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Landmark Judgements by the Hon’ble NCLAT 16th to 31st January, 2021

  1. Ravindra Chaturvedi Liquidator of Excel Glasses Ltd v. Kopran Ltd (DOJ: 25-01-2021)

In the instant case, the NCLAT held that the observation and remarks made by the adjudicating authority with respect to the conduct of the liquidator are unwarranted and brook interference. Any observation with respect to the issue of non-maintainability of the application or any legal merits of the case is rightful on the part of the Adjudicating Authority but remarks regarding conduct of proceedings by the Liquidator can have serious consequences that can brand him for life with a scar affecting his reputation. The case can be frivolous or vexatious or could lack merits but that does not justify the conclusion that liquidator was either the instigator or the collaborator with respect to any omission or commission of any offence. Accordingly, the NCLAT allowed the appeal and directed expunging first four lines of para 24 of the impugned order containing the words ‘collusion by the Liquidator with the applicant’

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  1. Silvassa Cement Products Pvt Ltd v. Noor India Buildcon Pvt Ltd (DOJ: 22-01-2021)

Hon’ble NCLAT has held that if there was any shortcoming in regard to filing of Vakalatnama or making endorsement in regard to date in the prescribed format, Appellant could be provided an opportunity in terms of mandate of proviso under Section 9(5) of the Insolvency and Bankruptcy Code. It further said that incompleteness is distinct from non-maintainability and the latter has broader interpretations. The Adjudicating Authority is required to pass an order of admission or rejection of the application upon being satisfied about the completion of the application and proof of debt and default under section 9(5). But, the NCLT in the instant matter has failed to provide opportunity to rectify the defects and bring it in conformity with the law. Accordingly, the Appellate Authority set aside the impugned order and remits the matter back to the Adjudicating Authority to allow the applicant the opportunity to rectify the defect, if any, in the application and thereafter pass order of admission or rejection as it thinks fit.  The NCLAT set aside the impugned order and remitted the matter back to the Adjudicating Authority to allow the Appellant/ Applicant opportunity to rectifying the defect, if any, in the application and thereafter pass order of admission or rejection in regard to initiation of Corporate Insolvency Resolution Process on merit.

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  1. Pondicherry Extraction Industries Pvt Ltd v. Bank of Baroda (DOJ: 20-01-2021)

The question before the Hon’ble NCLAT, in the instant matter is, whether Rule 7 of the Adjudicating Authority Rules empowers the Adjudicating Authority to examine the documents filed with the application under section 10 of Code.  The Appellate Authority held that the moment the Adjudicating Authority is satisfied that there is a debt and a default has occurred, the application must be admitted unless it is incomplete. Section 10 of the I&B Code does not empower the Adjudicating Authority to go beyond the record as prescribed under section 10 and the information as required to be submitted in Form 6 of Adjudicating Authority Rules. The NCLT assumed that Rule 7 empowers it to ascertain whether the documents annexed with the application under section 10 of the Code are in order and accordingly held that the application filed by the corporate applicant is surrounded with doubts and thereby rejected the application. NCLAT held that Rule 7 only provides the procedure for filing the application under Section 10 of Code and does not empower the Adjudicating Authority to examine the financial statements. The Appeal was allowed, the impugned order was set aside and the case remitted back to the Adjudicating Authority, to admit the application under Section 10 after notice to the parties if there is no defect.  In case of any defect, appellant may be allowed time to remove the defects.

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  1. Supertech Township Project Ltd v. Inderpal Singh Khandpur HUF (DOJ: 18-01-2021)

In this case, the Hon’ble NCLAT held that no legal right vested in the Appellant/Corporate Debtor can be said to have been infringed by the impugned order by the Adjudicating Authority, directing him to provide information about 100 allottees or 1/10th of the total number of the allottees, whichever is less, excluding those with whom the settlement has happened.  The order of Hon’ble Apex Court cannot be interpreted to hold that the requisite information for initiating class action by an allottee under Section 7 of the I&B Code to meet the threshold criteria laid down under the ordinance cannot be provided, more so when the Corporate Debtor and the Regulator are under legal obligation to display the particulars in regard to allottees on their websites. No prejudice can be claimed by the Appellant on account of the direction in so far as the same relates to providing information in regard to allottee for limited purpose of enabling it to garner necessary support for initiating class action.

The Appeal was disposed of with the direction that the Corporate Debtor will display the information in regard to the allottees with full particulars on its website within two weeks and that in the event Respondent-Allottee approached the Appellant for providing necessary information, same shall be provided to the Allottee by the Appellant.

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  1. MCC Concrete v. Northway Spaces Ltd (DOJ: 22-01-2021)

In the instant case, the Hon’ble NCLAT held that period of limitation start from the last date of payment which is also shown in ledger account. The Appellant OC supplied material at various sites of the Corporate Debtor upon its purchase order. Accordingly, the OC issued invoices and delivery challans to the CD on various occasions of delivery. The CD made part payment of the supplied goods and the rest of the amount was remaining for payment. After several reminders, the CD sent a demand notice seeking its payment. Since no reply on the same was received, the OC filed an application under section 9 of I&B Code before the Adjudicating Authority for initiation of CIRP that was challenged on limitation. NCLAT held that the ledger account is a running account and the date of last payment will be considered as the date of acknowledgment within three years of which the application must be filed as is done in the instant case. Accordingly, the appeal is allowed.

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  1. Shubham Jain v. Gagan Ferrotech Ltd & Anr (DOJ: 29-01-2021)

The main issue of consideration under the appeal of the present case was whether service of demand notice under section 8 of the I&B Code on a Director of the Corporate Debtor can be construed as deemed delivery or not for initiation of corporate insolvency resolution process under section 9 of the Code. Hon’ble NCLAT held that an attempt was made to deliver the Demand Notice to the respondent at its registered address but it remained unserved as the ‘addressee moved’. Later, on the very same date, an attempt to serve at another address of the respondent was made but it remained ‘unclaimed’. Such a demand notice demanding payment in respect unpaid operational creditor debt under section 8 of the Code was deemed to be duly served on the respondent as evident from the service affidavit containing receipt of speed post and the tracking report. Despite the same, the CD has failed to pay the amount and has neither replied to the demand notice.

NCLAT further observed that the legislative intent of issuance of Demand Notice under Section 8(1) is not a mere formality but a mandatory provision. Only after service of notice under Section 8(1) and on completion of 10 days, if payment towards the demand is not made, an Operational Creditor gets right to apply under Section 9 and not before such date. The mandate under section 8 of the Code was fuflfilled and the Adjudicating Authority has rightly admitted the application by the Operational Creditor for initiating CIRP against the Corporate Debtor. Accordingly, the appeal was dismissed for the lack of merit.

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  1. Saboo Tor Pvt Ltd v. Mr. Sanjay Gupta, Liquidator Case Cold Roll Forming Ltd (DOJ: 18-01-2021)

The appeal in the present matter is regarding the issue of forfeiture of Earnest Money Deposit from the E-Auction Applicant/Bidder. The Appellant participated in the E-Auction and deposited 10% of the EMD amount. He was declared as a successful bidder and was issued a Letter of Intent by the Liquidator under which he was required to pay 25 % of the total consideration by a certain date. The appellant sought extension of time for the payment which was granted to him by the Liquidator. Multiple reminders were issued by the Liquidator requesting payment of the balance amount of the 25% of the consideration but the appellant neither replied to the reminder mails nor did he make the payments adhering to the terms and conditions. As a result, the appellant made several requests but the respondent liquidator forfeited the entire money deposit.

Hon’ble NCLAT held that it can be safely construed that the Appellant, by his own conduct, precluded the coming into existence of the concluded ‘Sale’ and cannot now be given an advantage or benefit of his own wrong doing by not allowing forfeiture.

It was further observed that the documentary evidence, the reminder e-mails clearly establish that sufficient opportunity was given to the Appellant to make the balance payments, which he failed to respond or comply with the requests made and therefore Clause 3 of the “Forfeiture of Earnest Money Deposit” from the E-Auction terms and conditions, squarely applies to the facts of this case. Accordingly, the appeal was dismissed.

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