Operational Creditors Getting Zero Payouts, Hands Of Courts Are Tied, Observed NCLAT, Delhi

Recently the NCLAT, New Delhi in its judgement to the case of Rajat Metaal Polychem Pvt. Ltd. Vs. Mr. Neeraj Bhatia RP Vinayak Rathi Steels Rolling Mills Pvt. Ltd. and Anr. stated that during the Resolution Process, the operational creditors are denied any payment when the amount that is payable to them in the event of the Insolvency Process is nil. The courts are not able to assist them unless the legislation tends to come in aid of the operational creditors. In the following case, the...

Past Tax Claims Against Corporate Debtor Stands Extinguished Consequent To Approval Of Resolution Plan Under IBC: Bombay HC

Since upon the completion of Corporate Insolvency Resolution Process (CIRP), the Assessee has changed hands and commenced under a new ownership and management, the Bombay High Court held that tax proceedings pertain to period prior to the CIRP, and consequent to the approval of the resolution plan, the tax proceedings stand extinguished. The Division Bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan observed that “provisions outlined in Section 31(1) of the Insolvency...

NCLAT Declares Sale Agreement Not A Financial Debt, Dismisses Insolvency Petition

The NCLAT Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Member, Technical), and Arun Baroka (Member, Technical), has held that a sale consideration in the sale agreement did not constitute a “financial debt” under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC). Brief Facts: Gujarat State Financial Corporation (“GSFC”), Gujarat Industrial Investment Corporation (“GIIC”), Bank of Baroda, and Dena Bank provided term loans...

Filing Section 9 Applications For Money Recovery Instead Of Insolvency Resolution Is Abuse Of Process: NCLAT Principal Bench

The National Company Law Appellate Tribunal Principal Bench, New Delhi bench of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) has held that filing a Section 9 application for the sole purpose of recovering money, rather than resolving insolvency, constitutes an abuse of the IBC's provisions and is strongly disapproved. The bench held that: “We need to be mindful that no stakeholder takes any undue benefit of the provisions of...

Insolvency Proceedings Initiated Against A Personal Guarantor Under IBC Abate Upon The Death Of The Guarantor: NCLT, New Delhi

The National Company Law Tribunal (NCLT), New Delhi, Bench VI, comprising Shri Mahendra Khandelwal (Member, Judicial) and Shri Rahul Bhatnagar (Member, Technical), has held that insolvency proceedings initiated against a personal guarantor under the IBC abate upon the death of the guarantor and that legal representatives cannot be substituted in such cases. Brief Facts: M/s Apogee Enterprises Pvt. Ltd. (the Applicant) filed C.P. (I.B.) No. 514 of 2020 under Section 95 of the...

Invoices Deemed Bogus By Income Tax Department Cannot Justify Insolvency Proceedings Against Corporate Debtor: NCLAT Principal Bench

The National Company Law Appellate Tribunal Principal Bench, New Delhi of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) and Arun Baroka (Technical Member) has held that invoices deemed bogus by the Income Tax Department in assessment orders cannot be relied upon to initiate insolvency proceedings against a Corporate Debtor. Brief Facts: N.V. Aluminium Cast Pvt. Ltd. (Appellant), an Operational Creditor, filed an appeal against the order in the NCLAT passed by...

Power Of Recall Limited To Procedural Errors, Not Rehearing For Judgment Review: NCLAT Principal Bench

The National Company Law Appellate Tribunal Principal Bench, New Delhi of Justice Yogesh Khanna (Judicial Member) and Ajai Das Mehrotra (Technical Member) has held that the power of recall does not grant the NCLAT the authority to rehear a case in order to identify any apparent error in the judgment, as that falls within the scope of a review. The bench held that the power of recall can only be exercised when a procedural error has been made in delivering the original judgment. ...

Stakeholders Consultation Committee's Advice Not Binding On Liquidator: Supreme Court

Recently, the Supreme Court clarified that the advice offered by the Stakeholders Consultation Committee (SCC) constituted in liquidation proceedings is not binding on the Liquidator. In this case, the appellant claimed that the Liquidator failed to constitute an SCC before initiating a liquidation process. However, the respondent refuted this argument stating that constituting an SCC was not a requirement at that time because an Explanation appended to Regulation 31A was inserted in the...

IBC| Timeline To Pay Balance Sale Consideration By Auction Purchaser In Liquidation Proceedings Mandatory : Supreme Court

The Supreme Court recently interpreted Rule 12 of Schedule 1 under Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 as mandatory in character. Rule 12 relates to how assets of the Company (Corporate debtor) are to be sold by the Liquidator. Rule 12 reads: "On the close of the auction, the highest bidder shall be invited to provide balance sale consideration within ninety days of the date of such demand: Provided that payments made after...

IBC | 'Auction-Purchaser Entitled To Benefit Of COVID Limitation Extension' : Supreme Court Refuses To Cancel Sale Over Delayed Deposit

The Supreme Court recently refused to cancel an e-auction despite the Auction Purchaser making a glaring default in making a deposit of the balance sale consideration on grounds that the subject matter of the auction has been utilised and the appellant failed to approach the court on time.A bench of Justices Hima Kohli and Ahsanuddin Amanullah noted: "Much water has flown under the bridge by now. The subject land has been utilized by the Auction Purchaser to build a 200-bed Mother and Child...

Interest Claims Must Be Based On Contractual Agreement, Not Just Invoice Terms: NCLT Kolkata

The NCLT Kolkata Divison Bench, comprising Bidisha Banerjee, Member (Judicial) and D. Arvind, Member (Technical) has held that interest cannot be clubbed along with the debt in the absence of an agreement or clause in the purchase order. The Tribunal further observed that TDS deduction on the interest payable is not an acknowledgement of liability. Brief Facts: Sudarshan Paper & Board Private Limited, the Applicant (the Operational Creditor) filed a petition under Section 9 of ...

Section 12A Application Not Permitted During Liquidation Period: NCLAT Principal Bench

The National Company Law Appellate Tribunal Principal Bench, New Delhi of Justice Ashok Bhushan (Chairperson), Barun Mitra (Technicial Member) and Arun Baroka (Technicial Member) has held that an application under Section 12A of the IBC is not permitted during the liquidation period. Section 12A allows for the withdrawal of an insolvency application with the approval of ninety percent of the Committee of Creditors (CoC). The bench noted that Section 12A is designed to facilitate the...