Landmark Judgements in Insolvency and Bankruptcy Code(IBC), 2016

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I. Lokhandwala Kataria Construction (P) Ltd. (Corporate Debtor) Vs. Nisus Finance & Investment Manager LLP.- Supreme Court:

Brief about decision:
“In view of Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, the National Company Law Appellate Tribunal (NCLAT) could not utilise the inherent power recognised by Rule 11 of the National Company Law Appellate Tribunal Rules, 2016″

Read full judgment: Lokhandwala Kataria Construction (P) Ltd. (Corporate Debtor) Vs. Nisus Finance & Investment Manager LLP.

II. Innoventive Industries Ltd. (Corporate Debtor) Vs. ICICI Bank & Anr.- Supreme Court:

Brief about decision:
“Once an insolvency professional is appointed to manage the company, the erstwhile directors who are no longer in management, obviously cannot maintain an appeal on behalf of the company – The Insolvency and Bankruptcy Code, 2016 is an Act to consolidate and amend the laws relating to reorganization and insolvency resolution, inter alia, of corporate persons – The Insolvency and Bankruptcy Code is a Parliamentary law that is an exhaustive code on the subject matter of insolvency in relation to corporate entities – On reading of section 238 of the code it is clear that the later non-obstante clause of the Parliamentary enactment will also prevail over the limited non-obstante clause contained in Section 4 of the Maharashtra Act and therefore, the Maharashtra Act cannot stand in the way of the corporate insolvency resolution process under the Code – There would be repugnancy between the provisions of the two enactments.”

Read full judgment: Innoventive Industries Ltd. (Corporate Debtor) Vs. ICICI Bank & Anr.

III.  Macquarie Bank Ltd. Vs. Shilpi Cable Technologies Ltd.- Supreme Court:

Brief about decision:

“The first question is whether, in relation to an operational debt, the provision contained in Section 9(3)(c) of the Code is mandatory?
It is true that the expression “initiation” contained in the marginal note to Section 9 does indicate the drift of the provision, but from such drift, to build an argument that the expression “initiation” would lead to the conclusion that Section 9(3) contains mandatory conditions precedent before which the Code can be triggered is a long shot. Equally, the expression “shall” in Section 9(3) does not take us much further when it is clear that Section 9(3)(c) becomes impossible of compliance in cases like the present. It would amount to a situation wherein serious general inconvenience would be caused to innocent persons, such as the appellant, without very much furthering the object of the Act, therefore, Section 9(3)(c) would have to be construed as being directory in nature.

Whether a demand notice of an unpaid operational debt under section 8 can be issued by a lawyer on behalf of the operational creditor?
Sections 8, 9 and 238 of the Insolvency and Bankruptcy Code, 2016 read with Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 30 of the Advocates Act – A fair construction of Section 9(3)(c), in consonance with the object ought to be achieved by the Code, would lead to the conclusion that it cannot be construed as a threshold bar or a condition precedent – The non-obstante clause contained in Section 238 of the Code will not override the Advocates Act as there is no inconsistency between Section 9, read with the Adjudicating Authority Rules and Forms referred to hereinabove, and the Advocates Act -Since there is no clear disharmony between the two Parliamentary statutes in the present case which cannot be resolved by harmonious interpretation, it is clear that both statutes must be read together. Also, we must not forget that Section 30 of the Advocates Act deals with the fundamental right under Article 19(1)(g) of the Constitution to practice one’s profession. Therefore, a conjoint reading of Section 30 of the Advocates Act and Sections 8 and 9 of the Code together with the Adjudicatory Authority Rules and Forms thereunder would yield the result that a notice sent on behalf of an operational creditor by a lawyer would be in order.”

Read full judgment: Macquarie Bank Ltd. Vs. Shilpi Cable Technologies Ltd.

IV.  Mobilox Innovations (P) Ltd. Vs. Kirusa Software (P) Ltd.- Supreme Court:

Brief about decision:
“The expression “and” occurring in section 8(2)(a) may be read as “or” in order to further the object of the statute and/ or to avoid an anomalous situation – once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility – So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application – A “dispute” is said to exist, so long as there is a real dispute as to payment between the parties that would fall within the inclusive definition contained in Section 5(6).”

Read full judgment: Mobilox Innovations (P) Ltd. Vs. Kirusa Software (P) Ltd.

 

V. Surendra Trading Company Vs. Juggilal Kamlapat Jute Mills Company Ltd. & Others- Supreme Court:

Brief about decision:

“The question before the NCLAT was as to whether time of fourteen days under section 9(5) given to the adjudicating authority for ascertaining the existence of default and admitting or rejecting the application is mandatory or directory. NCLAT hold that the mandate of sub-section (5) of section 7 or sub-section (5) of section 9 or sub-section (4) of section 10 is procedural in nature, a tool of aid in expeditious dispensation of justice and is directory.

Further question (with which supreme Court is concerned) was as to whether the period of seven days for rectifying the defects under proviso to sub-section (5) of Section 9 is mandatory or directory. The aforesaid provision of removing the defects within seven days is directory and not mandatory in nature.”

Read full judgment: Surendra Trading Company Vs. Juggilal Kamlapat Jute Mills Company Ltd. & Others

 

 

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