individual will not make its debt fall within the ambit of “Financial Debt”. Following points to be considering in the decree/award:
a) a Decree/Award of the Court/Tribunal is a measure of debt,
b) mere holding of a Decree per se by an individual will not make its debt fall within the ambit of “Financial Debt”,
c) it is the underlying claim under a decree that will decide the nature of the debt, whether it is Financial or Operational debt.
In our considered view, the amount claimed by the Applicant out of the Arbitral Award dated 24.09.2021 is neither based on any transaction having the time value of money nor the commercial effect of borrowing. At the most, the claims of the Applicant (other than brokerage, fee, etc.) could be in the nature of “damages” which do not fall within the ambit of Financial Debt.
The Respondent was providing “Financial Services” in terms of Section 3(16)(d) of IBC 2016. the Respondent was registered with SEBI, which is evident from the “Clearing Member – Trading Member Agreement dated 09.03.2017”. Since, the Respondent was registered with SEBI, the Services of the Respondent could be regulated by SEBI, which is covered under the definition of “Financial Sector Regulator” under Section 3(18) of IBC 2016.

A Trading Member of National Stock Exchange is a Financial Service Provider in terms of Section 3(17) of IBC 2016, CIRP u/s 7, 9 & 10 cannot be initiated – Globe Capital Market Ltd. Vs. Narayan Securities Ltd. – NCLT New Delhi Bench Court-II Read Post »

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