Leading Corporate and Commercial Law Cases in September 2022

Reading Time: 11 minutes
1. Trident Fabricators Pvt. Ltd. v Hiranmayee Energy Ltd

Citation: Trident Fabricators Pvt. Ltd. Vs. Hiranmayee Energy Ltd: 2021 SCC OnLine NCLT 14663, Company Appeal (AT) (Insolvency) No. 989 of 2022. Decided by Hon’ble Justice Ashok Bhushan Chairperson, Hon’ble Justice M. Satyanarayana Murthi (Judicial) and Barun Mitra (Technical)

Ratio: In the above case the Operational Creditor (OC) had filed an application seeking directions upon the Corporate Debtor (CD) to produce certain financial statements and documents pertaining the OC, which the NCLT, Kolkata Bench had rejected on the ground that if the CD has committed a default, the OC has to place all documents on record. The NCLT only needs to verify the authenticity of the information and the documents for reaching a conclusion whether a case for admission of the petition or initiation of CIRP is made out or not. The prayer clause of the Operational Creditor seeking directions upon the Corporate Debtor to produce the documents by way of an affidavit, falls beyond the jurisdiction of NCLT. The NCLT had further stated that the OC cannot base its claim on the basis of documents to be produced by the CD. The NCLAT emphasized the observations made by the NCLT, Kolkata Bench and accordingly and dismissed the above appeal.

2. Jose M M v State Bank of India

Citation: Jose M M VS State Bank of India: Comp App (AT)(INS) No.262/2022 IA No 554/2022, IA No 555/2022. Decided by Justice M. Venugopal (Judicial) and Naresh Salecha (Technical)

Ratio: The issue at hand was whether the guarantees given by the managing director and director of the corporate debtor should be considered as personal guarantees or otherwise. The amended Section 2(e) of the IBC includes personal guarantees to corporate debtors and allows for insolvency proceedings against personal guarantors. The personal guarantees given by Mrs. Merin Jose and Mr. Jose M.M are enforceable, and the Adjudicating Authority made the correct decision. Therefore, there is no error in this regard. The appellant also proposed a compromise settlement acknowledging the existence and acceptance of the debt, including principal and interest. Therefore, there was a clear financial debt that was due and unpaid, and the Adjudicating Authority admitted the application under Section 9(5) of the IBC.
3. Rakesh and Ors. v Ismail and Ors
Citation: Rakesh and Ors. vs. Ismail and Ors: Misc. Criminal Case No. 41296 of 2021, High Court of Madhya Pradesh. Decided by Hon’ble Judge, Satyendra Kumar Singh, (Judicial).

Ratio: The Court held that the process of summoning other persons, involved in the crime is only a part of the process of taking cognizance. In the event that Criminal Complaint u/S 200 of Cr.P.C. has been filed for impleading other persons alleging that the police is intentionally not taking action against them, the same can only be considered by the Court of JMFC, who had taken the cognizance in the matter.

4. Yogesh Singh v Mr. Supriyo Kumar

Citation: Yogesh Singh Vs. Mr. Supriyo Kumar: 2022 SCC OnLine NCLAT 2002 Company Appeal (AT) (Insolvency) No.565 OF 2021, NCLAT, Principal Bench, New Delhi. Decided by Hon’ble Justice Rakesh Kumar (Judicial) and Mr. Kanthi Narahari (Technical)

Ratio: The NCLAT expressed doubts regarding the standing of the appellants to file the appeal, as they were not directly involved in the corporate insolvency proceedings or the subsequent liquidation process. The appeal raised a question of law concerning the distribution of sale proceeds and the accumulated profit of the corporate debtor.

However, the NCLAT clarified that the liquidator had a duty to distribute the accumulated profit and found no error in their approach. The distribution of funds was made in accordance with the law, and the NCLAT concluded that the appeals lacked merit and should be rejected, with the imposition of heavy costs.
5. Insolvency and Bankruptcy Board of India v Aditya Kumar

Citation: Insolvency and Bankruptcy board of India Vs. Aditya Kumar: 2022 SCC OnLine NCLAT 359, Company Appeal (AT) (Insolvency) No. 769-770 of 2021, NCLAT, Principal Bench, New Delhi. Decided by Hon’ble Justice Anant Bijay Singh (Judicial) and Ms. Shreesha Merla (Technical)

Ratio: The Appellant Board directed the respondent to provide a response and relevant documents regarding their appointment as an Insolvency Resolution Professional (IRP). However, while the response was being examined, the Adjudicating Authority issued an order halting any further inquiry by the Appellant Board. The Appellant Board argues that the Adjudicating Authority exceeded its jurisdiction by interfering with the Board’s powers and functions. The Code establishes the Appellant Board as the sole authority to regulate the actions of Insolvency Professionals (IPs) and conduct inspections and investigations. 

The Board has the power to order inspections and investigations, and its regulations outline the procedures for such processes. The Adjudicating Authority does not have the power to quash or stay proceedings initiated by the Board. Previous judgments by the Supreme Court and the Appellate Tribunal have affirmed the limited jurisdiction of the Adjudicating Authority and its inability to interfere with the Board’s proceedings. The Appellant Board requests that the impugned orders be set aside as the Adjudicating Authority has exceeded its powers.

6. Preet Singh and Ors. v The State (NCT of Delhi) and Ors

Citation: Preet Singh and Ors. vs. The State (NCT of Delhi) and Ors: 022 SCC OnLine Del 2506 W.P. Crl. 1762 of 2022, High Court of Delhi. Decided by Hon’ble Judge, Swarana Kanta Sharma.

Ratio: A Petition to quash FIR u/ Section 482 Cr.P.C. can be granted only upon submission of chargesheet. In the present case, investigation has not been completed and charge sheet has not been filed and non bailable warrant have been issued against the Petitioner. The court is required to ascertain whether a prima facie case exist prior to granting quashing petition.
7. CBRE South Asia Pvt. Ltd v United Concepts and Solutions Pvt. Ltd

Citation: CBRE South Asia Pvt. Ltd Vs. United Concepts and Solutions Pvt. Ltd: 2022 SCC OnLine NCLAT 2223, Company Appeal (AT (Insolvency) No. 188 of 2022, NCLAT, Principal Bench, New Delhi. Decided by Hon’ble Justice Ashok Bhushan (Chairperson), Hon’ble Justice M. Satyanarayana Murthy (Judicial) and Barun Mitra (Technical)

Ratio: The Adjudicating Authority had rejected the Section 9 of Insolvency and Bankruptcy Code 2016, application filed by the Appellant, who claimed to be an Operational Creditor seeking a total amount of Rs. 1,39,84,400/-. The Adjudicating Authority rejected the application on the grounds that the claimed interest amount cannot be included in the threshold calculation, and since the principal amount was below Rs. 1 crore, it did not meet the threshold requirement. The Appellant argued that the Authority’s view contradicted a previous judgment of the Tribunal.

The Tribunal agreed with the Appellant, referring to the previous case where it had ruled that interest could be added to fulfil the threshold. Therefore, the Tribunal set aside the Authority’s order and remitted the matter back to the Authority for fresh consideration in accordance with the law.
8. The Hamlin Trust v LSFIO Rose Investments S.a.r.I

Citation: The Hamlin Trust Vs. LSFIO Rose Investments S.a.r.I: 2022 SCC OnLine NCLAT 462, Company Appeal (AT) No: 77 pf 2022, NCLAT, New Delhi. Decided by Hon’ble Justice Anant Bijay Singh (Judicial), Dr. Alok Srivastava (Technical) and Mr. Barun Mitra (Technical)

Ratio: The above appeal revolves around two key issues regarding the appointment of a Chief Financial Officer (CFO) in R-2 Company. The first issue is whether the appointment of a CFO should be governed solely by Article 140 of the Articles of Association (AoA), without any reference or compliance with the relevant provisions of the Companies Act, 2013. The second issue is whether the nominations suggested by R-1 (Rose Investments) for the position of CFO comply with the requirements of Article 140 of the AoA. 

The National Company Law Tribunal (NCLT) held that the provision in Article 140 does not consider a nomination as valid or invalid based on any particular reason, thus rejecting the argument that the first two nominations were invalid. The NCLT also directed the nominee, Mr. Bipin Kabra, to fulfill the requirements of sections 184, 189, and 203 of the Companies Act, 2013.The AoA states that Rose Investments has the right to nominate a person for the position of CFO, and if the JV Partners reject the first two nominations or 45 days have passed since the position was vacant, Rose Investments can nominate any person.

However, the Companies Act, 2013 defines the CFO as a whole-time key managerial personnel (KMP) and sets eligibility criteria and standards for KMPs. Although the AoA does not explicitly address eligibility or the selection process for the CFO, it would be logical to consider the provisions of the Companies Act, 2013 in the absence of specific mention. The first two suggested candidates, Mr. Devendra Mehta and Mr. Venkataraman Subramanian were found to be ineligible as they contravened the requirements of section 203 of the Companies Act. Therefore, the NCLT erred in stating that the Appellants must accept the third nomination without considering eligibility. 

The Tribunal emphasized that all suggested candidates should meet the eligibility conditions under section 203 for the Appellants to exercise their right to select the most suitable candidate in line with Article 140 of the AoA.
9. Akshat Pandey v Avighna Films Private Limited

Citation: Akshat Pandey v. Avighna Films Private Limited: C.P. (IB) No. 178/KB/2021, NCLT, Kolkata Bench. Decided by Hon’ble Justice Shri Rohit Kapoor (Judicial), Mr. Harish Chander Suri (Technical)
Ratio: The main issue in the above case concerns whether an investment made by a director of a company can be classified as an operational debt. According to Section 5(21) of the Insolvency and Bankruptcy Code, an operational debt refers to a claim related to the provision of goods or services, including employment, or a debt arising from the repayment of dues to the Central Government, State Government, or local authority. Additionally, Section 5(20) defines an operational creditor as a person to whom an operational debt is owed, including any legally assigned or transferred debt.

Based on the provided definitions, it is evident that an investment made by the director of the company, in this case, for the production of a movie, does not fall within the scope of an operational debt as outlined in the Insolvency and Bankruptcy Code.

10. Cholamandalam Investment and Finance Company Ltd v Hotchand Kishinchand Talreja

Citation: Cholamandalam Investment and Finance Company Ltd v. Hotchand Kishinchand Talreja: I.A. No. 230/2022 (Stay) In Misc. Appeal No. 65/2022, DRAT, Mumbai. Decided by Hon’ble Justice Ashok Menon, Chairperson (Judicial)

Ratio: SARFAESI Proceedings and arbitration proceedings can be resorted to simultaneously by parties. arbitral proceedings are a form of adjudication of the dispute between the appellant and the respondents whereas SARFEASI measures are provided for expeditious action against the debtors. In the present case, the appellant resorted to arbitration and challenge to award should be before High Court u/ Section 34 of the Arbitration Act.

11. Bajaj Rubber Company Pvt. Ltd. v Saraswati Timber Pvt. Ltd

Citation: Bajaj Rubber Company Pvt Ltd vs. Saraswati Timber Pvt Ltd: 2023 SCC OnLine NCLAT 204, C.P. (IB)-1441(ND)2018, NCLT, New Delhi Bench, Court II, Decided by Hon’ble Justice Dharminder Singh (Judicial) and Mr. L.N. Gupta (Technical)

Ratio: In the above matter, the Operational Creditor had, previously filed an application under section 9 of the IBC, 2016, which was subsequently withdrawn as the parties had reached a compromise by way of a settlement agreement. However, the OC had filed the above application seeking revival of the previous Sec 9 application as he had taken liberty to do so while withdrawing the same, as there has been a breach of the terms and conditions of such settlement agreement.
The NCLT held that breach of terms and conditions of a settlement agreement do not come under the purview of operational debt as defined under the provisions of IBC and the same cannot be a ground to trigger CIRP against the Corporate Debtor.
12.P M Cold Storage Pvt Ltd v Goouksheer Farm Fresh Pvt. Ltd

Citation: P M Cold Storage Pvt Ltd VS Goouksheer Farm Fresh Pvt. Ltd. Through Resolution Professional Mr Sanjeev Jhunjhunwala & Anr: 2022 SCC OnLine NCLAT 2068, Company Appeal (AT)(Ins) – 615/2020, NCLAT, New Delhi. Decided by Hon’ble Justice Rakesh Kumar Jain (Judicial) and Mr. Kanthi Narahari (Technical) and Dr. Alok Srivastava (Technical)

Ratio: The NCLAT concluded that the payment of TDS by the corporate debtor on the interest payable does not constitute a written acknowledgment of the liability. Therefore, such TDS payment does not serve as an acknowledgment of the debt. The NCLAT also emphasized that Rule 13 of the CIRP Regulations imposes a responsibility on the IRP/RP to verify and maintain a list of creditors during the CIRP. In this case, the RP failed to exercise due diligence in verifying the claims and scrutinizing the submitted documents for genuineness and authenticity. The NCLAT recommends that the Insolvency and Bankruptcy Board of India investigate the conduct of the RP and take appropriate action under the regulations.

Based on the above analysis, the NCLAT concludes that the documents relied upon by the RP to admit and accept the claim of NHSH as a member of the CoC are not reliable and should not have been considered for admitting NHSH’s claim within the limitation period. Therefore, the Adjudicating Authority made an error in upholding the admission of NHSH’s claim by the RP. Consequently, the NCLAT sets aside the Impugned Order and directs that NHSH should not be a member of the CoC in the CIRP of Goouksheer Farm Fresh Pvt. Ltd.
13. Sapan Mohan Garg RP of Sort India Enviro Solutions Ltd. v Manish G Patel & Anr

Citation: Sapan Mohan Garg RP of Sort India Enviro Solutions Ltd. Vs. Manish G Patel & Anr: 021 SCC OnLine NCLAT 4972, Company Appeal (AT) (Insolvency) No. 873 of 2021, NCLAT New Delhi, Decided by Hon’ble Justice Rakesh Kumar Jain (Judicial) and Ms. Shreesha Merla (Technical)

Ratio: This appeal challenges the order of the Adjudicating Authority dismissing an application filed by the appellant (RP) under Section 70 of the Insolvency and Bankruptcy Code, 2016. The dismissal was based on the jurisdiction of the Tribunal to entertain such an application. The appellant’s counsel referred to a previous decision of the National Company Law Appellate Tribunal, which held that the RP is not authorized to initiate prosecution under Section 70, and only the Insolvency and Bankruptcy Board of India (IBBI), the Central Government, or an authorized person can file a complaint to initiate prosecution under that section.

Considering the circumstances, the Tribunal finds no error in the order of the lower Tribunal and dismisses the present appeal. However, the RP is granted the liberty to file an appropriate application to the IBBI in this matter, if advised to do so.

14.Trafigura India Pvt. Ltd. v TDT Copper Ltd

Citation: Trafigura India Pvt. Ltd. Vs. TDT Copper Ltd: 2021 SCC OnLine NCLAT 4850Company Appeal (AT) (Insolvency) No. 742 of 2020, NCLAT, Principal Bench, New Delhi. Decided by Hon’ble Justice Anant Bijay Singh (Judicial) and Ms. Shreesha Merla (Technical)

Ratio: The NCLAT held that the Adjudicating Authority correctly determined that the default in the settlement agreement does not qualify as an “operational debt” under Section 5(21) of the Insolvency and Bankruptcy Code (IBC). The NCLAT also agreed with the Adjudicating Authority’s decision that the matter should not be referred to arbitration under Section 8 of the Arbitration and Conciliation Act. Furthermore, the NCLAT noted that the Adjudicating Authority appropriately considered the pending commercial civil suit and rejected the appellant’s claim. Based on these reasons, the NCLAT found no merit in the appeal and affirmed the impugned order of the Adjudicating Authority, dismissing the appeal.
15. State of Rajasthan & Others v O.P. Gupta

Citation: State of Rajasthan & Others v. O.P. Gupta: DIARY NO. 27824 OF 2020, Supreme Court of India. Decided by Hon’ble Justice Indira Banerjee and Hon’ble Justice J.K. Maheshwari 

Ratio: The court held that “The High Court has rendered a just decision based on a purposive interpretation of Rule 25(2) of the Rules applied to the admitted facts on record. The interpretation given by the High Court to Rule 25(2) of the Rules is a plausible interpretation.”

It is settled law that when financial rules framed by the Government such as Pension Rules are capable of more interpretations than one, the Courts should lean towards that interpretation which goes in favour of the employee.
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.
Please follow us on FacebookInstagram and LinkedIn for law-related updates and case studies.
Cookie Consent with Real Cookie Banner