Landmark Judgments by the Hon’ble NCLAT 16th to 31st March, 2021
- Kishanlal Likhmichand Bothra vs. Canara Bank (DOJ: 24-03-2021)
Hon’ble NCLAT in the instant matter held that Section 18 of the Limitation Act is applicable to proceedings under Insolvency & Bankruptcy Code and if there is acknowledgment of debt in the Balance-Sheets or the OTS Proposal, the period of limitation would get extended if such acknowledgment is made before the period of limitation expires. With regard to limitation, the Tribunal took reference of a recent Judgment delivered by the Apex Court in Sesh Nath Singh & Anr. v. Baidyabati Sheoraphuli Co-operative Bank Ltd. & Anr. and a couple of other judgments wherein the Hon’ble Supreme Court considered entries in Books of Accounts/Balance Sheets and observed that entries in such records may amount to Acknowledgment of debt.
Accordingly, no error by the Adjudicating Authority was established on the conclusion that the debt was not time-barred and the application was admitted. The appeal was dismissed.
Judgment link: https://nclat.nic.in/Useradmin/upload/1161117804605c755a19a19.pdf
- Ram Ratan Kanoongo, Resolution Professional of Sirpur Paper Mills Ltd vs. Veda Kumar Nimbagal (DOJ: 17-03-2021 )
The issue dealt by the Hon’ble NCLAT in the current matter was whether the Adjudicating Authority can issue the directions to erstwhile Resolution Professional once the Resolution Plan under Section 31 of the Code has been approved, and the Resolution Professional has been discharged of his duties. It was observed by the Tribunal that any claim for the CIRP period can be raised only before the approval of the Resolution Plan. After a Resolution Plan has been approved and implemented, no direction can be issued to the erstwhile Resolution Professional on account of any belated and settled claim.
It was further held that a successful Resolution Applicant cannot be burdened with the claim/dues of the Corporate Debtor and that the Adjudicating Authority has erred in issuing directions to the erstwhile Resolution Professionals to make payment of salary to the Appellant. Accordingly, the impugned Order was set aside and the Appeal was allowed.
Judgment link: https://nclat.nic.in/Useradmin/upload/11089552856051da82c023b.pdf
- M/s Albanna Engineering LLC vs. M/s Sanghvi Movers Ltd & Ors. (DOJ: 17-03-2021)
Hon’ble NCLAT in the present matter held that Sub-Contractor cannot be a party in a matter between Corporate Debtor and Contractor. While observing the same, it further held that the impugned order cannot be sustained in the eyes of law as the appellant was not made party to the impugned order passed by the Adjudicating Authority.
The tender of the Appellant, a Foreign Company incorporated overseas was accepted post which it appointed its subsidiary for the execution of work as sub-contractor under an agreement. Consequently, the appellant furnished two bank guarantees and submitted final pro-forma invoices in respect of the work completed by it. However, subsidiary of the Appellant Company went under CIRP and application was filed to invoke both the performance Bank Guarantees and sought for the amounts to be kept under the control of the Resolution Professional. The Appellant was not arrayed behind and the impugned order cannot be sustained in the eye of law and natural justice has been violated. The impugned order dated 20.04.2020 was set aside and the matter was remitted to the AA to hear the matter afresh and dispose of. Accordingly, the appeal was disposed of.
Judgment link: https://nclat.nic.in/Useradmin/upload/4593551946051f241c9fe6.pdf
- Gyanchand Mutha vs. M/s. Aditya Birla Money Limited (DOJ: 18-03-2021)
Hon’ble NCLAT held in this case that when it comes to invoking provisions under section 9 of Insolvency & Bankruptcy Code, if the law has protected the Financial Service Provider, IBC could not have been invoked against them.
Referring to judgments under Randhiraj Thakur vs. Jindal Saxena Financial Services Pvt Ltd & Anr and Saumil A. Bhavnagri vs. Nimit Builders Pvt Ltd and Anr, it has earlier been reiterated by this Tribunal that considering the position of law where it appears that the Corporate Debtor did not fall in the concerned definition of Corporate Person under Section 3(7) of IBC, Adjudicating Authority could not have initiated CIRP against it. Under Section 3(8) “Corporate Debtor” means a corporate person who owes a debt to any person and in the instant matter the Application could not have been admitted as a way of punishment for concealing particular facts in KYC. However, the conduct of the Corporate Debtor may attract any other action that the Operational Creditor may decide. Consequently, the appeal was disposed of.
Judgment link: https://nclat.nic.in/Useradmin/upload/16731405496058705db4d5f.pdf
- Kuldeep Verma, Resolution Professional K. S. Oils Ltd. vs. State Bank of India (DOJ: 16-03-2021)
In the instant case, even after the lapse of 981 days and repeated compliance by the Resolution Professional of the direction of the Adjudicating Authority; the Adjudicating Authority has not yet considered initiation of Liquidation as per Section 33 of the Code.
Hon’ble NCLAT held that the Insolvency & Bankruptcy Code came into force with the basic objective of Resolution in a time bound manner. But, as is prima facie visible in the instant matter, if the Adjudicating Authority takes such a considerable amount of time, it will defeat the very purpose of the Code. It further observed that although reorganization and Insolvency Resolution is the prime purpose of the Act but with a rider in a time bound manner as well as maximization of the value of assets of such Corporate Debtor.
The Tribunal while appreciating that the year 2020 has faced unprecedented global pandemic Covid-19 that has acted as a bottleneck to the Adjudicating Authority; it may avoid repeated reference of Resolution Applicant for the consideration of CoC when CoC was repeatedly rejecting their variants of proposals. In the Appeal filed by State Bank of India challenging the order dated 06.09.2019 by the Adjudicating Authority, the NCLAT has passed orders on 18.11.2019 that the CoC is allowed to consider the revised Resolution Plan within 2 weeks and in case the ‘proposed resolution plan’ is not filed within a week, the Adjudicating Authority will take up the application under Section 33 of the IBC and pass appropriate orders in accordance with the law.
The NCLAT held that the AA has failed to implement the order of the Appellate Tribunal dated 18.11.2019, it is settled law that whatever power vests in the Adjudicating Authority is always available to Appellate Authority. The order dated 01.01.2021 passed by the AA was set aside and at the same time, the order of initiation for liquidation of the CD M/s. K. S. Oils Ltd was allowed.
Judgment link: https://nclat.nic.in/Useradmin/upload/71342984060508604bf6e2.pdf