Acknowledged Interest On ICDs Forms Part Of Financial Debt Under IBC: NCLAT New Delhi

On 13 July, the New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) held that acknowledged interest on Inter Corporate Deposits (ICDs) forms part of “financial debt” under the Insolvency and Bankruptcy Code, 2016 (IBC). Judicial Member Justice N Seshasayee, along with Technical Members Indevar Pandey and Arun Baroka, allowed an appeal filed by Wild Dreams Trading Company Pvt. Ltd. against the Chandigarh Bench of the National Company Law Tribunal (NCLT), which had rejected its...

Equity Investment Without Repayment Obligation Does Not Qualify As Financial Debt: NCLAT New Delhi

The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) on 1 July held that an amount advanced under a Subscription and Shareholders Agreement (SSA) towards purchase of equity shares and convertible warrants does not qualify as “financial debt” under the Insolvency and Bankruptcy Code, 2016 (IBC), unless the agreement creates a repayment obligation. Judicial Member Justice Mohd Faiz Alam Khan and Technical Member Ajai Das Mehrotra dismissed Metamorphosis Trading LLP's appeal...

Delayed Homebuyer Claim Cannot Be Rejected When RP Failed To Verify Records: NCLAT New Delhi

The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) on 30 June held that a genuine homebuyer cannot be denied the benefit of an approved resolution plan merely because the homebuyer filed the claim belatedly, when the delay occurred due to the Resolution Professional's (RP) failure to identify and notify the homebuyer despite the corporate debtor's records reflecting the allotment. Judicial Member Justice N Seshasayee and Technical Members Arun Baroka and Indevar Pandey...

Appeal Against Deferred Intervention Application In Insolvency Case Not Maintainable: NCLAT Chennai

The Chennai Bench of the National Company Law Appellate Tribunal (NCLAT) on 15 June held that an appeal under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 cannot be filed against an order that only defers an intervention application for consideration along with a revised resolution plan after reconsideration by the Committee of Creditors (CoC). Judicial Member Justice Sharad Kumar Sharma and Technical Member Jatindranath Swain dismissed the appeal filed by AYRA Consortium, a...

NCLAT New Delhi Expunges Remarks Against Mahavir Medicare RP, Clarifies RP's Independent IBC Duty

The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) on 6 July, held that a Resolution Professional (RP) must independently ensure that the Corporate Insolvency Resolution Process (CIRP) complies with the Insolvency and Bankruptcy Code, 2016 (IBC), and cannot merely implement the decisions of the Committee of Creditors (CoC). Judicial Member Justice N. Seshasayee with Technical Members Arun Baroka and Indevar Pandey allowed the application filed by the RP and expunged the...

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....

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,...

'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...

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...

IBC S.121(2) Timeline For Personal Guarantor Bankruptcy Applications Directory, Not Mandatory: NCLAT

The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) on 30 June held that the three month period prescribed under Section 121(2) of the Insolvency and Bankruptcy Code, 2016 (IBC) for filing a bankruptcy application against a personal guarantor is directory and not mandatory. Judicial Member Justice N Seshasayee and Technical Member Arun Baroka set aside the order of the Cuttack Bench of the National Company Law Tribunal (NCLT), which had dismissed Cosmos Co Operative Bank...

Continuation Of CIRP By Sole Creditor Despite Full Repayment Is Malicious Use Of IBC: NCLAT Delhi

The New Delhi National Company Law Appellate Tribunal (NCLAT) on 30 June held that continuation of insolvency proceedings by a sole creditor despite full repayment of the debt amounted to malicious use of the Insolvency and Bankruptcy Code (IBC), which is intended for revival of corporate debtors and not for pursuing coercive or vindictive action. Judicial Member Justice N Seshsayee and Technical Members Arun Baroka and Indevar Pandey terminated the Corporate Insolvency Resolution Process...