Director's Resignation Did Not Discharge His Liability Under Deed Of Guarantee In Technofab Case: NCLAT

The National Company Law Appellate Tribunal (NCLAT) in Delhi has upheld the initiation of personal insolvency proceedings against a former director of Technofab Engineering Limited, holding that under the terms of the deed of guarantee executed in the case, his resignation from the company did not discharge him from liability. The tribunal also held that the subsequent renewal of State Bank of India's credit facilities did not amount to a variation. A bench of Judicial Member Justice N....

NCLT Kochi Rejects Insolvency Plea Against BPL, Finds It Was Attempt To Recover Arbitral Award Dues

The National Company Law Tribunal (NCLT) at Kochi has recently dismissed an insolvency plea against consumer electronics company BPL Limited. It held that the Insolvency and Bankruptcy Code (IBC) cannot be invoked as an additional or parallel mechanism to recover the balance amount under an arbitral award after a creditor has already pursued execution proceedings. The tribunal observed, "the present proceedings are essentially an attempt to recover the balance amount claimed under the Award...

Cooperative Society's Statutory Charge Survives Liquidation, Enforceable Against Auction Purchaser: NCLT Mumbai

The Mumbai Bench of the National Company Law Tribunal (NCLT) has held that a cooperative society can enforce its statutory first charge over a property against an auction purchaser even after participating in the liquidation process by filing its claim before the liquidator. A bench of Judicial Member Ashish Kalia and Technical Member Charanjeet Singh Gulati observed that participation in the liquidation process does not extinguish the statutory charge created under the Maharashtra Co-operative...

NCLT Mumbai Rejects 4B Networks Resolution Plan Over Clause Giving SRA Exclusive Rights To PUFE Recoveries

The Mumbai Bench of the National Company Law Tribunal has rejected the resolution plan submitted by Armaan Sunil Kothari for 4B Networks Pvt Ltd. It held that the plan wrongly allowed the successful resolution applicant (SRA) to exclusively retain recoveries from pending Preferential, Undervalued, Fraudulent and Extortionate (PUFE) proceedings, including one seeking recovery of about ₹7,349 crore. The tribunal granted liberty to the resolution professional (RP) and the committee of creditors...

Expeditious Resolution Under IBC Cannot Override Natural Justice: NCLAT

The National Company Law Appellate Tribunal (NCLAT) in Delhi has held that the objective of speedy insolvency resolution under the Insolvency and Bankruptcy Code cannot come at the cost of fairness, setting aside an order that had closed a corporate debtor's right to file its reply in a pending insolvency case.A bench of Judicial Member Justice N. Seshasayee and Technical Member Indevar Pandey observed: “The objective of the Code is undoubtedly expeditious resolution. However, such expeditious...

Separate Legal Personality Can't Shield Related Party From Disclosing Information on Corporate Debtor: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has held that a related party cannot rely on its separate legal personality to refuse disclosure of financial information sought by a Resolution Professional where the information has a direct nexus with the corporate debtor's transactions and arrangements. A coram of Judicial Member Justice N. Seshasayee and Technical Members Indevar Pandey and Arun Baroka observed,“Separate legal personality cannot become a shield against disclosure,...

Statutory Authorities Not Exempt From CIRP Timelines: NCLT Mumbai Rejects EPFO's Delayed Claim

The Mumbai Bench of the National Company Law Tribunal refused to condone a 400-day delay by the Employees' Provident Fund Organisation (EPFO) in filing its claim in the corporate insolvency resolution process (CIRP) of Sovika Aviation Services Pvt Ltd. The tribunal held that the statutory authority had failed to provide any convincing explanation for the delay. It observed that permitting the claim after the Committee of Creditors (CoC) had approved the resolution plan would unsettle the...

'Shylockian System' Of Lending Cannot Be Permitted To Misuse IBC For Debt Recovery: NCLT Kochi

The National Company Law Tribunal (NCLT) at Kochi has refused to admit an insolvency plea against NCS Autocars Private Limited, holding that a "shylockian system" of lending involving advance deduction of interest cannot be permitted to misuse the Insolvency and Bankruptcy Code (IBC). The tribunal found that the proceedings bore the characteristics of a debt recovery action rather than a bona fide insolvency proceeding. A coram of Judicial Member Vinay Goel and Technical Member Ravichandran...

'Endless Indulgence' Under Guise Of Resolution Defeats IBC's Purpose: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at Delhi has observed that the Insolvency and Bankruptcy Code (IBC) is intended to maximise value through a time-bound resolution process and cannot permit indefinite delays in implementing an approved resolution plan. Applying that principle, it upheld the liquidation of Ushdev International Limited after its approved resolution plan remained unimplemented for more than three years. A bench of Judicial Member Justice N. Seshasayee and...

IBC Claim Requires Crystallised Right To "Payment," Not Mere Right To "Performance": NCLT Kolkata

The Kolkata Bench of the National Company Law Tribunal (NCLT) on 3 July held that a contractual right to performance cannot be treated as a “right to payment” under Section 3(6) of the Insolvency and Bankruptcy Code, 2016, unless the claim has crystallised into a payable amount. Technical Member Rekha Kantilal Shah and Judicial Member Bidisha Banerjee dismissed the appeal filed by NPGC Ltd against the liquidator's rejection of its Rs. 71.33 crore claim against D.C. Industrial Plant Services Pvt...

Order Passed On Mistaken Facts Cannot Be Basis For Contempt: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has dismissed a contempt petition against a liquidator after holding that an order passed under a mistaken impression of facts cannot be enforced through contempt proceedings. A bench of Judicial Member Justice N. Seshasayee and Technical Member Indevar Pandey observed, “The Order passed on a mistaken impression about the existence of a fact, therefore, can neither be understood as a direction to restore a certain status quo ante, nor can it...

COVID Extension Does Not Waive Interest On Delayed Liquidation Payments: NCLT Mumbai

On 6 July, the Mumbai Bench of the National Company Law Tribunal (NCLT) held that a liquidator's extension of the timeline for payment of auction consideration due to COVID 19 disruptions under Regulation 47A of the Liquidation Process Regulations does not waive the successful bidder's liability to pay contractual interest for delayed payment. Judicial Member Lakshmi Gurung and Technical Member Hariharan Neelakanta Iyer dismissed an application filed by Rudra Construction Co. seeking waiver of...