CIRP/Liquidation- Oppression and Mismanagement during IBC

When a fraudulent CIRP proceeding is initiated, Adjudicating Authority has jurisdiction under the IBC to consider allegations of fraudulent and malicious initiation of CIRP proceedings under Section 65 of IBC and to recall the CIRP admission order/ terminate CIRP (even if a Resolution Plan approval application has been filed before the NCLT) – Acute Daily Media Pvt. Ltd. and Ors. Vs. Rockman Advertising and Marketing (India) Ltd. and Ors. – NCLAT New Delhi

The Hon’ble NCLAT held that:

(i) There is no statutory embargo on the Adjudicating Authority to exercise its discretion carefully and judiciously in a Section 65 application to prevent and protect the Corporate Debtor from being dragged into CIRP.
(ii) When no interest income had been reflected in the balance sheet, yet computing the interest amount in the Section 7 application to cross the threshold hurdle lends credence to the narrative of precipitation of fraud.
(iii) As non- compliance under the Companies Act cannot negate a petition filed under Section 7 as long as there is a valid debt and default in payment of the said debt.
(iv) Debt and default cannot always be seen in isolation. AA is also required to take care that the provisions of Section 7 of IBC are not misused or abused in any manner either by the financial creditor or the promoters of the Corporate Debtor to take undue advantage at the cost of insolvency resolution.

When a fraudulent CIRP proceeding is initiated, Adjudicating Authority has jurisdiction under the IBC to consider allegations of fraudulent and malicious initiation of CIRP proceedings under Section 65 of IBC and to recall the CIRP admission order/ terminate CIRP (even if a Resolution Plan approval application has been filed before the NCLT) – Acute Daily Media Pvt. Ltd. and Ors. Vs. Rockman Advertising and Marketing (India) Ltd. and Ors. – NCLAT New Delhi Read Post »

Shareholders or Investors in a Corporate Debtor are not to be treated as “person aggrieved” under the IBC | Disputes related to shareholder oppression or mismanagement under the Companies Act, 2013 fall outside the purview of the Code | An argument is not part of the original pleadings cannot be considered – Clarion Health Food LLP Vs. Goli Vada Pav Pvt. Ltd. and Anr. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT, referring various judgments, held that the Shareholders or Investors in Corporate Debtor are not to be treated as “person aggrieved” under the IBC.

The NCLAT also held that judgment in Ashish Gupta v. Delagua Health India Pvt. Ltd. (2023) ibclaw.in 87 NCLAT is not applicable in the present appeal because in this particular case, the peculiar circumstances were that the Board of Directors had resigned and therefore there was no representation in CIRP proceedings on behalf of the Corporate Debtor. Accordingly, the shareholders were permitted to defend the Corporate Debtor before the Hon’ble NCLT.

Shareholders or Investors in a Corporate Debtor are not to be treated as “person aggrieved” under the IBC | Disputes related to shareholder oppression or mismanagement under the Companies Act, 2013 fall outside the purview of the Code | An argument is not part of the original pleadings cannot be considered – Clarion Health Food LLP Vs. Goli Vada Pav Pvt. Ltd. and Anr. – NCLAT New Delhi Read Post »

In case of two parallel proceedings are pending before the NCLT, one under Section 7 of the IBC, 2016 and the other under Section 241-242 of the Companies Act, 2013 (Oppression and Mismanagement), it is duty cast on the Tribunal to first decide the petition filed under Section 7 of the Code – Entegra Ltd. and Ors. Vs. Shree Maheshwar Hydel Power Corp Ltd. and Ors. – NCLAT New Delhi

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In case of two parallel proceedings are pending before the NCLT, one under Section 7 of the IBC, 2016 and the other under Section 241-242 of the Companies Act, 2013 (Oppression and Mismanagement), it is duty cast on the Tribunal to first decide the petition filed under Section 7 of the Code – Entegra Ltd. and Ors. Vs. Shree Maheshwar Hydel Power Corp Ltd. and Ors. – NCLAT New Delhi Read Post »

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