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Articles & Newsletter

Landmark Judgement by the Hon’ble NCLAT 16th to 31st December, 2020

1.  Mohan Lal Jain, in the capacity of Liquidator of Kaliber Associates Pvt Ltd v. Lalit Modi & Ors (DOJ:16.12.2020)

The Liquidator approached the Adjudicating Authority to invoke Sections 43 and 66 of the Code, in regard to preferential transactions and fraudulent trading/ wrongful trading wherein the Adjudicating Authority referred the matter to Ministry of Corporate Affairs, with directions that explanation of the opposite party, if required, can be offered to the Investigating Agency.

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IBBI Asseverates its Disciplinary Stance on the Dutiful Profession of an Insolvency Professional

The Insolvency and Bankruptcy Board of India (IBBI) has time and again reiterated that the role of Insolvency Professional (‘IP’) is sacrosanct for achieving the legislative intent behind the Insolvency and Bankruptcy Code, 2016 (‘I&B Code’) itself. It has expressed vide its various circulars and orders that even a slight deviation from the scope of duties endowed upon the Insolvency Professional under the Code will attract strict penalization and disciplinary action from the Board.

The Board recapitulated its intent by pulling up the socks of all the working IPs through its recent order passed against an eminent IP, Mr. Vijay Kumar Garg. The order highlights how an IP’s role is of utmost vitality to any Corporate Insolvency Resolution Process (‘CIRP’) and his dutifulness the breath and soul of the Code. Key take-aways from the order have been discussed below.

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Reverse CIRP – An appraisal of the NCLAT’s Insolvency Voyage

Introduction

“The first requirement of a sound body of law is, that it should correspond with the actual feelings and demands of the community, whether right or wrong.” – Oliver Wendell Holmes Jr.

The concept of ‘Reverse Insolvency’ was alien to the Insolvency and Bankruptcy Code, 2016. It is a well acknowledged fact that the Code has undergone several amendments since its inception. One of the most prominent being, inclusion of homebuyers as financial creditors. But the corporate insolvency resolution process of Real Estate Company was not that uncomplicated. The process posed a major hurdle in terms of the rigorousness that could prejudice the rights of homebuyers.

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Supreme Court Ordered No NPA till further orders

About Moratorium granted by RBI

In the wake of the coronavirus pandemic, RBI had announced a moratorium on repayment of debt beginning March 1, 2020, to help tide over the financial problems for disruption in normal business activities till 31st May 2020 which was extended for till 31st August 2020.

As per the RBI circular, interest would continue to accrue on the outstanding portion of the term loans during the moratorium period. This means a borrower will have to bear the burden of additional interest if he/she chose to avail the benefit.

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Landmark Judgement by the Hon’ble NCLAT 1st to 15th December, 2020

Excise and Taxation Department Rewari, Haryana v. M/s Argl Ltd & Ors (DOJ 04.12.2020)

The NCLAT observed with disappointment that delay of 307 days, is sought to be condoned by the Appellant, on the ground of completion of inter departmental procedures, is absurd and the complacency on the part of those at the helm of affairs, cannot be a legal consideration warranting condonation of delay.  The Appeal was not filed within the prescribed period of 30 days or even within the extended period of 45 days.

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RP cannot wear the hat of ‘Former RP’ to pursue avoidance application: Delhi HC – By Adv Aniketa Prasad and Adv Aditya Gauri

In a judgment dated 26th November, 2020, a single judge bench of Justice Pratibha M Singh of Delhi High Court while adjudicating the matter between M/s Venus Recruiters Pvt. Ltd. v. Union of India (2020) ibclaw.in 41 HC, held that an avoidance application relating to preferential transaction under section 43 of Insolvency and Bankruptcy Code shall not survive beyond the conclusion of the insolvency resolution process.

The court observed that the continuation of the Resolution Professional for the purpose of prosecuting an avoidance application after the completion of insolvency resolution process (CIRP) is beyond the contemplation of the IBC.

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Insolvency Professional and the Challenges ahead! – By IP Umesh Goyal and Adv. Aditya Gauri

Insolvency Professional (IP) is an individual, enrolled with Insolvency Professional Agency (IPA) and registered with the Insolvency & Bankruptcy Board of India (IBBI or The Board). An IP is not a Public Servant (as per Section 232 of the IBC) and Section 233 of the Insolvency and Bankruptcy Code, 2016 (The Code or IBC) provides protection to the IP’s for the action taken in good faith.

Insolvency & Bankruptcy Code 2016 has facilitated in improving the index of ease of doing business in India.  The implementation of the IBC is being handled by the Government of India and the Insolvency and Bankruptcy Board of India (IBBI) in a very pragmatic manner by bringing necessary changes as necessitated with the implementation of the IBC, for achieving the intent and purpose of the Code.

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Withdrawal of CIRP Proceeding pursuant to Settlement under Insolvency and Bankruptcy Code, 2016 – By Advocate Shivam Jaiswal

Introduction

This is well proven that the ultimate aim of civil lawsuits is to resolve disputes, which are typically accomplished by the constructive intervention of the judiciary, and sometimes by parties reaching out to court settlement as allowed by statute.

Previously, in accordance with the Insolvency and Bankruptcy Code, 2016 (“IBC”), no provision was made for the withdrawal of an application filed before the NCLT except as provided for in Rule 8 of the Insolvency and Bankruptcy (Application to the NCLT) Rules of 2016, where the NCLT could permit the withdrawal of the application on a request made by the applicant prior to its admission. The report of the Insolvency Law Committee too recommended amendment of Rule 8 to allow withdrawal after the admission of CIRP. Subsequently, Section 12A was inserted via Amendment Ordinance of 6th June 2018 which gave the Adjudicating Authority power to allow withdrawal on application by CIRP applicant with 90% voting share approval of CoC in such manner as “prescribed”.

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Landmark Judgements by the Hon’ble NCLAT 15th to 30th November, 2020

1) State Bank of India v. Krishidhan Seeds Pvt Ltd (DOJ 17.11.2020)

The date of filing of the Application in the prescribed format to the Adjudicating Authority was nearly four years after the date on which the default occurred. The Appellant assails that the impugned order primarily on the ground that there was an Acknowledgment by the Corporate Debtor through revival letter extending the period of limitation which is said to have been overlooked by the Adjudicating Authority.  NCLAT held that there cannot be two defaults in respect of the same debt, one for the purpose of claim filed before the Debts Recovery Tribunal and the other for the purposes of I&B Code based on OTS proposal, more so when an is an application filed before the Adjudicating Authority in prescribed format and the date of default has unambiguously been reflected beyond three years of the occurrence of default. Such an application is hopelessly time-barred and shall not be permissible for Appellant. The petition was dismissed at the threshold.

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