Leading Corporate and Commercial Law Cases in July 2022

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1. Harsh Vinimay Pvt. Ltd. v Gajanan Industries Ltd

Citation: Harsh Vinimay Pvt. Ltd. v Gajanan Industries Ltd:  C.P. No. (IB) 2521/MB/2018, NCLT, Mumbai Bench, Decided by Hon’ble Justice H. V. Subba Rao (Judicial) and Smt. Anuradha Bhati (Technical). 

Ratio: The Application was rejected and was held as non-maintainable due to the nationwide outbreak of coronavirus and lockdown. It was filed by the Liquidator seeking exclusion for the period of 594 days from the liquidation period due to the nationwide outbreak of coronavirus and lockdown. The Applicant was seeking condonation of delay of 666 days in submitting the claim to the liquidator. The Bench was of the considered opinion that there is no merit in the Application and the same deserves to be dismissed.

2. K.M. Manjunath v Erappa

Citation: K.M. Manjunath Vs Erappa: G (D) SLP (C) 10700 Of 2022, Supreme Court. Decided by Hon’ble Justice CT Ravikumar And Hon’ble Justice Sudhanshu Dhulia.

Ratio: The question before the Hon’ble Supreme Court, whether the issue as to the requirement or otherwise of issuance of a notice in terms of Section 106 of the Transfer of Property Act, 1882 was available for consideration by the High Court indisputable facts obtained from the evidence on record are worthy of reference. The Hon’ble Supreme Court held that, on expiry of the term fixed under the deed the tenant would not be entitled to statutory notice under Section 106 of the Transfer of Property Act, 1882.
3. Ms. Teena Saraswat Pandey RP of M/s Rajpal Abhikaran Pvt. Ltd. v Mr. Rakesh Rajpal

Citation: Ms. Teena Saraswat Pandey RP of M/s Rajpal Abhikaran Pvt. Ltd. VS Mr. Rakesh Rajpal: IA (I.B.C) – 128/2021 in (MP) CP (IB) 6 of 2020, NCLT Indore Bench. Decided by Hon’ble Justice Madan B. Gosavi (Judicial) and Mr. Ajai Das Mehrotra (Technical)

Ratio: The NCLT, Indore Bench reiterated the fact that CIRP is a time bound Process and the proceedings for the same cannot go on like a civil suit. It was further reiterated that the suspended management of the CD are obligated, and duty bound to cooperate with the Resolution Professional by handing over all necessary and required documents and assets of the CD for the successful completion of the CIRP in time bound manner.

4. Promila Taneja v Surendri Design Pvt. Ltd

Citation: Promila Taneja Vs. Surendri Design Pvt. Ltd: NCLAT, New Delhi No.4237/2020. Decided by Hon’ble Justice A.I.M. Chemma (Judicial), V.P. Singh (Technical) 

Ratio: REPEALED On 05.07.2022: The NCLAT larger bench, constitution of 5 members held that Judgment in Mr. M. Ravindranath Reddy as well as judgment in Promila Taneja’s case does not lay down the correct law. The claim of Licensor for payment of license fee for use of Demised Premises for business purposes is an ‘operational debt’ within the meaning of Section 5(21) of the Code.

Note: The matter is still pending in Apex court as reported at: Promila Taneja Vs. Surendri Design Pvt. Ltd.

5. Avantha Holdings Ltd. v. Mr. Abhilash Lal, RP for Jhabua Power Ltd 

Citation: Avantha Holdings Ltd. Vs. Mr. Abhilash Lal, RP for Jhabua Power Ltd:   IA(IB) No.537/KB/2021 in CP (IB) No.634/KB/2017, NCLAT, New Delhi Bench. Decided by Hon’ble Justice Ashok Bhushan (judicial), Ms. Shreesha Merla (Technical) and Naresh Salecha (Technical) 

Ratio: The Hon’ble NCLAT stated that when interpreting a provision like section 29A, a purposive interpretation is preferred over a literal interpretation. The purpose of section 29A should be considered in the context of the entire statute. It was never the intention to permanently disqualify a resolution applicant based on an initial disqualification. If a resolution applicant’s disqualification can be cured before the final consideration of the resolution plan, they should be encouraged and allowed to do so, as it would benefit the corporate debtor.
Therefore, the eligibility of a resolution applicant should be assessed at a meaningful stage, specifically when the plan is ready for consideration by the Committee of Creditors (CoC). This approach gives meaning and effectiveness to section 29A. Rejecting a resolution plan solely because the applicant had a connected account classified as a non-performing asset (NPA) on a technical ground, without any fault on their part, serves no purpose. The resolution plan process should focus on selection rather than rejection. Additionally, if a resolution applicant is required to inform the Resolution Professional (RP) immediately if they become ineligible during the Corporate Insolvency Resolution Process (CIRP), there is no reason why the reverse should not apply. An applicant who was initially ineligible but becomes eligible later should also be considered.

The term “at the time of submission of the resolution plan” in section 29A(c) should be interpreted as “at the time of submission of the relevant resolution plan.” Consequently, the crucial date for determining eligibility should be when all plans are finally considered by the CoC before being put to a vote, as per regulation 39 of the CIRP Regulations. The “gate-pass theory,” which takes a mechanical check-box approach, is rejected in favour of a more comprehensive assessment.
6. Sanjeev Mahajan v India Bank (Erstwhile Allahabad Bank) & Anr

Citation: Sanjeev Mahajan Vs. India Bank (Erstwhile Allahabad Bank) & Anr: 2022 SCC OnLine NCLAT 2258, CP (IB)-1913(ND)/2019, NCLAT, New Delhi bench. Decided by Hon’ble Justice Ashok Bhushan (Chairperson) and Naresh Salecha (Technical)

Ratio: The Hon’ble NCLAT stated that it has already been established by the Hon’ble Supreme Court that while settlement is encouraged in the Insolvency and Bankruptcy Code (IBC), there cannot be a directive to the Financial Creditor to grant the benefit of a One-Time Settlement (OTS) to a borrower. In this case, the Adjudicating Authority found the existence of debt and default, which was not disputed before the court. Thus, the Tribunal sees no error in the order admitting the Section 7 Application.

The IBC provides provisions and procedures for settlement, as recognized under Section 12A of the Code and Regulation 30A of the CIRP Regulations, 2016. Considering the facts and sequence of events, the court believes that the Appellant should be given another opportunity to submit an application under Section 12A to the Insolvency Resolution Professional/Resolution Professional (IRP/RP) for consideration by the Committee of Creditors (CoC). While the CoC’s decision- making is unrestricted, in this case, the court advises the CoC to consider factors
such as the Bank’s proposal to sell the non-performing asset (NPA) of the Corporate Debtor to other entities, the potential realization of a higher amount through the insolvency resolution process or liquidation, and the objective of maximizing the assets and recovering the Bank’s financial dues. The CoC can proceed with issuing Form-G and receiving Resolution Plans but should refrain from voting on any Resolution Plans until a decision on the proposal under Section 12A is made.

7. Mahendra Kumar Jajodia v State Bank of India

Citation: Mahendra Kumar Jajodia v. State Bank of India: 2022 SCC OnLine SC 908, CP (AT) Insolvency No. 60 of 2022, NCLAT, New Delhi. Decided by Justice Ashok Bhushan (Chairperson) and Dr. Alok Srivatava (Technical)

Ratio: The creditor had filed an application for insolvency of the personal guarantor, but it was dismissed by the NCLT as premature since no CIRP or Liquidation proceedings were pending against the corporate debtor. The NCLAT overturned the NCLT’s order, stating that the application was maintainable regardless of the absence of ongoing CIRP or Liquidation proceedings. The personal guarantor appealed to the Supreme Court, which upheld the NCLAT’s order. The core issue revolves around the interpretation of Sections 60(1), 60(2), and 95(1) of the Code.

The NCLAT emphasized that Section 60(2) is supplemental to Section 60(1) and applies only when a CIRP or liquidation proceeding against the corporate debtor is pending before a specific NCLT. The Court clarified that independent actions can be initiated against the corporate debtor, corporate guarantor, and personal guarantor, without being hindered by Section 60(2). The order reinforces the co- extensive nature of guarantees while maintaining their independence, contributing to the understanding of the contract of guarantee and its treatment under the Code.
Citation: Mr. Shubh Gautam Vs. Anjani Technoplast Ltd, Shubh Gautam vs. Anjani Technoplast Limited: (20.06.2022 – NCLT – New Delhi), 2022 SCC OnLine NCLAT 3395. Decided by Hon’ble Justice Dharminder Singh (Judicial) and Smt. Sumita Purkayasth (Technical)

Ratio: The above application was filed under Section 7 of the Code, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against M/s. Anjani Technoplast Limited. The key issue was whether the amount claimed by the applicant, based on a court decree, qualifies as a financial debt under the definition provided in the Code.

The Hon’ble NCLT held that it is essential to prove that the claim of a financial creditor is based on the transaction between the debtor and creditor and not on the decree issued by a court or tribunal in any other case between the debtor and creditor. It was further stated that the amount claimed under the decree is an adjudicated amount and not a debt disbursed against the consideration for the time value of money and does not fall within the ambit of any of the clauses enumerated under Section 5(8) of the Code as the “amount claimed under the decree is an adjudicated amount and not a debt disbursed against the consideration for the time value of money.”
9. S. Rajendran, Liquidator of M/s. Arohi Infrastructure Pvt. Ltd. Vs. Tata Capital Financial Services Pvt. Ltd  

Citation: S. Rajendran, Liquidator of M/s. Arohi Infrastructure Pvt. Ltd. Vs. Tata Capital Financial Services Pvt. Ltd:  Chennai Bench MA(IBC) – 924/2019, NCLT. Decided by Hon’ble Justice R. Sucharitha (Judicial) and B. Anil Kumar (Technical)

Ratio: In the above case, the Corporate Debtor is undergoing liquidation as ordered by the National Company Law Tribunal (NCLT) on December 5, 2018. Despite various attempts by the Liquidator to sell the Corporate Debtor’s assets, no favourable outcome has been achieved.
The Adjudicating Authority referred to a judgment by the National Company Law Appellate Tribunal (NCLAT) in the case of Shwetha Vishwanath Shrike & Ors. vs. The Committee of Creditors & Anr., wherein it was held that Promoters/Shareholders have the right to settle matters under Section 12A of the Insolvency and Bankruptcy Code (IBC), and in such cases, the Applicant has the option to withdraw the application. Additionally, in the case of V. Navaneetha Krishnan vs. Central Bank of India, Coimbatore & Anr., the NCLAT held that even during the liquidation period, if individuals not barred under Section 12A of the IBC fulfil the demands of the Committee of Creditors, they may approach the Adjudicating Authority to withdraw the proceedings. Therefore, if parties reach a settlement during the liquidation process, applications filed under Sections 7, 9, and 10 can be withdrawn.

10.The Management of M/s Grasim Industries Ltd v The General Secretary Harihar Polyfibers, Employees Union & Others

Citation: The Management of M/s Grasim Industries Ltd v. The General Secretary Harihar Polyfibers, Employees Union & Others: WA No. 100250 OF 2021, Dharwad Bench, Karnataka High Court. Decided by Hon’ble Justice Krishna (Judicial) S Dixit and Hon’ble Justice P Krishna Bhat (Judicial)

Ratio: The Hon’ble High Court of Karnataka held that the retirement age of 60 years for workmen as set out in the certified standing orders of the appellant (which, in turn, were modified pursuant to a similar stipulation made in the model standing orders by the state government) must be complied with by the employer. The judgment holds relevance because employers in the private sector generally have been able to retain flexibility as regards determination of the retirement age for their employees.

11.M/s. Regen Powertech Pvt. Ltd. Represented by RP Ebenezar Inbaraj v Veeral Controls Pvt. Ltd

Citation: M/s. Regen Powertech Pvt. Ltd. Represented by RP Ebenezar Inbaraj Vs. Veeral Controls Pvt. Ltd: IA(IBC) 491 (CHE)/2021 in IBA/1099/2019, NCLT, Division Bench-II, Chennai. Decided by Mr. Anil Kumar B (Technical) and Hon’ble Justice (Retd.) S. Ramathilagam

Ratio: The Adjudicating Authority has concluded that the Corporate Insolvency Resolution Process (CIRP) in this particular case has reached its final stage, rendering the Resolution Professional incapable of filing any application on behalf of the company. According to Section 23 of the Insolvency and Bankruptcy Code (IBC), the Resolution Professional’s role is limited to managing the affairs of the Corporate Debtor during the Resolution Process and not beyond. The responsibility to file such applications lies with the new management of the Corporate Debtor.
It is important to note that the Resolution Professional’s authority ceases to exist once the Resolution Plan is approved. The role of the Resolution Professional, including the erstwhile Resolution Professional, is to facilitate the benefit of the Corporate Debtor during the insolvency period and until the completion of the Resolution Process.
12.IDBI Bank Limited v V Venkata Sivakumar

Citation: IDBI Bank Limited v. V Venkata Sivakumar: NCLT Division Bench II, Chennai, 2022 SCC OnLine NCLT 212, No. 754 of 2020 Special Bench, Decided by Hon’ble Justice (Retd) S. Ramathilingam- Member (Judicial) and Mr. Anil Kumar B- Member (Technical)

Ratio: The applicant in this case argues that the Liquidator (respondent) did not possess a valid Authorization for Assignment as required by the IBBI Regulation at the time of appointment, and therefore seeks the removal of the respondent as the Liquidator and the invalidation of all duties and functions performed in that role.
The Adjudicating Authority has determined that based on a combined interpretation of Section 33 of the Insolvency and Bankruptcy Code (IBC), 2016, and Section 16 of the General Clauses Act, 1897, the authority responsible for appointing a person also has the power to suspend or dismiss that person in the absence of any specific powers granted elsewhere. Thus, by virtue of Section 16 of the General Clauses Act, 1897, this Adjudicating Authority has the power to dismiss the Liquidator since it is vested with the powers under Section 33 and 34 of the IBC, 2016 to appoint a Liquidator. In the absence of specific provisions within the IBC, 2016, we can refer to Section 276 of the Companies Act, 2013.
13.Jaipur Trade Expocentre Private Limited v M/s Metro Jet Airways Training Private Limited

Citation: Jaipur Trade Expocentre Private Limited v. M/s Metro Jet Airways Training Private Limited: 2022 SCC OnLine NCLAT 95 NCLAT Jaipur bench No. 423 of 2021. Decided by Hon’ble Justice Ashok Bhushan (Chairperson), Hon’ble Justice Rakesh Kumar Jain (Judicial), Mr. Barun Mitra (Technical) and Mr. Naresh Salecha (Technical)
Ratio: The nature of the dues in this case is related to the license fee for the use of premises specifically designed for an educational institution, including fittings, fixtures, and other amenities. The Adjudicating Authority erroneously concluded that the debt claimed by the Operational Creditor was not an ‘operational debt,’ while the appellant argues that it falls within the definition of ‘operation debt’ as stated in Section 5(21) of the Code. The Tribunal acknowledges that the previous judgments in Mr. M. Ravindranath Reddy’s case and Promila Taneja’s case do not establish the correct law. Therefore, the judgment in Promila Taneja’s case cannot be followed based on this understanding.

Consequently, the Tribunal rules that the claim for payment of the license fee by the Licensor for the business use of the premises constitutes an ‘operational debt’ under Section 5(21) of the Code.
14.Prabhat Pincha v Ultratech Cement Limited

Citation: Prabhat Pincha Vs Ultratech Cement Limited: IA (I.B.C) – 582/2021 NCLT, Kolkata bench.

Ratio: As per Section 31 of the Insolvency and Bankruptcy Code (IBC), the Adjudicating Authority approves a Resolution Plan if it is satisfied that it has been approved by the Committee of Creditors (CoC) with the required 66% votes and after considering its feasibility and viability (Section 30(4) of the Code). In this case, the Resolution Plan of Ultratech Cement Limited was unanimously approved by the CoC and subsequently approved by the Hon’ble National Company Law Appellate Tribunal (NCLAT) on November 14, 2018. The Hon’ble Supreme Court also upheld the NCLAT’s order on November 19, 2018.

The NCLAT held that the applicants should have pursued their claims against the admission or rejection by the Resolution Professional (RP) at the relevant time under the Code. It is too late to demand payment of operational debts from the Corporate Debtor under new management, as these debts were extinguished by the approval of the resolution plan in 2018. The Supreme Court has cautioned against such claims arising long after the approval of the resolution plan in the Essar Steel judgment (2019). The successful resolution applicant should not be burdened with unexpected claims that emerge later on.
15.Vidarbha Industries Power Ltd. v Axis Bank Ltd

Citation: Vidarbha Industries Power Ltd. Vs. Axis Bank Ltd: 2020 SCC OnLine NCLAT 413, NCLAT CP (AT) (Ins) No. 389 of 2020, New Delhi. Decided by Hon’ble Justice S.J. Mukhopadhaya (Chairperson) and Hon’ble Justice Bansi Lal Bhat. 

Ratio: The appellant filed an appeal against the order before the Hon’ble NCLAT Delhi. However, the appeal was dismissed, and the Tribunal held that the appellant had no justification to stall the process and seek a stay on the Corporate Insolvency Resolution Process (CIRP).

The Hon’ble NCLAT found no legal flaws in the impugned order and stated that the flow of legal process cannot be hindered based on considerations that go against the mandate of the Insolvency and Bankruptcy Code. The appeal was deemed to be without merit and dismissed, with no costs imposed.

16.Krishan Kumar Basia v State Bank of India

Citation: Krishan Kumar Basia Vs. State Bank of India: 2022 SCC OnLine NCLAT 1619 W.P.(C) 1286/2015, C.M. NO.2282/2015 & 2283/2015, High Court of Delhi. New Delhi. Decided by Hon’ble Justice R. K. Gauba and Hon’ble Justice S. Ravindra Bhat
Ratio: The Petitioner in this case was unaware of DRT proceedings initiated against them until recovery certificate was issued and Bank was enforcing security interest on mortgaged lands. The Petitioner contended that such decree was fallacious as the lands were agricultural in nature and required the permission of the Revenue Officer for deposit of title deeds in accordance with the Delhi Land Reforms Act and Punjab Land Revenue Act. The DRAT dismissed the appeal on the grounds that appeal was highly belated.

The Hon’ble High Court granted allowed the writ petition and directed the DRAT to hear the matter since the Petitioner was unaware of the DRT proceedings till recovery proceeding were first sought to be enforced. Further, considering the serious substantive issues of facts and law raised by the appeal, the DRAT should be more circumspect to dismissing a matter on grounds of delay alone.
17.Mrs. Anugya Gupta v Mr. Ajay Kumar & Anr:
Citation: Mrs. Anugya Gupta v. Mr. Ajay Kumar & Anr : 2022 SCC OnLine Del 1922, High Court of New Delhi, CS (COMM) 422/2020, Decided by Hon’ble Justice Navin Chawla 

Ratio: The Delhi High Court has reiterated that the mere fact that both the prior user and the subsequent user are registered proprietors is irrelevant for the purposes of examining who generated the goodwill first in the market and whether the latter user is causing misrepresentation in the course of trade and damaging the goodwill of the former user.

The subsequent user of a mark dishonestly adopted is equally tainted and totally immaterial. The party who has stolen the mark cannot claim the benefit of a concurrent user because the governing principle of concurrent user lies on account of honesty.

18.IDBI Bank Ltd. v Abhijeet Integrated Steel Ltd:

Citation: IDBI Bank Ltd. Vs. Abhijeet Integrated Steel Ltd: C.P (IB) 1676/2018 NCLT, Kolkata Bench- I, Kolkata, Decided by Balraj Joshi (Technical) and Rajashekhar V K (Judicial)

Ratio: In the case of State Bank of India v N. S. Engineering Projects Private Limited, it was established that a Financial Creditor who has contributed to the default through their own actions cannot maintain a Section 7 of the Insolvency and Bankruptcy Code 2016 (“Code”), application against the Corporate Debtor. In the current case, where the Financial Creditor’s involvement in causing the default is evident. The principle of nullus commodum capere potest de injuria sua propria (no one can take advantage of their own wrongdoing) is applicable in this situation.

Mechanical admission of an application under Section 7 of the Code solely based on the establishment of debt and default is not appropriate. The primary focus should be on achieving the resolution of the Corporate Debtor, as intended by the Code. To satisfy the provisions of Section 7(5) of the Code, the role of the petitioning creditor in the alleged default must be examined.
19.Tirupati Sugars Ltd. v M/s Sona Sati Organics Pvt. Ltd:
Citation: Tirupati Sugars Ltd. Vs. M/s Sona Sati Organics Pvt. Ltd; 2021 SCC OnLine NCLT 6738, C.P (IB) No.2110/KB/2019, NCLT Kolkata Bench. Decided by Mr. Rohit Kapoor (Judicial) Mr. Harish Chander Suri (Technical) 

Ratio: The Corporate Debtor had fully paid the agreed amount and the Hon’ble Tribunal found no outstanding or due amount owed to the Corporate Debtor. The Operational Creditor’s denial at this stage, after receiving the payment, seemed to be an attempt to extract more money from the Corporate Debtor, which was evident from the Operational Creditor’s refusal to sign the settlement terms provided by the Corporate Debtor.

20.Karan Kapoor v Madhuri Kumar:

Citation: Karan Kapoor Vs Madhuri Kumar: Supreme Court of India, (2022) 10 SCC 496 CA No. 4545/2022. Decided by Hon’ble Justice Indira Banerjee and J K Maheshwari.

Ratio: After evaluating submissions made by both the parties the SC held that “for the purpose of Order XII Rule 6, the said admission is not clear and categorical, so as to exercise a discretion by the Court without dealing with the defense as taken by Defendant. As we are conscious that any observation made by this Court may affect the merit of either side, therefore, we are not recording any finding either on the issue of tenancy or with respect to the defense as taken by the Defendant.

Consequently, the judgment and decree passed by the Trial Court, as confirmed by the High Court, only on admission of fact without considering the defense in exercise of power under Order XII Rule 6 of CPC is hereby set aside.”

Disclaimer: This material and the information contained herein prepared by Anirudh Associates is intended to provide general information on a subject or subjects and is not an exhaustive treatment of such subject(s). Anirudh Associates is not, by means of this material, rendering professional advice or services. The information is not intended to be relied upon as the sole basis for any decision. Anirudh Associates shall not be responsible for any loss whatsoever sustained by any person who relies on this material.
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