- CRPL Infra Private Limited v. Shri Anil Agarwal, RP and Ors. (DOJ: 17.01.2022)
The Hon’ble NCLAT while dismissing the appeal held that if CoC has approved with 66% majority as provided under Section 12(2) of the Code and has decided not to extend the time to the Appellant herein on the ground that several extensions have already been given, the RP cannot take any contrary decision. The NCLAT while reiterating the judgements of the Supreme Court stated that the provisions investing jurisdiction and authority in the NCLT has not made the commercial decision exercised by the CoC of not approving the Resolution Plan or rejecting the same, justiciable.
- M/s Amsons Communication Pvt Ltd. v. M/s ATS Estates Pvt. Ltd. (DOJ: 17.01.2022)
The Hon’ble NCLAT upholding the order of the NCLT reiterated that the provisions of Code cannot be allowed as a recovery mechanism or to recover the claim of interest by Operational Creditor. An Application under Section 9 of Code cannot be converted into proceedings for recovery of interest by Operational Creditor on delayed payment, as it is not the object of Code. The object of the Code is to resolve the insolvency of the Corporate Debtor and to bring back the Corporate Debtor on its feet. The Court reiterated the case of SS Ploymers v. Knodia Technoplast Limited to hold that an application for realisation of interest amount under Section 9 is against the principle of the Code, as it should be treated to be an application pursued with malicious intent (to realise only Interest) for any purpose other than for the Resolution of Insolvency, or Liquidation of the ‘Corporate Debtor’, same being barred in view of Section 65 of the Code.
- Indiabulls Housing Finance Limited v. Sandeep Chandna and Ors. (DOJ: 18.01.2022)
In facts of present case, IRP convened a CoC meeting to discuss filing of an exclusion Application and put it to vote. The resolution failed as only 19.81% voted in favour. Despite the same, the IRP filed an application for exclusion of 87 days (covid lockdown) from 180 days period, without intimating the same to the CoC. NCLT allowed the same. In Appeal, the Appellant (a member of CoC having 42% voting) contested the mandatory requirement of Section 12(2) and requested to seek replacement of IRP/RP.
The Hon’ble NCLAT observed that Section 12(2) provides extension of time with approval of 66% CoC voting and Regulation 40C of the CIRP Regulations speaks about exclusion of time. NCLT had exercised its Discretionary Powers under Rule 11 of the NCLT Rules, 2016 allowed exclusion based on the fact that had this period not been excluded, the Company would have gone into Liquidation. Thus, the Hon’ble Tribunal held that Corporate Death of a company should be last resort as observed by Hon’ble Supreme Court in catena of judgments. Moreover, keeping in mind the unforeseen pandemic and conjoint reading of Section 12 with Regulation 40C, the NCLT has rightly excluded the period of 87 days from the CIRP period, same being in the spirit of the Code. The Hon’ble Tribunal further held that IRP is appointed as per Section 22 and replaced under Section 27. Therefore, there is no provision under the Code empowering only one of the Members of the CoC to approach this Tribunal seeking replacement of the IRP or RP when the same is rejected by a majority of Members of the CoC.
- BDR Builders and Developers Pvt. Ltd. v. Mohan Lal Jain, Liquidator and Ors. (DOJ: 18.01.2022)
In present case, the Appellants pleaded for replacement of Liquidator as he failed to consult and take advice of SCC members relating to the sale of the Corporate Debtor assets and failed to carry liquidation process in a fair and transparent manner. The Hon’ble NCLAT held that Regulations 47 and 44 of the Liquidation Regulations, provides that if liquidation of the Corporate Debtor is to be done as a going concern, an additional 90 days is allowed beyond one year for completion of liquidation process. In the present case, from third SCC meeting it was decided that the Corporate Debtor is not to be sold as a going concern hence, time limit of 365 days for completion of liquidation be counted from the date of 3rd meeting. Further, the Hon’ble Tribunal after relying on the facts of the case observed that the Appellants have been not able to convincingly advance their arguments for replacement of the liquidator as no material irregularities have been found in the functioning of the liquidator, as the liquidator sought and obtained approval of the SCC for selling the Corporate Debtor as a going concern in the 1st SCC meeting and recorded provisions for sale of assets in SCC minutes but the same was not done in a specific manner. Thus, the Hon’ble Tribunal strongly recommended that the liquidation of the Corporate Debtor should be done as quickly as possible to ensure that the assets of the Corporate Debtor do not undergo deterioration resulting in loss of their value and liquidation costs should be restricted to the payment of actual costs incurred in liquidation process.
- K. Dhir v. Punjab National Bank and Ors. (DOJ: 18.01.2022)
The Hon’ble NCLAT upholding the order of NCLT held that the date of the default can be considered as recorded in the certificate of Information Utility services instead of date of NPA. It stated that it is a settled law that default is committed first and second stage comes as NPA, if it is not regularized in between the period of default and within 90 days thereafter. As per Section 3(11), 3(12), 5(7), 5(8) and 7 of the Code, it is very clear that Code is a complete Act in itself. Thus, Section 7 of Code requires that a Financial Creditor by filing an application in the requisite format can initiate CIRP against the Corporate Debtor when a Debt is due and payable in law and a default has occurred. The NCLT is to initiate CIRP if, it finds default recorded in the Information Utility or evidence of default. Hence, the criteria for initiation of the CIRP under the Code is limited to three things (i) there is a debt due and payable in law and has not been paid (ii) default has occurred (iii) default is recorded with the Information Utility.
- Government of India Vs. Ashish Chhawchharia, RP (DOJ: 18.01.2022)
The present Appeal was filed by the Appellant (Government of India) being aggrieved by the order of NCLT whereby the NCLT approving the Resolution Plan reduced the allocation of the claim of the Appellant to the extent of Rs.1,75,46,497/-. The Hon’ble NCLAT held that the Appellant falls under the category of Operational Creditor as the statutory dues payable to the Central Government is covered under Operational Debt as defined in Section 5(21) of the Code. Further, the Hon’ble Tribunal relying on the judgment of Principal Director General of Income Tax v M/s. Synergies Dooray Automotive Ltd. and Ors. held that there is no special treatment or category under the Code, made separately for statutory dues. The Appellant contended that the Resolution Plan cannot extinguish statutory dues without seeking approval of the concerned Revenue Authority as it does not arise out of a mutual agreement or contract and are in the nature of statutory dues. The Hon’ble Tribunal observed that the payments are to be made in terms of approved Resolution Plan by the Resolution Applicant, of the claims admitted by the Resolution Professional. Once the Resolution Applicant takes over the Corporate Debtor on a fresh slate the claims of all creditors get settled and extinguished by operation of the Code. Section 238 of the Code has overriding effect of other laws. Therefore, the stand of the Appellant that the statutory dues cannot be extinguished has no legs to stand. The plan submitted by the SRA was approved as per Section 31(1) of the Code and NCLT clearly stated that the same shall be binding on the Corporate Debtor, its employees, members, creditors, including the Central Government, State Governments, Local Authority, Guarantors and other Stakeholders. The Appellant was paid to the extent of 36.30% of the amount claimed and the R Plan has dealt with the interest of all the stakeholders of the Corporate Debtor including Financial Creditors and Operational Creditors in compliance with Regulation 38(1)(A) of the CIRP Regulations. Thus, there is no infirmity in the order passed by the NCLT. Accordingly, the Appeal was dismissed.
- Varrsana Ispat Ltd. v. Varrsana Employee Welfare Association (DOJ: 19.01.2022)
In facts of present case, the NCLT allowed distribution of funds by the liquidator amongst Stakeholders including the claims of the employees in accordance with Section 53 of the Code. However, upon a review petition filed by the Respondent herein, the NCLT virtually reversed its decision by asking the Liquidator that the Stakeholders/Financial Creditor who are in receipt of the funds shall keep the amounts in an interest-bearing account of the Corporate Debtor and returnable if need arises for operating the Corporate Debtor. The NCLT also directed the Liquidator to pay the portion of salary deducted from the salary of the employees with applicable bank interest. However, in Appeal the Hon’ble NCLAT relying on various provisions of the Code and Liquidation regulations held that recovery from the Debtors also form part of liquidation estate and the liquidator complied with Regulation 43 of the IBBI Regulations by taking appropriate undertaking from the concerned Nationalized Public Sector Banks. Further, NCLT has only power to rectify any mistake apparent from the record in accordance with Section 420 of the Companies Act, 2013 R/w Rule 154 of NCLT Rules, 2016. Thus, basis the provisions of law and facts on record, the Hon’ble Tribunal partially allowed the Appeal and held the distribution made by the liquidator was in accordance to the provisions of Code and Regulations.
- Association of aggrieved Workmen of Jet Airways (India) Ltd. Vs. Jet Airways (India) Ltd. (DOJ: 20.01.2022)
In present case the Hon’ble NCLAT held that a Resolution Plan after its approval by the NCLT is no more a confidential document and be disclosed to a claimant, but the same cannot be made available to each and to anyone who has no genuine claim or interest in the process. Thus, on various grounds the access to Resolution Plan even if it is not a confidential document, after approval can be denied in proper and appropriate cases. Therefore, Hon’ble Tribunal in present case, allowed the Appellant to entitled only for the relevant part of the Resolution Plan relating to the claim of the workmen and employees.
- State Bank of India, Stressed Asset Branch vs. Mahendra Kumar Jajodia, Personal Guarantor to Corporate Debtor (DOJ: 27.01.2022)
In facts of present case, SBI, the Financial Creditor of the Corporate Debtor filed Appeal against the order of the NCLT which refused to admit an application for initiation of CIRP against the Respondent / Personal Guarantor under Section 95(1) of the Code, being premature and non-compliance to provisions to Section 60(2) of the Code. The Hon’ble NCLAT held that initiation of CIRP is not a pre-requisite to initiate Insolvency Resolution Process against the Personal Guarantor of the Corporate Debtor. The Hon’ble Tribunal analysed the provisions of Section 60 of the Code and observed that Section 60 (1) provides that AA for the corporate persons including corporate debtors and personal guarantors shall be the NCLT and Section 60(2) requires that where a CIRP or Liquidation Process of the Corporate Debtor is pending before ‘a’ NCLT the application relating to CIRP of the Corporate Guarantor or Personal Guarantor as the case may be of such Corporate Debtor shall be filed before ‘such’ NCLT. The purpose and object of the Section 60 (2) is that both proceedings be entertained by one and the same NCLT and avoid two different NCLT to take up CIRP of Corporate Guarantor. Thus, Section 60(2) in no any way prohibit filing of proceedings under Section 95 of the Code even if no proceeding are pending before NCLT as Section 60(2) is applicable only when CIRP or Liquidation Proceeding of a Corporate Debtor is pending, when CIRP or Liquidation Proceeding are not pending with regard to the Corporate Debtor there is no applicability of Section 60(2). Accordingly, the Appeal was allowed.