1. Prafulla Purushottamrao Gadge v Narayan Mangal and Ors
Citation: Prafulla Purushottamrao Gadge vs. Narayan Mangal and Ors: 2022 SCC OnLine NCLAT 3472, Comp. App. (AT) (Ins.) No. 498 of 2022, NCLAT; New Delhi. Decided by Hon’ble Justice Ashok Bhushan (Chairperson) and Ms. Shreesha Merla (Technical), 06.05.2022.
Ratio: The Court held that, as per the recent amendment to the Insolvency and Bankruptcy Code, 2016, the threshold for initiating the Corporate Insolvency Resolution Process (CIRP) has been raised to Rs. 1 crore from Rs. 1 lakh. This means that a financial creditor cannot initiate CIRP for defaults below the threshold of Rs. 1 crore.
Regarding the cause of action arising out of the failure of the consent terms of the earlier Section 7 application, it is important to note that the new threshold of Rs. 1 crore applies to all cases, irrespective of the cause of action. Therefore, even if the cause of action arises out of the failure of the consent terms of the earlier Section 7 application, the threshold of Rs. 1 crore is required for initiating the CIRP.
2. Argentium International Pvt. Ltd. and Ors. v UTM Engineering Pvt. Ltd. and Ors
Citation: Argentium International Pvt. Ltd. and Ors. vs. UTM Engineering Pvt. Ltd. and Ors: 2021 SCC OnLine NCLT 16597, IA 3172/ND/2021 and IA 3113/ND/2021 in IB No. 248/ND/2019, NCLT; New Delhi. Decided by Hon’ble Justice Dharminder Singh- (Judicial) and Sumita Purkayastha (Technical),
Ratio: National Company Law Tribunal has the power to pierce the corporate veil in order to ascertain the real successful bidder. The separate legal personality of a company is a statutory privilege, but it should not be used for fraudulent or dishonest purposes. If a fraudulent or dishonest use is made of the legal entity, then the individual behind the company cannot hide behind the corporate veil.
Piercing the corporate veil means that the NCLT may disregard the separate legal personality of the company and look at the individuals who are actually controlling the company. This may happen when the company is being used as a shield to conceal the real owners or beneficiaries of the company or to perpetrate a fraud or dishonest act.
Therefore, the separate legal personality of the company is not an absolute shield and may be disregarded by the NCLT in certain circumstances where the corporate structure is being used for fraudulent or dishonest purposes.
3. Ibrat Faizan v Omaxe Buildhome Private Limited
Citation: Ibrat Faizan vs. Omaxe Buildhome Private Limited: 2022 SCC OnLine SC 730, Civil Appeal No. 3072 of 2022, Supreme Court. Decided by Hon’ble Justice M.R. Shah and Hon’ble Justice B.V. Nagarathna, 21.03.2022.
Ratio: It was held by the Hon’ble Supreme Court that an order passed by National Consumer Disputes Redressal Commission (“NCDRC”) in appeal under Section 58 (1)(a)(iii) of Consumer Protection Act, 2019 can be challenged by filing a Writ Petition under Article 227 of Constitution of India.
Hence, a Writ Petition filed before the concerned High Court under article 227 of Constitution of India Aggrieved by the any order passed by NCDRC in any appeal under Section 58(1)(a)(iii) of the Consumer Protection Act, 2019, will be maintainable.
4. ASREC (India) Ltd. v S.A. Ramkumar
Citation: ASREC (India) Ltd. vs. S.A. Ramkumar: CP(IB)/80(CHE)/2021, NCLT, Division Bench- I, Chennai. Decided by Hon’ble Justice Sucharitha R(Judicial) and Sameer Kakar (Technical)
Ratio: The Interim Resolution Professional appointed for a Corporate Debtor is prohibited from serving as an Insolvency Professional for the Personal Guarantor associated with the same Corporate Debtor as per the IBBI rules.
5. Padmaadevi Sugars Ltd v Deputy Commissioner of Tax Benami Prohibition
Ratio: In this case, the Adjudicating Authority has determined that the provisional attachment imposed by the Respondents falls within the scope of the Prohibition of Benami Property Transaction Act, 1988, which includes a prescribed procedure for property attachment under Section 7 of the Act.
Both the Insolvency and Bankruptcy Code, 2016, and the Prohibition of Benami Property Transaction Act, 1988 are specialized legislations. The Adjudicating Authority found no conflict between the two statutes, as the Liquidator is not prohibited by the IBC, 2016 from including the aforementioned property in the liquidation estate for the purpose of conducting liquidation proceedings, unless it can be proven otherwise.
Citation: Khushvinder Singhal, Erstwhile RP of Bestways Transport (India) Pvt. Ltd. vs. Reena Tiwari, Financial Creditor, Bestways Transport (India) Pvt. Ltd. and Ors: 2022 SCC OnLine NCLAT 279, Company Appeal (AT) (Insolvency) No. 469 of 2022, NCLAT; New Delhi. Decided by Hon’ble Justice Ashok Bhushan, J. (Chairperson) and Shreesha Merla (Technical), 04.05.2022
Ratio: In this case, there are two decisions made by the Committee of Creditors (CoC) on April 30, 2021, and May 17, 2021, where the fee has been approved. It is being argued that once a decision is made, it cannot be questioned later. However, in the process of Corporate Insolvency Resolution, the CoC has the authority to revise the fee even if it was previously approved. The fee entitlement depends on various factors, such as changes in circumstances and the duration of the resolution proceedings.
7. Drolia Agencies Pvt. Ltd. v HS Mercantile Ltd
Citation: Drolia Agencies Pvt. Ltd. vs. HS Mercantile Ltd: C.P (IB) No. 1781/KB/2019; NCLT, Kolkata. Decided by Hon’ble Justice Jinan K.R., (Judicial) and Harish Chander Suri, (Technical)
Furthermore, it is important to note that the transaction in question took place in 2009, specifically on November 7, 2009. The alleged acknowledgement, as claimed by the Financial Creditor, relates to the financial year 2016-2017, which exceeds the applicable limitation period. Additionally, it is worth mentioning that there is no direct acknowledgment provided to support the claim. Therefore, the Tribunal was not being satisfied.
Citation: Sharma and Associates vs. New Delhi Municipal Council: (2022) 3 HCC (Del) 207, FAO – 257 of 2021 & CM APPL. 41562 OF 2021, Delhi High Court. Decided by Hon’ble Justice Sanjeev Sachdeva.
Ratio: The appellant is challenging an order dismissing their application filed under Section 34(3) of the Arbitration and Conciliation Act, 1996. The order stated that the appellant failed to provide sufficient cause for not challenging the arbitral award within the prescribed time limit. The appellant received a soft copy of the award on 20.11.2019 and the physical copy on 04.06.2020. The time for filing objections expired on 20.02.2020, excluding the date of receipt of the copy by email. The appellant argues that they were in Canada until 29.02.2020, followed by quarantine and a lockdown due to the pandemic. They contend that the circumstances prevented them from filing the objections within the original 90-day period.
The Supreme Court had extended the limitation period from 15.03.2020 until further orders. The appellant filed the objections on 23.01.2021, and the Trial Court held that they were filed within the extended period but failed to show sufficient cause for the delay. The appellant argues that their explanation is valid and provides sufficient cause for the delay. The Court agrees with the appellant, sets aside the order, and restores the objections to the Trial Court.
Citation: Zoom Communications Private Limited vs. Par Excellence Real Estate Private Limited: 2020 SCC OnLine NCLT 400, IB No. 616/ND/2020, NCLT, New Delhi. Decided by Hon’ble Justice Abni Ranjan Kumar Sinha (Judicial) and L.N. Gupta (Technical)
Ratio: The events indicate that the application for initiating the Corporate Insolvency Resolution Process (CIRP) was filed while concealing a crucial fact: the Applicant and the Corporate Debtor had a relationship at the time of the transaction forming the basis for the operational debt claim. This transaction has now been revealed as fraudulent, suggesting collusion between the parties. It appears that the application was filed with malicious intent, not for the purpose of resolving the Corporate Debtor’s insolvency, which is not allowed under the Insolvency and Bankruptcy Code (IBC) of 2016.
According to the IBC, initiating the insolvency resolution process fraudulently or with malicious intent for any purpose other than insolvency resolution or liquidation is punishable under Section 65(1) of the IBC. Therefore, a show cause notice was issued to M/s. Zoom Communications Pvt. Ltd., M/s Par Excellence Real Estate Pvt. Ltd., and Mr. Gulshan Kumar Jhurani, asking them to explain why the penalty under Section 65(1) of the IBC should not be imposed on them.
10. Prateek Gupta and Ors. v Kotak Mahindra Bank Limited and Ors
Citation: Prateek Gupta and Ors. vs. Kotak Mahindra Bank Limited and Ors: 2022 SCC OnLine NCLAT 2305, Company Appeal (AT) Insolvency No. 147 of 2022, NCLAT, New Delhi. Decided by Hon’ble Justice Ashok Bhushan (Chairperson) and Dr. Alok Srivastava (Technical)
Ratio: This appeal is against the dismissal of I.A. No. 32/KB/2022 filed by the suspended director of the corporate debtor. The appellant sought a stay on the e- auction sale notice for the assets of the corporate debtor and the guarantor. The e- auction notice was for a joint sale of the assets owned by both entities. The Adjudicating Authority rejected the application, stating that a joint sale would maximize the value of the assets and not prejudice the applicant. The reserved price for both properties in the e-auction notice was Rs. 16.15 crores. The appellant argued that selling the guarantor’s assets would affect their rights under the SARFAESI Act.
The respondent referred to a previous judgment supporting their position. The court found no error in the Adjudicating Authority’s decision and dismissed the appeal. However, the appellant was given the option to pursue remedies under SARFAESI for the auction in accordance with the law.
11. Srei Equipment Finance Limited v Assistant Commissioner of Income Tax and Ors
Citation: Srei Equipment Finance Limited vs. Assistant Commissioner of Income Tax and Ors: IA No. GA/1/2022 in W.P. NO. 1839 of 2022, Calcutta High Court. Decided by Hon’ble Justice T.S. Sivagnanam and Hon’ble Justice Hiranmay Bhattacharyya.
Ratio: In this matter, the Hon’ble High Court held that the assessing officer made a serious error by proceeding with the assessment and passing the order without staying the proceedings during the Insolvency Resolution Process. Referring to a Supreme Court decision.
The High Court emphasized that under the insolvency law, once an insolvency petition is admitted, a moratorium is in effect that prohibits the institution or continuation of pending suits or proceedings against the corporate debtor. Therefore, the assessment order was set aside, and the matter was restored to the assessing officer’s file, with the instruction to keep it on hold until the completion of the insolvency resolution proceedings. The appellant was directed to inform the assessing officer in writing once the proceedings are completed.
Citation: Millennium School vs. Pawan Dawar: 2022 SCC OnLine Del 1390, OMP (Comm) 590 of 2020, Delhi High Court. Decided by Hon’ble Justice Vibhu Bakhru.
Ratio: The Petition arises out of challenge to the award of arbitrator directing the Petitioners to pay the Respondents amounts arising out of contractor fee for transportation services availed by Petitioner on the grounds that evidence of deficiency and material breach by the Respondent was disregarded as the Petitioner had failed to file Affidavit u/ Section 65B of the Evidence Act. The Hon’ble Court held that the Evidence Act does not apply to arbitration. While it is open for the parties to make an objection during the submission of evidentiary documents, mere non-production of 65B affidavit was not grounds to disregard the evidence of the Petitioner.
Citation: Saraf Chits Private Limited and Ors. vs. KAD Housing Private Limited: IB 255(ND)/2021, NCLT, New Delhi Court- II. Decided by Hon’ble Justice Abni Ranjan Kumar Sinha (Judicial) and L.N. Gupta (Technical)
Ratio: The Adjudicating Authority determined that based on the definitions provided in section 5(8) for “Financial Debt,” section 3(11) for “Debt,” and section 3(6) for “Claim,” it is evident that interest is not inherently included in the term “debt.” Instead, interest can only be claimed as “financial debt” if such a debt exists.
Citation: S.M. Ghogbhai vs. Schedulers Logistics India Pvt. Ltd: 2022 SCC Online NCLAT 216, Company Appeal (AT) Insolvency No. 251 of 2022 NCLAT, New Delhi. Decided by Hon’ble Justice Ashok Bhushan (Chairperson) and Dr. Alok Srivastava (Technical), 23.05.2022
Ratio: Article 1 of the Limitation Act, 1963 provides the general rule for the limitation period for filing a suit or application in court. It states that every suit or application instituted after the prescribed period shall be dismissed, and no court shall entertain such a suit or application unless it is allowed by the court.
Regarding the petition filed by an operational creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, the Supreme Court has held that the provisions of the Limitation Act, 1963 are not applicable to such petitions. In the case of “B.K. Educational Services Private Limited vs. Parag Gupta and Associates,” the Supreme Court observed that the filing of a petition under Section 9 of the IBC is not a suit or application within the meaning of the Limitation Act, 1963.
Therefore, it can be concluded that the provisions of Article 1 of the Limitation Act, 1963 are not applicable to the petition filed by an operational creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016.
Ratio: The National Company Law Tribunal (NCLT) has stated that there is no provision in the Insolvency and Bankruptcy Code (IBC) or its regulations that allows the Tribunal to waive interest. Considering this, the NCLT believes that since the IBBI (Liquidation Process) Regulations, 2016 explicitly include provisions for imposing interest on delayed payments, and the process memorandum and terms of sale under the Letter of Intent (LOI) also stipulate interest, it is not appropriate to invoke the inherent powers under Rule 11 of the NCLT Rules, 2016 in the current case.
The NCLT further emphasized that the intention of the legislature behind the IBC is to consolidate the resolution of insolvency for corporate entities within a specified time, ensuring maximization of asset value. To achieve this objective, the legislature has wisely incorporated provisions for charging interest on delayed payments during the liquidation process to ensure timely completion.
Citation: Employees Provident Fund Organisation vs. Subodh Kumar Agarwal, RP Ambient Computronics Private Limited and Ors: 2022 SCC OnLine NCLAT 227, Company Appeal (AT) (Insolvency) No. 116 of 2022, NCLAT, New Delhi. Decided by Hon’ble Justice Ashok Bhushan, Ms. Shreesha Merla (Technical) and Mr. Naresh Salecha, (Technical), 27.05.2022.
Ratio: The NCLAT stated that there should be an obligation for the IRP/RP to inform creditors whose liabilities are recorded by the Corporate Debtor, as the objective of insolvency resolution is to consider and address all of the Corporate Debtor’s liabilities. This matter should be brought to the attention of the regulatory authorities and the government by the Tribunal, so that appropriate remedial measures can be taken if necessary.
The Insolvency Resolution Professional/Resolution Professional (IRP/RP) has a responsibility to include any orders or ongoing proceedings against the Corporate Debtor in the Information Memorandum and bring it to the attention of the Committee of Creditors (CoC). Currently, the law does not require the IRP/RP to provide information to any creditor or statutory authority, even if the Corporate Debtor’s records indicate liabilities towards them. It is up to the IRP/RP’s discretion whether to share such information with these entities
Citation: Kotak Mahindra Bank Limited vs. A. Balakrishnan and Ors: (2022) 9 SCC 186, CIVIL APPEAL NO.689 OF 2021, Supreme Court. Decided by Hon’ble Justice L. Nageswara Rao, Hon’ble Justice B.R. Gavai and Hon’ble Justice A.S. Bopanna, 30.05.2022
Ratio: The Appellant argued that a recent Supreme Court judgment established a fresh right to recover dues when a Debt Recovery Certificate (DRC) is issued. The Respondents’ counsel invoked the merger doctrine and claimed the Dena Bank case was per incuriam. The court agreed with the Appellant on the Dena Bank case and rejected the per incuriam argument. Justice BR Gavai supported the Appellant’s position on the Insolvency and Bankruptcy Code (IBC), stating that liabilities arising from DRCs should be considered financial debt.
Consequently, the Supreme Court allowed the appeal, set aside the judgment of the National Company Law Appellate Tribunal (NCLAT), and ruled in favor of the Appellant. The court focused on Section 5(8) of the IBC, which addresses “financial debt,” and interpreted the term “includes.” Considering the purpose of the IBC, the court concluded that liabilities arising from DRCs should not be excluded under Clause (8) of Section 5.
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