GCS-Going Concern-Reliefs Concessions & Waivers

The primary goal of a Resolution Plan as well as the sale of a Corporate Debtor as a Going Concern remains the same i.e revival of Corporate Debtor’s business – Universaltech Paper LLP Vs. Mr. Krishnaswami CVR, Liquidator of Kohinoor Pulp & Paper Pvt. Ltd. – NCLT Kolkata Bench

In IA to grant the reliefs/ concessions to successful bidder, Hon’ble NCLT Kolkata Bench holds that:
(i) The primary goal of a resolution plan as well as the sale of a Corporate Debtor as a going concern remains the same i.e revival of the Corporate Debtor’s business. The struggles faced by the purchaser during the sale of a Corporate Debtor as a ‘going concern’ and that of the Successful Resolution Applicant are similar, if not the same. As such, comparable reliefs and concessions ought to be granted in both cases.
(ii) While the successful bidder is allowed the liberty to file application before the Adjudicating Authority claiming reliefs and concessions, the said reliefs and concessions cannot be too elaborate and general and must be in consonance with the process document in the liquidation proceedings.
(iii) With respect to the waivers sought in relation to guarantors, the judgment of Lalit Kumar Jain v Union of India & Ors. (2021) ibclaw.in 61 SC wherein the Hon’ble Supreme Court held in para 133 that sanction of a resolution plan and finality imparted to it by section 31 does not per se operate asa discharge of the guarantor’s liability shall apply. In view of the above position of law, the sale of the assets of the Corporate Debtor ‘as a going concern’ shall be binding on the Corporate Debtor and other persons, authorities etc.

The primary goal of a Resolution Plan as well as the sale of a Corporate Debtor as a Going Concern remains the same i.e revival of Corporate Debtor’s business – Universaltech Paper LLP Vs. Mr. Krishnaswami CVR, Liquidator of Kohinoor Pulp & Paper Pvt. Ltd. – NCLT Kolkata Bench Read Post »

Unpaid liabilities/existing share capital of Corporate Debtor, which are to be extinguished as per the relief and concessions granted, are to be credited into the Capital Reserve in accordance with applicable Indian Accounting Standards(IndAS) – Arrhum Tradelink Pvt. Ltd. Vs. Vineeta Maheshwari, Liquidator of Kaneria Granito Ltd. – NCLT Ahmedabad Bench

An IA filed by Successful Bidder under Section 60(5)(c) of the IBC, 2016 seeking certain reliefs and concessions for the Corporate Debtor which is sold in the process of liquidation as a going concern.

NCLT Ahmedabad Bench granted reliefs and concessions and also clarified that:
(i) The unpaid liabilities of the past period shall be extinguished and the same shall be converted as a “Capital Reserve” in accordance with the Indian Accounting Standards.
(ii) Unpaid liabilities/existing share capital of the Corporate Debtor, which are to be extinguished as per the relief and concessions granted, are to be credited into the “Capital Reserve” in accordance with applicable Indian Accounting Standards.
(iii) The accumulated losses, if any, as per the balance sheet prior to the date of acquisition will have to be adjusted/set off as against such “capital reserve”.

Unpaid liabilities/existing share capital of Corporate Debtor, which are to be extinguished as per the relief and concessions granted, are to be credited into the Capital Reserve in accordance with applicable Indian Accounting Standards(IndAS) – Arrhum Tradelink Pvt. Ltd. Vs. Vineeta Maheshwari, Liquidator of Kaneria Granito Ltd. – NCLT Ahmedabad Bench Read Post »

In case of Going Concern Sale in Liquidation process, Successful Bidder can approach to Income Tax Authority to get the benefits of brought forward losses – Consortium of RVR Enterprises Vs. G. Madhusudan Rao Liquidator of Chadalavada Infratech Ltd. – NCLT Hyderabad Bench

The successful bidders of Corporate Debtor filed this application under Section 60(5)(c) of IBC r/w NCLT Rule 11 seeking certain reliefs to them to kickstart the business of the Corporate Debtor. NCLT held that the Corporate Debtor is entitled to get the benefits of brought forward losses, if any, subject to permission of the appropriate authority, if so entitled under the relevant provisions of the Income Tax Act, 1961. As far as the prayer for considering the bid submitted by the successful bidder as Resolution Plan under Section 79 of Income Tax Act, 1961 is concerned, the bidder may approach the authority concerned who would consider such request under the Income Tax Act.

In case of Going Concern Sale in Liquidation process, Successful Bidder can approach to Income Tax Authority to get the benefits of brought forward losses – Consortium of RVR Enterprises Vs. G. Madhusudan Rao Liquidator of Chadalavada Infratech Ltd. – NCLT Hyderabad Bench Read Post »

Sale of Corporate Debtor as a going concern is akin to a de-facto CIRP, therefore, the judgments are applicable in a going concern sale too and NCLT has power to grant reliefs/waivers/concessions only that are directly in relation to the Code and the Companies Act, 2013 – Soumitra Lahiri, Liquidator of SKP Steel Industries Pvt. Ltd. – NCLT Kolkata Bench

In this important judgment, NCLT Kolkata Bench held that:
(i) Adjudicating Authority has power to grant reliefs, waivers and concessions only with respect to the reliefs, waivers and concessions that are directly in relation to the Code and the Companies Act, 2013 (within the powers of the NCLT).
(ii) The reliefs, waivers and concessions that pertain to other governmental authorities/departments shall be dealt with the respective competent authorities.
(iii) The competent authorities including the Appellate authorities may consider grant such reliefs, waivers and concessions keeping in view the spirit of the code (IBC 2016).
(iv) The sale of the Corporate Debtor as a going concern is akin to a de-facto CIRP, and therefore the judgments are applicable in the present case of a going concern sale too, shall therefore be applicable in the present case as well.

Sale of Corporate Debtor as a going concern is akin to a de-facto CIRP, therefore, the judgments are applicable in a going concern sale too and NCLT has power to grant reliefs/waivers/concessions only that are directly in relation to the Code and the Companies Act, 2013 – Soumitra Lahiri, Liquidator of SKP Steel Industries Pvt. Ltd. – NCLT Kolkata Bench Read Post »

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