Leading Corporate and Commercial Law Cases in June 2022

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1. Aradhya Wire and Ropes Pvt. Ltd. v South Indian Bank Limited

Citation: Aradhya Wire and Ropes Pvt. Ltd. vs. South Indian Bank Limited: 2022 SCC OnLine NCLT 218, I.A. No. 63 OF 2022 in CP (IB) No.366/BB/2019, NCLT, Bengaluru Bench. Decided by Rajeswara Rao Vittanala (Judicial) and Ashutosh Chan
dra (Technical)

Ratio: The provisions of Section 12A along with CIRP Regulation 30A allow for the withdrawal of applications filed under Section 7, 9, or 10 of the IBC. In this case, the application was initially filed by the corporate applicant itself under Section 10 of the IBC. The corporate debtor was taken over by the RP upon admission of the application and later placed under liquidation. The liquidator filed the current application after receiving it from one of the promoters of the corporate debtor.

It has been established by the NCLAT that promoters/shareholders have the right to settle matters under Section 12A, and therefore, the liquidator’s application under Section 12A of the IBC is valid. The NCLAT has also ruled that even during the liquidation period, if a person not barred under Section 12A satisfies the demands of the Committee of Creditors, they may seek withdrawal of the proceedings from the Adjudicating Authority.

2. Arrow Engineering Limited v Golden Tobacco Limited

Citation: Arrow Engineering Limited vs. Golden Tobacco Limited: 2021 SCC Online NCLT 1434 Company Appeal (AT) (Insolvency) No. 183 of 2021, NCLAT, Principal Bench, New Delhi. Decided by Hon’ble Justice Ashok Bhushan, Jarat Kumar Jain, Member (Judicial) and Ashok Kumar Mishra, Member (Technical).

Ratio: The learned counsel argued that the application under Section 7 of the IBC is not valid because the debt does not qualify as a financial debt as defined in Section 5(8) of the IBC. However, the NCLAT held that the debt in question is indeed a financial debt and that the previous judgment on this matter has already been affirmed by the Supreme Court.

The doctrine of res judicata applies to IBC proceedings, and the appellants are not entitled to raise the same arguments that were already decided. The findings of the previous judgment have become final and cannot be challenged in incidental orcollateral proceedings.
The appellants are precluded from re-agitating the same issues, and the claims are dismissed as an abuse of the court process. The judgment of the court is binding on the shareholders claiming rights through the corporate debtor, and it cannot be reviewed or challenged in a collateral proceeding. Therefore, the appeals were dismissed.
3. Reactive Chemicals and Solvents and Ors. v Indian Overseas Bank and Ors

Citation: Reactive Chemicals and Solvents and Ors. vs. Indian Overseas Bank and Ors: 2022 SCC OnLine Mad 2958, Petition(s) for Special Leave to Appeal (Crl.) No(s). 3159/2015; SLP (C) No. 7192/205, Madras High Court. Decided by Hon’ble Justice Senthilkumar Ramamoorthy. 09.06.2022

Ratio: Section 34 CPC provides for interest at a rate considered reasonable by the Court. Even the proviso thereto, which was relied on strongly by the plaintiff, enables the Court to award further interest for the post-decree period at the rate at which nationalized banks lend in commercial transactions but does not provide for award of compound interest. To put it differently, the scope of the proviso is limited to interest in the post-decree period and, in any event, does not authorise the court to award compound interest. Hence, the plaintiffs’ claim for compound interest is neither supported by contract nor by any statute.

4. Brahm (Alloys) Ltd. and Ors. v West Bengal Financial Corporation and Ors

Citation: Brahm (Alloys) Ltd. and Ors. vs. West Bengal Financial Corporation and Ors: 2021 SCC OnLine Cal 195, W.P.A.9084 of 2020 With CAN 1 of 2021, Calcutta High Court. Decided by Hon’ble Justice Sabyasachi Bhattacharyya.

Ratio: Section 5 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 indicates that there is sufficient scope under the provision for an Asset Reconstruction Companies to acquire the debt and provide financial assistance to the borrower in repayment of loan.
Certain directions for sale of properties owned by the financial institution concerned were issued by the Supreme Court, in the absence of any rules or guidelines having been framed by the State in that regard. It highlights the direction that the authority concerned shall serve to the borrower a notice of 30 days for sale of immovable secured assets. substantial injury by the sale.
5. Ravi Auto Limited v Surana Mercantiles Private Limited   
Citation: Ravi Auto Limited vs. Surana Mercantiles Private Limited: 2021 SCC OnLine NCLT 6254, NCLT, Kolkata, Decided by Rajasekhar V.K., Member (Judicial) and Balraj Joshi, Member (Technical)

Ratio: The Adjudicating Authority rejected the petition filed by the Financial Creditor for insolvency proceedings against the Corporate Debtor. The authority found that there was no evidence to prove a contravention of the Companies Act, and no written agreement existed between the parties. The promissory note provided by the Financial Creditor was deemed insufficient and its authenticity could not be established in a summary proceeding. The confirmation of accounts did not establish that the amount owed to the Financial Creditor was due to the investment made. Moreover, no date of default or demand for payment was provided. Therefore, the Adjudicating Authority concluded that there was no default by the Corporate Debtor and dismissed the petition, allowing the Financial Creditor to explore alternative legal avenues for recovery.

The genuineness and sufficiency of the said promissory note cannot be ascertained in a summary proceeding and needs to be adjudicated in a civil trial by leading evidence. it fails to establish that the amount due from the Corporate Debtor to the Financial Creditor is on account of the Inter-Corporate Deposit extended by the Financial Creditor.

6. Telangana State Tourism Development Corporation Limited v A.A. Avocations Pvt. Ltd

Citation: Telangana State Tourism Development Corporation Limited vs. A.A. Avocations Pvt. Ltd: 2022 SCC OnLine TS 1266, W.P.A.9084 of 2020 With CAN 1 of 2021, High Court of Telangana. Decided by Hon’ble Justice P. Naveen Rao and Sambasiva Rao Naidu, 09.06.2022.

Ratio: The Division Bench of the Telangana High Court had opined that, on a cumulative reading of Section 2 (1)(C)(vii), Section 10 and Section 12 of the Commercial Courts Act, 2015 it is apparent that if a dispute arising out of an agreement concerning immovable property which is exclusively used in trade or commerce and whose ‘specified value’ is more than one crore, then, it is a ‘commercial dispute’ and only the commercial Court has jurisdiction to deal with application filed under Section 9 of the Act.

If a dispute arises from an agreement regarding an immovable property that is used exclusively for trade or commerce, and the ‘specified value’ of such property exceeds one crore, such dispute shall be considered a ‘commercial dispute’. Only a commercial court shall have the jurisdiction to handle an application filed under Section 9 of the relevant act in such matters.
7. State Bank of India v Rajkumar Baban Mahabade

Citation: State Bank of India vs. Rajkumar Baban Mahabade: W.P.A.9084 of 2020 With CAN 1 of 2021, High Court of Bombay. Decided by Hon’ble Justice N.B. Suryawanshi

Ratio: A daily wage worker was occupied as peon, water-man and sweeper of the Petitioner Bank. He had not been regularised as a permanent employee. Upon request for making employment permanent, his occupation was terminated by the Petitioner. Subsequently, the labour court passed order for reinstatement with continuity in service on 60% back wages. Upon appeal before the High Court, the award was set aside as respondent is not in service since last more than 23 years and the settled legal position that daily rated employee has no right to continue in service.
8. Educomp Infrastructure & School Management Ltd. v Millenium Education Foundation

Citation: Educomp Infrastructure & School Management Ltd. v Millenium Education Foundation: Comp. App. (AT) (Ins.) No. 901 of 2022, NCLT, New Delhi. Decided by Hon’ble Justice Abni Ranjan Kumar Sinha (Judicial) and Mr. Hemant Kumar Sarangi (Technical)

Ratio: The application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was filed by Educomp Infrastructure & School Management Ltd. through the chairman of the Monitoring Committee. The question of whether the application filed through a Monitoring Professional is valid under the Code was considered by the Adjudicating Authority.
The Bench observed that the Chairman of Monitoring Committee is covered under the purview of IBC by virtue of Section 2(d), which states that the provision of IBC is applicable to “such other body incorporated under any law for the time being in force, as the Central Government may, by notification, specify in this behalf“. The Monitoring Committee is formed, and its chairman is appointed under the provisions of IBC. Therefore, the Chairman possesses the proper authority to take necessary steps to protect the Corporate Debtor’s interest.

9. Jar Productions Private Limited vs. The Union of India and Ors  

Citation: Jar Productions Private Limited vs. The Union of India and Ors: Comp. App. (AT) (Ins.) No. 901 of 2022, High Court of Bombay. Decided by Hon’ble Justice S.V. Gangapurwala and Hon’ble Justice M.G. Sewlikar.

Ratio: The Bombay High Court has held that GST does not apply to the services rendered abroad as they amount to the export of services.
The division bench of Justice S.V. Gangapurwala and Justice M.G. Sewlikar has allowed the GST refund to the petitioner/assessee as the department has failed to establish that the incidence of tax was passed on to the client amounted to unjust enrichment.

10.Mr. Sunil vs. Union Bank of India

Citation: Mr. Sunil vs. Union Bank of India: WP (C). No. 32 of 2022 (Y), High Court of Bombay, Nagpur Bench, Decided by Hon’ble Justice A.S. Chandurkar and Hon’ble Justice Urmila S. Joshi-Phalke.

Ratio: Bank has no right to withhold the documents of security under the right of general lien especially when the entire loan amount is repaid.

11.Manoj Pratap Singh vs. The State of Rajasthan

Citation: Manoj Pratap Singh vs. The State of Rajasthan: Special Leave Petition (CRL.) NOS. 7899 – 7900 of 2015 Supreme Court. Decided by Hon’ble Justice A.M. Khanwilkar, Hon’ble Justice Dinesh Maheshwari and Hon’ble Justice C.T. Ravikumar.
Ratio: The apex court, while hearing a petition against a Delhi HC order, observed that posting an application seeking anticipatory bail after two months cannot be appreciated The Supreme Court has said that in a matter involving personal liberty, courts are expected to pass orders at the earliest in one way or the other considering the merits of the case.

12.Purogen Industries and Ors. vs. Classic Plywood and Hardwares

Citation: Purogen Industries and Ors. vs. Classic Plywood and Hardwares: Criminal Petition No. 100642 of 2022, High Court of Karnataka. Decided by Hon’ble Justice V. Srishananda.

Ratio: The Petitioner was convicted under Section 138, NI Act for cheque bounce and subsequently appealed the conviction. Appellate court stayed conviction on the condition that the Petitioner deposit 20% of fine amount and execute personal bond with surety. The deposit of the fine amount was challenged in this Petition on the grounds that the fine amount (Rs. 25 lakhs) was double the amount stated in the cheque (Rs. 12.5 lakhs) and was an unreasonable compensation amount. The Hon’ble Court rejected the Petition on the grounds that 20% of fine amount (Rs. 5 lakhs) was still less than 50% of the cheque amount).
13.Dishnet Wireless Limited vs. Assistant Commissioner of Income Tax

Citation: Dishnet Wireless Limited vs. Assistant Commissioner of Income Tax: Dishnet Wireless Limited vs. Assistant Commissioner of Income Tax (OSD), Company Range-1 (17.06.2022 – MADHC) of 2018 High Court of Madras. Decided by Hon’ble Justice C. Saravanan.

Ratio: The High Court held that the provisions of Insolvency and Bankruptcy Code, 2016 (IBC) cannot be interpreted in a manner which is inconsistent with any other law in the time being in force. Therefore, Corporate Insolvency Resolution Plan sanctioned and approved cannot impugn on the rights of the Income Tax Department to pass any fresh Assessment Order under Section 148 read with Sections 143(3) and 147 of the Income Tax Act, 1961.
Therefore, the proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be pressed into service to dilute the rights of the Income Tax Department under the Income Tax Act, 1961 to re-open the assessment under Section 148 of the Income Tax Act, 1961. The proceedings under the IBC cannot be pressed into service to dilute the rights of the Income Tax Department to re-open the assessment under Section 148 of the Income Tax Act, 1961.

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 studies.
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