Supreme Court Judgments under Insolvency and Bankruptcy Code, 2016
By Dr. Justice D Y Chandrachud
1. No scope for modification of a Resolution Plan by Adjudicating Authority itself, CoC or SRA | Adjustment of PBG with tranche of Resolution Plan is impermissible under CIRP Regulation 36B(4A) | Timely implementation of Resolution Plan is also one of the underlying objectives of the IBC, 2016
Case Name: State Bank of India and Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch and Anr.
Case Citation: (2024) ibclaw.in 290 SC
This landmark judgment covers:
(i) The scope of an appeal under Section 62 of the IBC must be restricted to a “question of law”.
(ii) Interpretation of CIRP Regulation 36B(4A).
(iii) Whether the PBG could have been adjusted against the first tranche payment under the Resolution Plan.
(iv) Scope for modification of the terms of a Resolution Plan which has received the imprimatur of the Adjudicating Authority, be it by the Adjudicating Authority itself, the CoC or the SRA.
(v) Whether the non-implementation of the Resolution Plan by the SRA necessarily leads to the consequence of liquidation as under Section 33(3) of the IBC, 2016?
(vi) Whether the timely implementation of the Resolution Plan is also one of the objectives of the IBC, 2016?
(vii) Extension of time exercising power under Rule 15 of NCLT and NCLAT Rules, 2016.
(viii) Exercise of powers, even under Article 142, must be broadly compliant with the insolvency framework and its underlying objective.
(ix) Decision in Glas Trust Company LLC v. Byju Raveendran and Ors.
(x) Shortcomings and Suggestions to the IBC, 2016.
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2. High Court has no justification to direct the deferment of the CIRP in the exercise of its jurisdiction under Article 226 of the Constitution
Case Name: CoC of KSK Mahanadi Power Company Ltd. v. Uttar Pradesh Power Corporation Ltd. and Ors.
Case Citation: (2024) ibclaw.in 260 SC
In this case, the Hon’ble Telangana High Court, matter related to consolidated of CIRPs, directed petitioner to file an appropriate application before NCLT and raise all grounds available under law. It was also held that until such time, the Resolution Process shall be deferred. The Hon’ble Supreme Court held that the High Court declined to grant the main relief which was sought in the petition for the consolidation of the CIRP of three corporate entities. After coming to that conclusion, there was absolutely no reason for the High Court to exercise its jurisdiction under Article 226 by directing the deferment of the CIRP. Such a direction under Article 226 breaches the discipline of the law which has been laid down in the provisions of the Insolvency and Bankruptcy Code 2016.
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3. Whether both the certified copy which is made available free of cost and the certified copy which is made available on the payment of costs, are treated as certified copies for the purpose of NCLT Rule 50
Case Name: State Bank of India & Ors. Vs. India Power Corporation Ltd.
Case Citation: (2024) ibclaw.in 255 SC
Hon’ble Supreme Court held that:
(i) The important point to note is that both the certified copy which is provided free of cost as well as the certified copy which is made on an application in that behalf are treated as certified copies for the purposes of Rule 50.
(ii) Both the certified copy which is made available free of cost as well as the certified copy which is made available on the payment of costs, are treated as certified copies for the purpose of Rule 50.
(iii) A litigant who does not apply for a certified copy cannot then fall back and claim that he was awaiting the grant of a free copy to obviate the bar of limitation.
(iv) The provisions of Rule 50 of the NCLT Rules place both the free certified copy as well as the certified copy which is applied for on payment of fees on the same footing.
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4. Supreme Court dismisses appeal against NCLAT order dated 17.11.2023
Case Name: Mr. Sanil Prakash Sahu Vs. Kotak Mahindra Bank Ltd. and Ors.
Case Citation: (2024) ibclaw.in 22 SC
Hon’ble Supreme Court dismisses appeal against NCLAT order dated 17.11.2023 whereas it was held that the status of balance sheets as valid acknowledgment of debts needs to be examined depending upon the facts of each case while considering the mention of such non-acknowledging statements in the annexed notes or the auditor’s report. Hon’ble Tribunal also held that the facts in the present case being clearly distinguishable, the Vidarbha judgement cannot be said to apply ipso facto as claimed by the Appellant. Section 7 of the IBC allows a financial creditor to initiate an insolvency resolution process against the corporate debtor upon showing a default in debt owed by the corporate debtor.
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5. Appeal against NCLAT Principal Bench, New Delhi judgment dated 08.01.2024 has been dismissed
Case Name: Sanjeev Mahajan v. Nehru Place Hotels and Real Estates Pvt. Ltd. and Ors.
Case Citation: (2024) ibclaw.in 21 SC
Hon’ble Supreme Court has dismissed appeal filed against the judgment of NCLAT, Principal Bench, New Delhi in the matter of Nehru Place Hotels and Real Estates Pvt. Ltd. v. Sanjeev Mahajan and Ors., reported in (2024) ibclaw.in 14 NCLAT. In NCLAT judgments, a question was whether a settlement proposal under Sec. 12A of IBC, 2016 be allowed after a Resolution Plan has been approved by CoC and pending before NCLT for Approval?
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6. The pronouncement of the order is necessary and cannot be dispensed with | In cases where the matter has been heard on a particular day but the order is pronounced on a later date, the NCLT must refrain from affixing the date of hearing on the order
Case Name: Sanjay Pandurang Kalate v. Vistra ITCL (India) Ltd. and Ors.
Case Citation: (2023) ibclaw.in 154 SC
Hon’ble Supreme Court held that:
(i) The date on which the limitation begins to run is intrinsically linked to the date of pronouncement.
(ii) The pronouncement of the order is necessary and cannot be dispensed with.
(iii) In cases where the matter has been heard on a particular day but the order is pronounced on a later date, the NCLT must refrain from affixing the date of hearing on the order. Such an approach would be a violation of the NCLT Rules, which create a distinction between hearing and pronouncement and do not allow the NCLT to dispense with the requirement of pronouncement.
(iv) The Hon’ble Court appreciates the swift action taken by the NCLAT in view of the above observations. On 15 May 2023, soon after the decision in Sanket Agarwal (supra), an order was issued by the Registrar, NCLAT. Such proactive action by tribunals is essential to ensure that the move towards a modernized and technology-friendly judiciary trickles down to every judicial forum across the country. We record our appreciation of the proactive steps taken by the Chairperson, Members and the Registry of the NCLAT.
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7. The limitation stops running on e-filing of an appeal before NCLAT | The date on which the order is pronounced is to be excluded from the calculation of limitation | The time taken by the NCLT to provide the certified copy would be excluded from the calculation of limitation
Case Name: Sanket Kumar Agarwal & Anr Vs. APG Logistics Pvt. Ltd.
Case Citation: (2023) ibclaw.in 72 SC
Hon’ble Supreme Court held that
(i) Rule 3 of the NCLAT Rules 2016 stipulates that the date from which the period of limitation has to be reckoned (i.e., the date of the pronouncement of the order) would have to be excluded. Hence, the date on which the order was pronounced by the NCLT would have to be excluded from the computation of limitation. This is in line with Section 12(1) of the Limitation Act 1963. As noted earlier, the provisions of the Limitation Act 1963 are made applicable, inter alia, to appeals before the NCLAT by virtue of Section 238A of the IBC.
(ii) Limitation commences once the order was pronounced and the time taken by the court to provide the appellant with a certified copy would be excluded, as clarified in Section 12(2) of the Limitation Act 1963, if the appellant had applied for a certified copy within the prescribed period of limitation under Section 61(2) of the IBC.
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8. NCLT & NCLAT must not pass ad hoc orders regarding fee and expenses payable to Resolution Professionals
Case Name: Mr. Devarajan Raman Vs. Bank of India Ltd.
Case Citation: (2022) ibclaw.in 01 SC
In the present case, after the NCLAT set aside the order of the NCLT initiating the CIRP, the proceedings were remitted back for determining the insolvency resolution costs. It is material to note that the appellant had addressed a letter to the respondent on 13 December 2019 prior to the filing of the application to which the respondent responded on 24 January 2020 stating that, upon verification, the costs and fees were found in conformity with both the technical and financial bid, based on which the assignment was awarded. In the application which was filed by the appellant before the NCLT, the appellant annexed a statement of costs, the amount which was reimbursed with the balance dues. The order of the NCLT, however, reveals that none of the submissions of the appellant have been considered. The adjudicating authority merely directed the respondent to pay the expenses incurred and an amount of Rs 5,00,000 plus GST towards the fee of the RP. Neither the basis of the claim nor its reasonableness has been considered by the adjudicating authority. The appellate authority has merely proceeded in an ad hoc manner on the ground that the amount of Rs 5,00,000 as fee, in addition to the expenses, appears to be reasonable. Both the orders suffer from an abdication in the exercise of jurisdiction. In the absence of any reasons either in the order of the NCLT or the appellate authority, it is impossible for the Court to deduce the basis on which the payment of an amount of Rs. 5,00,000 together with expenses has been found to be reasonable. Consequently, an order of remand becomes necessary.
Hon’ble Supreme Court allows the appeal and set asides the impugned judgment and order of the NCLAT dated 30 July 2020. Similarly, the order of NCLT dated 7 February 2020 is set aside.
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9. Adjudicating Authority must either admit or reject an application filed u/s 7 of IBC, it cannot compel a party to the proceedings before it to settle a dispute
Case Name: E S Krishnamurthy & Ors. Vs. M/s Bharath Hi Tech Builders Pvt. Ltd.
Case Citation: (2021) ibclaw.in 173 SC
Hon’ble Supreme Court set aside judgment of NCAT and NCLT and held that the Adjudicating Authority must either admit the application under Section 7(5)(a) or it must reject the application under Section 7(5)(b). The statute does not provide for the Adjudicating Authority to undertake any other action, but for the two choices available. The Adjudicating Authority is empowered only to verify whether a default has occurred or if a default has not occurred. Based upon its decision, the Adjudicating Authority must then either admit or reject an application respectively. These are the only two courses of action which are open to the Adjudicating Authority in accordance with Section 7(5). The Adjudicating Authority cannot compel a party to the proceedings before it to settle a dispute. What the Adjudicating Authority and Appellate Authority, however, have proceeded to do in the present case is to abdicate their jurisdiction to decide a petition under Section 7 by directing the respondent to settle the remaining claims within three months and leaving it open to the original petitioners, who are aggrieved by the settlement process, to move fresh proceedings in accordance with law. Such a course of action is not contemplated by the IBC. Thus, while the Adjudicating Authority and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity.
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10. The residuary jurisdiction of the NCLT under Section 60(5)(c) of the IBC cannot be invoked if the termination of a contract is based on grounds unrelated to the insolvency of the Corporate Debtor
Case Name: Tata Consultancy Services Ltd. Vs. Vishal Ghisulal Jain
Case Citation: (2021) ibclaw.in 167 SC
Hon’ble Supreme Court held that the residuary jurisdiction of the NCLT cannot be invoked if the termination of a contract is based on grounds unrelated to the insolvency of the Corporate Debtor. The NCLT does not have any residuary jurisdiction to entertain the present contractual dispute which has arisen dehors the insolvency of the Corporate Debtor. In the absence of jurisdiction over the dispute, the NCLT could not have imposed an ad-interim stay on the termination notice. The NCLAT has incorrectly upheld the interim order of the NCLT. The Court further held that even if the contractual dispute arises in relation to the insolvency, a party can be restrained from terminating the contract only if it is central to the success of the CIRP. Crucially, the termination of the contract should result in the corporate death of the Corporate Debtor.
The Court also held that in any event, the intervention by the NCLT and NCLAT cannot be characterized as the re-writing of the contract between the parties. The NCLT and NCLAT are vested with the responsibility of preserving the Corporate Debtor’s survival and can intervene if an action by a third party can cut the legs out from under the CIRP.
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11. When will the clock for calculating the limitation period run for filing appeal under Section 61 of the IBC
Case Name: Mr V Nagarajan Vs. SKS Ispat and Power Ltd.
Case Citation: (2021) ibclaw.in 157 SC
(i) When will the clock for calculating the limitation period run for proceedings under the IBC
- The answer to the two issues set out in Section C of the judgement- (i) when will the clock for calculating the limitation period run for proceedings under the IBC; and (ii) is the annexation of a certified copy mandatory for an appeal to the NCLAT against an order passed under the IBC – must be based on a harmonious interpretation of the applicable legal regime, given that the IBC is a Code in itself and has overriding effect. Sections 61(1) and (2) of the IBC consciously omit the requirement of limitation being computed from when the “order is made available to the aggrieved party”, in contradistinction to Section 421(3) of the Companies Act. Owing to the special nature of the IBC, the aggrieved party is expected to exercise due diligence and apply for a certified copy upon pronouncement of the order it seeks to assail, in consonance with the requirements of Rule 22(2) of the NCLAT Rules. Section 12(2) of the Limitation Act allows for an exclusion of the time requisite for obtaining a copy of the decree or order appealed against.
- It is not open to a person aggrieved by an order under the IBC to await the receipt of a free certified copy under Section 420(3) of the Companies Act 2013 read with Rule 50 of the NCLT and prevent limitation from running. Accepting such a construction will upset the timely framework of the IBC. The litigant has to file its appeal within thirty days, which can be extended up to a period of fifteen days, and no more, upon showing sufficient cause. A sleight of interpretation of procedural rules cannot be used to defeat the substantive objective of a legislation that has an impact on the economic health of a nation.
(ii) Is the annexation of a certified copy mandatory for an appeal to the NCLAT against an order passed under the IBC
- On the second question, Rule 22(2) of the NCLAT Rules mandates the certified copy being annexed to an appeal, which continues to bind litigants under the IBC. While it is true that the tribunals, and even this Court, may choose to exempt parties from compliance with this procedural requirement in the interest of substantial justice, as re-iterated in Rule 14 of the NCLAT Rules, the discretionary waiver does not act as an automatic exception where litigants make no efforts to pursue a timely resolution of their grievance. The appellant having failed to apply for a certified copy, rendered the appeal filed before the NCLAT as clearly barred by limitation.
- The appellant was present before the NCLT on 31 December 2019 when interim relief was denied and the miscellaneous application was dismissed. The appellant has demonstrated no effort on his part to secure a certified copy of the said order and has relied on the date of the uploading of the order (12 March 2020) on the website. The period of limitation for filing an appeal under Section 61(1) against the order of the NCLT dated 31 December 2019, expired on 30 January 2020 in view of the thirty-day period prescribed under Section 61(2). Any scope for a condonation of delay expired on 14 February 2020, in view of the outer limit of fifteen days prescribed under the proviso to Section 61(2). The lockdown from 23 March 2020 on account of the COVID-19 pandemic and the suo motu order of this Court has had no impact on the rights of the appellant to institute an appeal in this proceeding and the NCLAT has correctly dismissed the appeal on limitation. Accordingly, the present appeal under Section 62 of the IBC stands dismissed. Pending application(s) if any, stand disposed of. No order as to costs.
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12. Whether when Resolution Plan awaits approval, personal properties of the promoters can be attached
Case Name: Anjali Rathi & Ors. Vs. Today Homes And Infrastructure Pvt. Ltd. & Ors.
Case Citation: (2021) ibclaw.in 152 SC
Counsel for the petitioners urged that this Court should at the present stage direct that the personal properties of the promoters be attached in view of the provisions contained in the Resolution Plan. The Resolution Plan is still to be approved by the Adjudicating Authority under the provisions of Section 31(1) of the IBC. Hence, at this stage, when the Resolution Plan awaits approval, it would not be appropriate for this Court to issue a direction of that nature. After the Resolution Plan is approved under the provisions of Section 31(1), consequences emanating from the statutory provision would ensue to the benefit of the home buyers. Hence, we have already directed that the NCLT shall dispose of the approval application filed on 21 August 2021, within a period of six weeks from the date of receipt of a certified copy of this order.
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13. Landmark Judgment – Whether Resolution Plan is the statutory or contract? | Whether a Resolution Applicant is entitled to withdraw or modify its Resolution Plan
Case Name: Ebix Singapore Pvt. Ltd. Vs. CoC of Educomp Solutions Ltd. & Anr.
Case Citation: (2021) ibclaw.in 153 SC
- The residual powers of the Adjudicating Authority under the IBC cannot be exercised to create procedural remedies which have substantive outcomes on the process of insolvency. The framework, as it stands, only enables withdrawals from the CIRP process by following the procedure detailed in Section 12A of the IBC and Regulation 30A of the CIRP Regulations and in the situations recognized in those provisions.
- Enabling withdrawals or modifications of the Resolution Plan at the behest of the successful Resolution Applicant, once it has been submitted to the Adjudicating Authority after due compliance with the procedural requirements and timelines, would create another tier of negotiations which will be wholly unregulated by the statute.
- A failed negotiation for modification after submission, or a withdrawal after approval by the CoC and submission to the Adjudicating Authority, irrespective of the content of the terms envisaged by the Resolution Plan, when unregulated by statutory timelines could occur after a lapse of time.
- The existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC-approved Resolution Plans, at the behest of the successful Resolution Applicant, once the plan has been submitted to the Adjudicating Authority.
- A Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analyzed the risks in the business of the Corporate Debtor and submitted a considered proposal. A submitted Resolution Plan is binding and irrevocable as between the CoC and the successful Resolution Applicant in terms of the provisions of the IBC and the CIRP Regulations.
- Since the 330 days outer limit of the CIRP under Section 12(3) of the IBC, including judicial proceedings, can be extended only in exceptional circumstances, this open-ended process for further negotiations or a withdrawal, would have a deleterious impact on the Corporate Debtor, its creditors, and the economy at large as the liquidation value depletes with the passage of time.
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14. Once the requirements of Section 30(2)(b) are fulfilled, the distribution in accordance with its provisions is to be treated as “fair and equitable” to the Operational Creditors
Case Name: Pratap Technocrats (P) Ltd. & Ors. Vs. Monitoring Committee of Reliance Infratel Ltd. & Anr.
Case Citation: (2021) ibclaw.in 148 SC
Hon’ble Supreme Court dismissed appeal against NCLAT order, reported at (2021) ibclaw.in 02 NCLAT and held that the ambit of the Adjudicating Authority is to determine whether the amount that is payable to the operational creditors under the resolution plan is consistent with the above norms which have been stipulated in clause (b) of sub-clause (2) of Section 30. Significantly, Explanation-1 to clause (b), which is clarificatory in nature, provides that a distribution which is in accordance with the provisions of the clause “shall be fair and equitable” to such creditors. Fair and equitable treatment, in other words, is what is fair and equitable between the operational creditors as a class, and not between different classes of creditors. The statute has indicated that once the requirements of Section 30(2)(b) are fulfilled, the distribution in accordance with its provisions is to be treated as fair and equitable to the operational creditors. It also held that the IBC, in our view, is a complete code in itself. It defines what is fair and equitable treatment by constituting a comprehensive framework within which the actors partake in the insolvency process.
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15. The Promoter, if ineligible u/s 29A cannot make an application for Compromise & Arrangement u/s 230 of the Companies Act, 2013
Case Name: Arun Kumar Jagatramka Vs. Jindal Steel And Power Ltd. & Anr.
Case Citation: (2021) ibclaw.in 46 SC
Hon’ble Supreme Court holds that the IBC has made a provision for ineligibility under Section 29A which operates during the course of the CIRP. A similar provision is engrafted in Section 35(1)(f) which forms a part of the liquidation provisions contained in Chapter III as well. In the context of the statutory linkage provided by the provisions of Section 230 of the Act of 2013 with Chapter III of the IBC, where a scheme is proposed of a company which is in liquidation under the IBC, it would be far-fetched to hold that the ineligibilities which attach under Section 35(1)(f) read with Section 29A would not apply when Section 230 is sought to be invoked. Such an interpretation would result in defeating the provisions of the IBC and must be eschewed.
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16. Jurisdiction of the NCLT/NCLAT over Contractual Disputes | Interpretation of Section 60(5)(c) of IBC
Case Name: Gujarat Urja Vikas Nigam Ltd. Vs. Mr. Amit Gupta
Case Citation: (2021) ibclaw.in 44 SC
This judgment covers:
A. Interpretation Rule for the provisions of the IBC.
B. Jurisdiction of the NCLT/NCLAT over contractual disputes.
C. Residuary jurisdiction of the NCLT under section 60(5)(c): “arising out of” and “in relation to”.
D.1 Position of ipso facto clauses in international and multilateral organizations.
D.2 Position of ipso facto clauses in India.
E. Going concern concept under IBC.
F. NCLT would have been empowered to set aside the termination of the PPA.
G. Others: Interpretation of a ‘word’ in the statue.
H. Conclusion
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17. Setting up an untenable plea should not in and by itself invite the penal consequences which emanate from the exercise of the contempt jurisdiction
Case Name: CoC of Amtekauto Ltd. Vs. Dinkar T. Venkatsubramanian & Ors.
Case Citation: (2021) ibclaw.in 10 SC
The role of the adjudicating authority under sub-section (1) of Section 31 comes into being upon the approval of the resolution plan by the CoC under sub-section (4) of Section 30. The function which is assigned by the statute to the adjudicating authority is to determine whether the resolution plan which has been approved by the CoC meets the requirements of sub-section (2) of Section 30. Upon being satisfied that the resolution plan meets those requirements, the adjudicating authority “shall by order approve the resolution plan”. Before passing an order of approval the adjudicating authority has to satisfy itself that the resolution plan has provisions for its effective implementation. The provisions of the IBC are premised on a time bound process for the resolution of corporate insolvencies.
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18. Whether Section 10A would stand attracted to a situation where the application under Section 9 was filed prior to 05.06.2020, when Section 10A was inserted, and in respect of a default which has taken place after 25.03.2020
Case Name: Ramesh Kymal Vs. M/s. Siemens Gamesa Renewable Power Pvt. Ltd.
Case Citation: (2021) ibclaw.in 08 SC
Hon’ble Supreme Court held that financial distress caused by the outbreak of Covid-19 provides the backdrop to the insertion of Section 10A. The language of the provision is not always decisive to arrive at a determination whether the provision if applicable prospectively or retrospectively. The Ordinance and the Amending Act enacted by Parliament, adopt 25 March 2020 as the cut-off date. The proviso to Section 10A stipulates that “no application shall ever be filed” for the initiation of the CIRP “for the said default occurring during the said period”. The expression “shall ever be filed” is a clear indicator that the intent of the legislature is to bar the institution of any application for the commencement of the CIRP in respect of a default which has occurred on or after 25 March 2020 for a period of six months, extendable up to one year as notified. The explanation which has been introduced to remove doubts places the matter beyond doubt by clarifying that the statutory provision shall not apply to any default before 25 March 2020. The substantive part of Section 10A is to be construed harmoniously with the first proviso and the explanation. Reading the provisions together, it is evident that Parliament intended to impose a bar on the filing of applications for the commencement of the CIRP in respect of a corporate debtor for a default occurring on or after 25 March 2020; the embargo remaining in force for a period of six months, extendable to one year. Acceptance of the submission of the appellant would defeat the very purpose and object underlying the insertion of Section 10A. For, it would leave a whole class of corporate debtors where the default has occurred on or after 25 March 2020 outside the pale of protection because the application was filed before 5 June 2020.(p22-23)
The Supreme Court also held that Section 10A does not contain any requirement that the Adjudicating Authority must launch into an enquiry into whether, and if so to what extent, the financial health of the corporate debtor was affected by the onset of the Covid-19 pandemic.
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19. Only those Financial Creditors that are related parties in praesenti would be debarred from CoC under the first proviso to Section 21(2), those related party Financial Creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder
Case Name: Phoenix Arc Pvt. Ltd. Vs. Spade Financial Services Ltd. & Ors.
Case Citation: (2021) ibclaw.in 03 SC
An issue of interpretation in relation to the first proviso of Section 21(2) is whether the disqualification under the proviso would attach to a financial creditor only in praesenti, or if the disqualification also extends to those financial creditors who were related to the corporate debtor at the time of acquiring the debt. Thus, facially, it would appear that the use of the simple present tense in the first proviso to Section 21(2) indicates that the disqualification applies in praesenti. Furthermore, this interpretation would also be supported by a reading of the first proviso to Section 21(2), in light of the definition of ‘related party’ under Section 5(24), which uses phrases such as ‘is accustomed to act’ or ‘is associated’ to define a related party in the present tense.(p82 & 84). While the default rule under the first proviso to Section 21(2) is that only those financial creditors that are related parties in praesenti would be debarred from the CoC, those related party financial creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder. Mr Kaul has argued, correctly in our opinion, that if this interpretation is not given to the first proviso of Section 21(2), then a related party financial creditor can devise a mechanism to remove its label of a ‘related party’ before the Corporate Debtor undergoes CIRP, so as to be able to enter the CoC and influence its decision making at the cost of other financial creditors.
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20. Purchasers of real estate have options to choose any law for for dispute such the Consumer Protection Act 1986, the RERA 2016 and the IBC
Case Name: Shelly Lal & Ors Vs. Union of India & Ors
Case Citation: (2021) ibclaw.in 01 SC
Several provisions of law confer statutory rights on purchasers of real estate and invest them with remedies enforceable at law. These include the Consumer Protection Act 1986, the Real Estate (Regulation and Development) Act 2016 and the Insolvency and Bankruptcy Code 2016. Parliament has enacted a statutory regime to protect the rights of purchasers of real estate and created fora which are entrusted with decision making authority. We, consequently, leave it open to the petitioners to pursue the remedies available in law.
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21. Insolvency commencement date has a different significance and has to be read in the context of definition in Section 5(12) and sub-section (5) and (6) of Section 7
Case Name: Joseph Philip Vs. Ashish Rathi & Anr.
Case Citation: (2018) ibclaw.in 83 SC
Going by the definition of “insolvency commencement date”, the insolvency commencement date means the date of admission of an application. Sub-section (5) of Section 7 speaks of an order admitting such application and in terms of sub-section (6) “the corporate insolvency resolution process” is to commence from the date of admission under sub-section (5). The concept of communication of the order in terms of sub-section (7) is only by way of an additional feature. The effect of the order does not depend upon and get postponed to the date of communication. For the purposes of the Code, the commencement has a different significance and has to be read in the context of definition in Section 5(12) and sub-section (5) and (6) of Section 7.
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22. Supreme Court sets Guidelines for Withdrawal and Settlement of Insolvency Cases under Section 12A of IBC read with CIRP Regulation 30A | Withdrawal application shall be moved through Resolution Professional only and NCLT Rule 11 or NCLAT Rule 11 or even the power under Article 142 no longer arises
Case Name: GLAS Trust Company LLC v. BYJU Raveendran and Ors.
Case Citation: (2024) ibclaw.in 275 SC
In this landmark decision, Hon’ble Supreme Court covers following issues:
i. Nature of the proceedings after admission of the application: proceeding in personam or in rem.
ii. Legal framework for withdrawal and settlement of claims.
iii. Four stages of withdrawal of Insolvency cases: A procedure prescribed under the existing framework.
iv. Comprehensive framework to deal with withdrawal and settlement: Rule 11 of the NCLT Rules, or Rule 11 of the NCLAT Rules or even the power under Article 142 no longer arises.
v. Withdrawal application u/s 12A through IRP only, NCLT conducts an adjudicatory exercise and the procedure is not a mere technicality.
vi. Inherent Powers under Rule 11 of NCLT/ NCLAT Rules, 2016.
vii. Meaning of the phrase “any person aggrieved” under Section 61 and Section 62 of IBC.
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23. Whether the period spent in pursuing proceedings under the IBC is liable to be excluded while computing the limitation period for filing the application under Section 11(6) of Arbitration and Conciliation Act, 1996? | Whether the principles contained in Order 23 Rule 1 of the CPC will apply to an application under Section 11(6)? | Whether the benefit of Section 5 and 14 of the Limitation Act is available in respect of an application for appointment of arbitrator under Section 11(6) of the Arbitration Act?
Case Name: HPCL Bio-Fuels Ltd. v. Shahaji Bhanudas Bhad
Case Citation: (2024) ibclaw.in 288 SC
In this landmark judgment, following issues are covered:
(i) Scope and applicability of Order 23 Rule 1 of the CPC to proceedings other than suits.
(ii) Whether the principles contained in Order 23 Rule 1 of the CPC will apply to an application under Section 11(6) of the Act, 1996.
(iii) Important aspect while applying the principles of Order 23 Rule 1 to applications under Section 11(6) of the Act, 1996.
(iv) Withdrawing Section 11 application to file application under Section 9 of IBC, it would no longer be open to it to file a fresh application for appointment of arbitrator without having obtained the liberty of the court to file a fresh application at the time of the withdrawal.
(v) Whether the period spent in pursuing proceedings under the IBC is liable to be excluded while computing the limitation period for filing the application under Section 11(6)?
(vi) Ingredients need to be fulfilled for the applicability of Section 14(1) of the Limitation Act.
(vii) Conditions required to be fulfilled for seeking the benefit of exclusion under Section 14(2) of the Limitation Act.
(viii) Key difference between sub-sections (1) and (2) of Section 14 of the Limitation Act.
(ix) Interpretation of the expression “other cause of a like nature” used in Section 14 of the Limitation Act.
(x) A Section 11 petition is in the nature of an ‘application’ and cannot be considered to be a ‘suit’ for the purposes of the Limitation Act.
(xi) Application under Section 11(6) of the Arbitration Act is not for the same relief as an application under Section 9 of the IBC.
(xii) Insolvency proceedings are fundamentally different from arbitration proceedings etc.
(xiii) Whether the benefit of condonation of delay under Section 5 of the Limitation Act is available in respect of an application for appointment of arbitrator under Section 11(6) of the Act, 1996?
(xiv) Whether it is permissible for the courts to condone delay under Section 5 of the Limitation Act in the absence of any application seeking such condonation?
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24. Vijay Kumar Singhania Vs. Bank of Baroda and Anr.
Case Citation: (2024) ibclaw.in 197 SC
Hon’ble Supreme Court has affirmed the decision of the NCLAT where NCLAT held that IU Regulation 20 although has been amended w.e.f 14.06.2022 but there is no amendment either in Section 7 of the IBC which empowers Financial Creditor to file record of the default recorded in the information utility or such other record and default as may be specified or in Rules 2016 or CIRP Regulations 2016. The statutory scheme, thus, contemplates furnishing record of default by the financial creditor as recorded with the information utility or such other record or evidence of default as may be specified.
The record of default for purposes of Section 7(3)(a) has been specified by Regulation 2A of the CIRP Regulations, 2016. Thus, record of default recorded with the information utility is not the only document which has to be furnished by financial creditor. Financial creditor is at liberty to submit such other record of default as may be specified which is a statutory provision contained in Section 7. Even after amendment of IU Regulation 20 by insertion of Regulation 20(1A) w.e.f 14.06.2022, Financial Creditor is entitled to file evidence of record of default as contemplated by CIRP Regulation 2A r/w Rule 4 of the AAA Rules, 2016.
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25. Can an application under Section 95(1) of IBC be filed jointly with other Creditors/Resolution Professional for initiating an insolvency resolution process?
Case Name: Arvind Dham Vs. State Bank of India and Anr.
Case Citation: (2024) ibclaw.in 161 SC
Hon’ble Supreme Court (3 Judge Bench) has dismissed an appeal filed against NCLAT’s judgment which was on the issue whether Section 95(1) empowers the creditor to apply either by himself, or jointly with other creditors, or through a resolution professional for initiating an insolvency resolution process under this section by submitting an application to the Adjudicating Authority.
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26. Can a New Resolution Applicant be brought in or substituted with another Resolution Applicant, after approval of a Resolution Plan u/s 31 of IBC?
Case Name: UV Asset Reconstruction Company Ltd. and Anr. Vs. Aircel Ltd.
Case Citation: (2024) ibclaw.in 162 SC
A 3-Judge Bench of Hon’ble Supreme Court has upheld the decision of NCLAT where NCLAT fully agreed with the reasons given by the Adjudicating Authority for rejecting the application filed by the Appellant for substituting another Resolution Applicant in place of the Appellant. When plan of the Appellant as Resolution Applicant was approved, the Adjudicating Authority rightly refused to substitute another Resolution Applicant, in which order no infirmity is found.
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27. Can Dissenting Secured Financial Creditor insist payment of amount as per security interest?, Supreme Court dismisses appeal
Case Name: Paridhi Finvest Pvt. Ltd. Vs. Value Infracon Buyers Association and Anr.
Case Citation: (2024) ibclaw.in 163 SC
A three-Judge Bench of Hon’ble Supreme Court has dismissed an appeal filed against an order of NCLAT where Hon’ble NCLAT held that dissenting Secured Financial Creditor cannot insist payment of amount as per security interest, when there is resolution of Corporate Debtor through a Resolution Plan.
The NCLAT also held that the Resolution Plan submitted by Flat Buyers Association cannot be faulted on the ground that CoC have chosen not to take any performance security. Hon’ble Court dismissed the appeal on the ground that no substantial question of law is involved in the appeal.
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28. Whether the right of subrogation shall stand extinguished after approval of the Resolution Plan under the Code or the same will continue to vest with Personal Guarantors in terms of the Indian Contract Act, 1872
Case Name: Sapna Aggarwal Vs. Asian Colour Coated Ispat Ltd. and Ors.
Case Citation: (2024) ibclaw.in 118 SC
Hon’ble Supreme Court upholds the decision of NCLAT where it was held that Doctrine of subrogation is an absolute right of Guarantor, however, the issue becomes different, if it falls within the domain of IBC. A Resolution Plan itself can vary and modify the rights of Creditors and Guarantors and provide for continuation of Personal Guarantees which do not need any confirmation from Personal Guarantor.
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29. Supreme Court dismisses appeal against NCLAT judgment dated 19.12.2023
Case Name: Mehul Parekh and Ors. Vs. Unimark Remedies Ltd. and Ors.
Case Citation: (2024) ibclaw.in 61 SC
Hon’ble Supreme Court has dismissed the appeal filed against order of NCLAT in Mehul Parekh and Ors. v. Unimark Remedies and Ors. (2023) ibclaw.in 806 NCLAT, where following questions were before the Hon’ble NCLAT:
A. Whether classification in Resolution Plan between payment to employees, is discriminatory and violative of provisions of Section 30(2) of the Code?
B. Whether the Adjudicating Authority erred in issuing directions for redetermination of the CIRP cost by the CoC?
C. Whether the direction of Adjudicating Authority to withhold the payment of CIRP cost to the Appellant, which payment was directed subject to appropriation towards amount found recoverable from such promoters/ KMPs in avoidance application, is violative of Section 30(2) of the Code and unsustainable?
D. Whether the Adjudicating Authority erred in issuing direction to CoC to pursue the avoidance application pending for adjudication before the Adjudicating Authority?
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30. Supreme Court sets aside judgment of Delhi High Court as the parties have agreed to refer their disputes to arbitration, after approval of Resolution Plan
Case Name: Indian Oil Corporation Ltd. Vs. Arcelor Mittal Nippon Steel India Ltd.
Case Citation: (2024) ibclaw.in 57 SC
Hon’ble Supreme Court sets aside the judgment of Delhi High Court in which Hon’ble High Court held that approval of the Resolution Plan clearly amounts to the extinguishment of all debts that were owed by the Corporate Debtor except to the extent as was admitted in the Resolution Plan. The IBC and the resolution process does not contemplate matters being left inchoate. In fact, and to the contrary it exhorts one to accept the seal of finality and quietitude which stands attached to the approval of a Resolution Plan. Where the claim can ex facie be said to be unenforceable in law say for instance where it is barred by the statute of limitation or where the dispute of which reference is sought falls within the genre of non-arbitrability.
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31. CIRP Claim filing ‘Form’ is directory, claim must be supported by proof is important | NCLT can recall Resolution Plan approval order passed under Sec. 31(1) of IBC | Claim filed in wrong Form/category would have to be accorded due consideration in the category to which it belongs
Case Name: Greater Noida Industrial Development Authority Vs. Prabhjit Singh Soni and Anr.
Case Citation: (2024) ibclaw.in 53 SC
In this landmark decision, Hon’ble Supreme Court rules that:
(i) Even if a claim submitted by a creditor against the CD is in a Form not as specified in the CIRP Regulations, 2016, the same has to be given due consideration by the IRP or the RP.
(ii) If a claim is submitted by an operational creditor claiming itself as a financial creditor, the claim would have to be accorded due consideration in the category to which it belongs provided it is verifiable.
(iii) The use of the words “a person claiming to be an operational creditor” in the opening part of CIRP Regulation 7, and the words “a person claiming to be a financial creditor” in CIRP Regulation 8, indicate that the category in which the claim is submitted is based on the own understanding of the claimant.
(iv) Once the claim was submitted with proof, it could not have been overlooked merely because it was in a different Form. The Form in which a claim is to be submitted is directory. What is necessary is that the claim must have support from proof.
(v) If any such shortcoming appears in the resolution plan, it may send the resolution plan back to the COC for re-submission after satisfying the parameters so laid down.
(vi) A Court or a Tribunal, in absence of any provision to the contrary, has inherent power to recall an order to secure the ends of justice and/or to prevent abuse of the process of the Court.
(vii) Even in absence of a specific provision empowering the Tribunal to recall its order, the Tribunal has power to recall its order.
(viii) However, such power is to be exercised sparingly, and not as a tool to re-hear the matter.
(ix) The recall application was maintainable notwithstanding that an appeal lay before the NCLAT against the order of approval passed by the Adjudicating Authority.
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32. CIRP Claim filing ‘Form’ is directory, claim must be supported by proof is important | NCLT can recall Resolution Plan approval order passed under Sec. 31(1) of IBC | Claim filed in wrong Form/category would have to be accorded due consideration in the category to which it belongs
Case Name: Greater Noida Industrial Development Authority Vs. Prabhjit Singh Soni and Anr.
Case Citation: (2024) ibclaw.in 53 SC
In this landmark decision, Hon’ble Supreme Court rules that:
(i) Even if a claim submitted by a creditor against the CD is in a Form not as specified in the CIRP Regulations, 2016, the same has to be given due consideration by the IRP or the RP.
(ii) If a claim is submitted by an operational creditor claiming itself as a financial creditor, the claim would have to be accorded due consideration in the category to which it belongs provided it is verifiable.
(iii) The use of the words “a person claiming to be an operational creditor” in the opening part of CIRP Regulation 7, and the words “a person claiming to be a financial creditor” in CIRP Regulation 8, indicate that the category in which the claim is submitted is based on the own understanding of the claimant.
(iv) Once the claim was submitted with proof, it could not have been overlooked merely because it was in a different Form. The Form in which a claim is to be submitted is directory. What is necessary is that the claim must have support from proof.
(v) If any such shortcoming appears in the resolution plan, it may send the resolution plan back to the COC for re-submission after satisfying the parameters so laid down.
(vi) A Court or a Tribunal, in absence of any provision to the contrary, has inherent power to recall an order to secure the ends of justice and/or to prevent abuse of the process of the Court.
(vii) Even in absence of a specific provision empowering the Tribunal to recall its order, the Tribunal has power to recall its order.
(viii) However, such power is to be exercised sparingly, and not as a tool to re-hear the matter.
(ix) The recall application was maintainable notwithstanding that an appeal lay before the NCLAT against the order of approval passed by the Adjudicating Authority.
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33. The bar of limitation cannot be obviated or circumvented by taking recourse of proceedings under Article 136 of the Constitution when a statutory appeal is available
Case Name: Gopal Krishnan MS and Anr. Vs. Ravindra Beleyur and Anr.
Case Citation: (2024) ibclaw.in 10 SC
Hon’ble Supreme Court declines to entertain a SLP holding that since the impugned order of the NCLAT is amenable to the appellate jurisdiction of Supreme Court under Section 62 of the IBC. The bar of limitation cannot be obviated or circumvented by taking recourse of proceedings under Article 136 of the Constitution when a statutory appeal is available.
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34. Landmark judgment on various provisions of IBC on Personal Insolvency | Provisions of Section 95 to Section 100 of the IBC are not unconstitutional
Case Name: Dilip B. Jiwrajka Vs. Union of India & Ors.
Case Citation: (2023) ibclaw.in 147 SC
Conclusion of the landmark judgment on personal insolvency as under:
(i) No judicial adjudication is involved at the stages envisaged in Sections 95 to Section 99 of the IBC;
(ii) The resolution professional appointed under Section 97 serves a facilitative role of collating all the facts relevant to the examination of the application for the commencement of the insolvency resolution process which has been preferred under Section 94 or Section 95. The report to be submitted to the adjudicatory authority is recommendatory in nature on whether to accept or reject the application;
(iii) The submission that a hearing should be conducted by the adjudicatory authority for the purpose of determining ‘jurisdictional facts’ at the stage when it appoints a resolution professional under Section 97(5) of the IBC is rejected. No such adjudicatory function is contemplated at that stage. To read in such a requirement at that stage would be to rewrite the statute which is impermissible in the exercise of judicial review;
(iv) The resolution professional may exercise the powers vested under Section 99(4) of the IBC for the purpose of examining the application for insolvency resolution and to seek information on matters relevant to the application in order to facilitate the submission of the report recommending the acceptance or rejection of the application;
(v) There is no violation of natural justice under Section 95 to Section 100 of the IBC as the debtor is not deprived of an opportunity to participate in the process of the examination of the application by the resolution professional;
(vi) No judicial determination takes place until the adjudicating authority decides under Section 100 whether to accept or reject the application. The report of the resolution professional is only recommendatory in nature and hence does not bind the adjudicatory authority when it exercises its jurisdiction under Section 100;
(vii) The adjudicatory authority must observe the principles of natural justice when it exercises jurisdiction under Section 100 for the purpose of determining whether to accept or reject the application;
(viii) The purpose of the interim-moratorium under Section 96 is to protect the debtor from further legal proceedings; and
(ix) The provisions of Section 95 to Section 100 of the IBC are not unconstitutional as they do not violate Article 14 and Article 21 of the Constitution.
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35. An advance payment paid by the Operational Creditor and not refunded by the Corporate Debtor
Case Name: Punj Lloyd Aviation Ltd. Vs. Chipsan Aviation Pvt. Ltd.
Case Citation: (2023) ibclaw.in 20 SC
Hon’ble Supreme Court held that NCLAT has reversed the decision while relying upon the decision of this Court in Consolidated Construction Consortium Limited vs Hitro Energy Solutions Private Limited, where it has been held that Section 5(21) has to be interpreted in a broad and purposive manner in order to include all those who provide or receive operational services from the Corporate Debtor which ultimately leads to an operational debt. The NCLT in its original order had not considered the other defences that were raised by the applicant to the application under Section 9 of the IBC. Hence, on remand, all the rights and contentions of the parties on the merits of the case are kept open to be urged before and decided by the NCLT.
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36. Supreme Court issues notice in appeal against NCLAT’s order in which relied upon Vidarbha Industries Power Limited judgment
Case Name: Maganlal Daga HUF & Anr. Vs. Jag Mohan Daga & Ors.
Case Citation: (2023) ibclaw.in 07 SC
The NCLAT has relied upon the decision of a two Judge Bench in Vidarbha Industries Power Limited Vs Axis Bank Limited. The decision in Vidarbha Indusries Power Limited, which was rendered on 12 July 2022, was since clarified in a review order dated September 22 2022. It has been submitted that the decision in Vidarbha Indusries Power Limited runs contrary to the settled position in law laid down in Innoventive Industries Ltd Vs ICICI Bank and subsequently followed in several decisions of this Court including E S Krishnamurthy Vs Bharath Hi-Tech Builders Pvt Ltd. Mr Tushar Mehta, Solicitor General of India submits that the principle which has been enunciated in Vidarbha Indusries Power Limited is liable to dilute the substratum of the Insolvency and Bankruptcy Code 2016.
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37. An acknowledgement in a balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgement was within a period of three years from the original date of default
Case Name: State Bank of India Vs. Krishidhan Seeds Pvt. Ltd.
Case Citation: (2022) ibclaw.in 40 SC
Hon’ble Supreme Court held that an acknowledgement in a balance sheet without a qualification can be relied upon for the purpose of the proceedings under the IBC. Neither the NCLT nor the NCLAT had the benefit of adjudicating upon the factual controversy in the context of the decisions of this Court.
The principles which emerge are that:
(i) The provisions of Section 18 of the Limitation Act are not alien to and are applicable to proceedings under the IBC; and
(ii) An acknowledgement in a balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgement was within a period of three years from the original date of default.
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