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Landmark Judgments by the Hon’ble NCLAT 1st May to 15th May, 2022

  1. Engineering Projects (India) Ltd. Vs. Mr. Ram Ratan Kanoongo, RP of D. Thakker Construction Pvt. Ltd. (06.05.2022)

In present case, the Resolution Professional preferred an Application before the Hon’ble NCLT under Section 14(1) of the Code, inter alia seeking directions to M/s. Engineering Projects (India) Limited to refund the money equivalent to the Bank Guarantees invoked by them. The issue that arose consideration was whether a Performance Bank Guarantee and/or mobilization Advance Bank Guarantee can be invoked or encashed after imposition of under Section 14 of the Code. The Hon’ble Appellate Tribunal held that keeping in view Section 14(3)(b) read with Section 3(31) of the Code, a Security Interest does not include Performance Bank Guarantee. Therefore, the same is not covered under Section 14(1) and the Appellant is entitled to invoke its Performance Bank Guarantee in full. Thus, the Hon’ble NCLT ought not to have allowed the refund of the amounts covered under those two Bank Guarantees. Accordingly, the Appeal was allowed, setting aside the order of Hon’ble NCLT.


  1. Davinder Kumar Singhal Director (Powers Suspended) of M/s Medinnbelle Herbalcare Pvt. Ltd. Vs. Mr. Sanjay Kumar Chetwani (DOJ: 09.05.2022)

In facts of present case, the Hon’ble NCLT dismissed an application challenging the order passed by the PMLA Court. In Appeal, the Hon’ble NCLAT relying on its earlier judgment in the matter of Kiran Shah, RP of KSL and Industries Ltd. Vs. Enforcement Directorate, reiterated that the Hon’ble NCLT is not empowered to deal with the matters falling under PMLA. Moreover, the Hon’ble NCLAT observed that the Kiran Shah’s Judgment relied on earlier judgment of this Tribunal in the matter of Varrsana Ispat Limited Vs. Deputy Director of Enforcement, which stands approved by the Hon’ble Supreme Court also. Hence, the NCLT did not commit any error in rejecting the Application filed by RP challenging the order passed by the PMLA Court.


  1. Kishore K. Lonkar Vs. Hindustan Antibiotics Ltd. (DOJ: 11.05.2022)

In facts of instant case, the Petitioner worked as an employee in Corporate Debtor and attained superannuation but the corporate debtor failed to pay Gratuity, EL Encashment and LTC. The Hon’ble NCLT dismissed Section 9 application thereby holding that the amounts due towards gratuity, leave encashment, and LTC on account of superannuation will not qualify under the definition Operational Debt. The above amount is due towards salary for the service rendered by him to the corporate debtor while he was in service and the object of code is not recovery and but only resolution. The Hon’ble NCLAT held that Section 5(21) of Code, includes any ‘Claim’ in respect of the provision of Goods and Services including employment. However, the service benefits accrue on account of service rendered during the period of employment, the scope and objective of the Code is not just for recovery of dues but Resolution of the Companies meant for ‘maximisation of the value of assets’, to promote entrepreneurship, availability of credit and balance all interest of the stakeholders. The Claims of the workmen/ employees may be classified as ‘service claims’ which arise during the terms of employment, in lieu of service rendered by the employee, salary, wages, bonus, dues etc., and ‘welfare claims’ which arise after cessation of employment, like ‘Gratuity’, ‘Leave Encashment’, Superannuation Dues, Workmen Compensation for closure of the entity which all depend on the tenure of the employment. Subsequent to the Company going into the Insolvency, all such claims may be submitted in Form D under Regulation 9 of the CIRP Regulations, 2016. But seeking to initiate CIRP on the ground that ‘LTC’ and ‘EL Encashment’ has not been paid, which fall within the ambit of service benefits/welfare benefits cannot be said to be the intent and objective of the Code.


  1. Potens Transmissions & Power Pvt. Ltd Vs. Gian Chand Narang (DOJ: 12.05.2022)

In facts of present case, the Appellant being the H1 Auction Purchaser was asked by the Appellant to deposit the sale consideration. The term sheet was executed between the parties for sale of Corporate Debtor as a going concern and a date was fixed as timeline for payment of balance amount. However, on non-payment by the Appellant after expiry of 90 days the Liquidator filed an Application before Hon’ble NCLT for cancellation of sale in favour of the Auction Purchaser, in view of his failure to make payment in terms of 2nd proviso to Clause 1(12) under Schedule I of the Liquidation Process Regulations, 2016. The Hon’ble NCLT allowed the application. The Hon’ble NCLAT upholding the decision of the Hon’ble NCLT observed that as per the regulation, it is clear that 90 days’ period is the maximum period provided for making the deposit by the Auction Purchaser. The 2nd  Proviso of the Item 12 of the Schedule I provides that sale shall be cancelled if the payment is not received within 90 days. When the Consequence of non-compliance of the provision is provided in the statute itself, the provision is necessary to be held to be mandatory. Further, item 12 provides that payment is to be made within 90 days and with interest after 30 days at the rate of 12 percent. Non-compliance of 2nd Proviso, sale shall be cancelled if the payment is not received within 90 days.


  1. Rosoboron Services (India) Ltd. (DOJ: 12.05.2022)

The Hon’ble NCLAT in instant case while dismissing the application filed under Section 10 of the Code observed that in case the Company has no assets, both tangible and intangible the Petitioner shall go for voluntary liquidation of the company and no purpose shall be served in insolvency resolution.


  1. Ayan Mallick vs. Pratim Bayal, Liquidator & Ors. (DOJ: 13.05.2022)

In facts of present case a joint auction under IBC and SARFAESI was carried as part of the land on which factory was built was owned by guarantors and without contiguous land sale, the liquidator was unable to sell building. The guarantors challenged the joint auction notice before the Hon’ble NCLT and prayed for stay. The Hon’ble NCLT rejected the prayer of the Guarantors.. The Hon’ble Appellate Tribunal upholding the order of the NCLT observed that a joint sale shall bring maximization of assets of the Corporate Debtor and the possession of the properties of the Guarantors have already been taken under SARFAESI. Both land and factory need to be sold together to maximize the value of the assets and thus, there is no substance to the fact that how the Appellant shall be prejudiced in any manner. Accordingly, the appeal was dismissed.