Landmark Judgements by the Hon’ble NCLAT 1st to 15th February, 2021
- M R Logistics India Pvt Ltd v. AGA Publications Ltd (DOJ: 1st February, 2021)
Hon’ble NCLAT in the present matter held that when there is a record of dispute existing between the parties prior to the issuance of Demand Notice and prior to filing of Section 9 Application, the same cannot be entertained by either Adjudicating Authority or the Appellate Tribunal in a Summary Proceedings.
Hon’ble Tribunal by the instrumentality of this case, emphasized upon the need for Adjudicating Authority to see at which ‘stage’ there is a plausible contention which requires further investigation and that the ‘dispute’ is not a patently feeble legal argument or an assertion of fact unsupported by evidence. As per Hon’ble NCLAT, the Corporate Debtor must bring to the notice of Operational Creditor, the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute. These disputes shall be inconsonance with Section 5(6) of the Insolvency & Bankruptcy Code and the Adjudicating Authority while determining the adequacy of the disputes, shall critically examine if the dispute and/or the suit or arbitration proceedings are pre-existing or not i.e., it must exist before the receipt of the Demand Notice or Invoices or as the case may be.
Accordingly, the appeal filed by the Operational Creditor was found to be devoid of merit and was dismissed.
Judgment Link: https://nclat.nic.in/Useradmin/upload/18803138566017e23fa69c5.pdf
- Adish Jain v. Sumit Bansal (DOJ: 3rd February, 2021)
Hon’ble NCLAT in the current case deliberates upon the scope of inherent powers to “Review” its own Order. The Hon’ble Tribunal stated that there is no express provision for ‘Review’ and such powers must be conferred by law either specifically or by necessary implication. It further observed that the untenable ambit of Rule 11 of the NCLAT Rules, vested powers of the Tribunal can only be exercised to enhance cause of justice or prevent abuse of process and any error showcasing in the said regard must be a ‘patent error’ which is ‘manifest’ and ‘self-evident’. Since no ‘apparent mistake from the record’ was observed in the said case, no re-hearing was permitted. Further, the Review Application was dismissed as impermissible in law.
Judgment link: https://nclat.nic.in/Useradmin/upload/1798063725601a51242c0c4.pdf
- TUF Metallurgical Pvt Ltd v. Impex Metal & Ferro Alloys Ltd (DOJ: 3rd February, 2021)
In the current matter, Hon’ble NCLAT discussed in length as to whether the advance paid to Corporate Debtor for the supply of goods during CIRP, on failure to supply part goods, during CIRP – can be treated as CIRP costs or not. It was held that in a process of managing the business operations of the Corporate Debtor, if advance payment for supply of goods is received, the same shall not be treated as raising an interim finance. It is considered an advance for payment of goods which the Corporate Debtor is manufacturing and for this purpose, if the goods are not supplied, the purchaser cannot be made to run for his money. Meaning thereby that either the goods have to be delivered or the amount has to be returned.
The Hon’ble Tribunal further opined that if such approach is not inculcated, it will become difficult for the Corporate Debtors to continue as a going concern and any such amount received as an advance payment for the supply of goods during the CIRP would have to be treated as CIRP costs. Accordingly, both the appeals filed before the Tribunal emanating from a common order were disposed of.
Judgment link: https://nclat.nic.in/Useradmin/upload/1683988625601a5a88ab8db.pdf
- Avil Menezes Resolution Professional of AMW Auto Component Ltd v. Shah Coal Pvt Ltd (DOJ: 3rd February, 2021)
Hon’ble NCLAT in the present case discussed as to whether a decision taken by the Adjudicating Authority in regard to admission or rejection of a claim can be questioned by the Resolution Professional in an appeal before the NCLAT or not.
Hon’ble Tribunal held that in the instances where the appeal has been preferred by the Resolution Professional (RP) in lieu of Section 21(1) of the Insolvency and Bankruptcy Code, 2016, the RP is not vested with any adjudicatory powers. He is only supposed to collate the claims which imply comparison with the record and verification and all such actions taken by him are subject to control of the Adjudicating Authority. However, this situation stands contrary with a Liquidator who is empowered to admit or reject a claim under Section 40 of the Code against which an appeal lies to the Adjudicating Authority (NCLT). The Appellant thereafter, submitted to withdraw the appeal. The appeal was accordingly dismissed as withdrawn.
Judgment link: https://nclat.nic.in/Useradmin/upload/246432756601a88ea2d1f4.pdf
- Om Prakash Agarwal v. Chief Commissioner of Income Tax (DOJ: 8th February 2021)
Hon’ble NCLAT in the present matter held that Section 53(1) (e) of the Code shall have an overriding effect on the provisions of Section 194 of the Income Tax Act (IT Act), thereby implying that purchasers of the property under liquidation are exempted from remitting TDS to the Income Tax Department. It was further observed that no provisions under IT Act or the Code suggests for Liquidators to file an Income Tax Return and consequently a Liquidator is not duty bound to prepare the financial statements. Since deduction of Tax at source under Section 194 IA of IT Act is by nature an advance capital gain tax and liquidators are not required to file Income Tax Return, no question of claiming refund of TDS deducted under Section 194 IA of the IT Act arises.
These directions were issued when liquidators filed application against successful bidders for sale of assets of the corporate debtor. The Adjudicating Authority in the case erroneously held that the deduction of Tax at source does not mean raising demand for collection of Tax by the department. Accordingly, the appeal was allowed.
Judgment link: https://nclat.nic.in/Useradmin/upload/155180032160212e9286f98.pdf
- Suri Rajendra Rolling Mills v. Bengani Udyog Pvt Ltd (DOJ: 11th February, 2021)
Hon’ble NCLAT in the present matter held that no fresh application to initiate corporate insolvency resolution process is maintainable wherein a similar application was filed by the same Operational Creditor for the same cause of action which was permitted to withdraw without liberty to file fresh application.
The Appellant claims to have withdrawn the application because the Corporate Debtor had told it would settle the dues which subsequently were not settled and hence a fresh notice led to a fresh cause of action. Hon’ble Tribunal denied the acceptability of the submission that the opposite party has instructed the Appellant to withdraw the petition and the Appellant agreed to the same. And even though such statement was made, it is not on record and consequently the fresh application cannot be supported. Accordingly, the appeal was dismissed.
Judgment link: https://nclat.nic.in/Useradmin/upload/1878525425602519062fe11.pdf
- Krishna Garg & Anr v. Pioneer Fabricators Pvt Ltd (DOJ: 12th February, 2021)
The Hon’ble Tribunal in the present case held that the Settlement Terms which were not incorporated in the order of the Adjudicating Authority cannot assume a character of a decree and any breach thereof would entitle the Corporate Debtor to come back and seek restoration or revival of the CIRP. It was further observed that Appellant being a Financial Creditor approached the Hon’ble NCLAT for revival of the CIRP on the grounds that Corporate Debtor did not adhere to the grounds of settlement and the cheques that were issued in this regard were subsequently dishonored.
Hon’ble Tribunal rejected the appeal being devoid of any merit. However, it also mentioned that remedy for the Appellant lie somewhere else and this dismissal will not preclude them from seeking such remedy.
Judgment Link: https://nclat.nic.in/Useradmin/upload/162148582560265274c5009.pdf