PUFE-Section 66 of IBC Vs. 339 of Companies Act

Section 66(1) of IBC confers no jurisdiction but declaring any transaction as void, even if fraudulent, but confers jurisdiction on NCLT to fix the liabilities on the persons responsible for conducting business of corporate debtor which is fraudulent or wrongful – Smt. Sudipa Nath Vs. Union of India – Tripura High Court

Hon’ble High Court held that in legislature wisdom and as apparent from the text of 66(1) it is clear that firstly it confers no jurisdiction but declaring any transaction as void, even if fraudulent, but confers jurisdiction on NCLT to fix the liabilities on the persons responsible for conducting business of corporate debtor which is fraudulent or wrongful. Secondly section 66(1) contemplates an application thereunder only by the resolution professional and by none other. Thirdly section 66 (1) also restricts the power of NCLT subject to being satisfy with pre-requisite that any business of the corporate debtor has been carried on with intent to defraud creditors or the corporate debtors or for any fraudulent purpose and if satisfied it powers to pass an order is only against such person who are responsible for the conduct of such fraudulent business of the corporate debtor with mens rea to make them personally liable to make such contributions to the assets of the corporate debtor as it may deem fit.

Section 66(1) of IBC confers no jurisdiction but declaring any transaction as void, even if fraudulent, but confers jurisdiction on NCLT to fix the liabilities on the persons responsible for conducting business of corporate debtor which is fraudulent or wrongful – Smt. Sudipa Nath Vs. Union of India – Tripura High Court Read Post »

Interpretation of Preferential & Undervalued Transactions under Section 43 of IBC| Whether the lender of Holding Company could be recognized as Financial Creditors of the Corporate Debtor (Subsidiary Company/Guarantor) on the strength of the mortgage created by the Corporate Debtor, as collateral security of the debt of its Holding Company – Anuj Jain IRP for Jaypee Infratech Ltd. Vs. Axis Bank Ltd. etc. – Supreme Court

This judgment covers:
A.1 PUFE transactions comes into full effect in CIRP too.
A.2 The concept of Preferential Transactions.
A.3 Charging parts of the Section 43 of IBC.
A.4 Section 43 of IBC is deeming provision.
A.5 Look-back period.
A.6 Exclusion Part: Interpretation of Section 43(3) of IBC.
A.6.a. Meaning of “new value” Explanation to Section 43(3).
A.6.b. Transfer made in the ordinary course of the business or financial affairs.
A.6.c. The expression “or”, appearing as disjunctive between the expressions “corporate debtor” and “transferee”, ought to be read as “and”.
A.6.d. The expression ‘ordinary course of business’.
A.7. Net concentrate of Section 43 of IBC.
A.8 Checklist/Test whether a transaction falls squarely within the ambit of Section 43 of the Code.
A.9 To do: Steps follow by a Resolution Professional to find out whether a Transaction falls under Section 43 of IBC.
A.10. Can RP file one composite application under Sections 43, 45 and 66 of the Code and AA decide?
B. Whether transactions in the present case are preferential, falling within the ambit of sub-section (2) of Section 43 IBC.
C. Interpretation of definition of Financial Debt and Financial Creditor.
C.1 The expressions “means and includes” in the definition of Financial Creditor.
C.2 The essentials for financial debt and financial creditor.
C.3 Every secured creditor may not be a financial creditor.
C.4 A person having only security interest over the assets of corporate debtor cannot partake the character of a Financial Debt within the meaning of Section 5(8) of IBC.
C.5 Secured creditors indicated by this Court in Essar Steel and Swiss Ribbons, as being subsumed in financial creditors.
D. Whether Lenders of JAL could be categorised as Financial Creditors of JIL.

Interpretation of Preferential & Undervalued Transactions under Section 43 of IBC| Whether the lender of Holding Company could be recognized as Financial Creditors of the Corporate Debtor (Subsidiary Company/Guarantor) on the strength of the mortgage created by the Corporate Debtor, as collateral security of the debt of its Holding Company – Anuj Jain IRP for Jaypee Infratech Ltd. Vs. Axis Bank Ltd. etc. – Supreme Court Read Post »

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