Leading Corporate Law Cases in April – 2022

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1. Union of India v Ganpati Dealcom Pvt. Ltd

Citation: Union of India v. Ganpati Dealcom Pvt. Ltd: (2023) 3 SCC 315 Civil Appeal 5783 of 2022, Supreme Court of India. Decided by Hon’ble Justice CJI NV Ramana, Justices Krishna Murari and Hima Kohli

Ratio: The Court also struck down the forfeiture provisions contained in Section 5 of the Benami Act 1988 by observing that it is a ‘half-baked provision’, which did not even provide any mechanism to ascertain when such forfeiture would be warranted.

Going by the rationale of this judgment, particularly in relation to the observation that imposition of criminal punishment in a retrospective manner is a violation of Article 20(1) of the Constitution of India, the retrospectivity of Section 72(c) of the Black Money Act 2015 may also be challenged by the aggrieved persons.
2. Baljinder Singh v State of Punjab 

Citation: Baljinder Singh v State of Punjab: (2011) 15 SCC 282, CRM(M) 8295 of 2020, Punjab & Haryana HC. Decided by Hon’ble Justice Ashok Kumar Verma

Ratio: All the facts and circumstances and then came to the conclusion that since the circumstantial evidence was not fully established, the guilt of the accused was not proved beyond reasonable doubt.

If there is even a slight possibility of an alternate theory being created in favour of the accused, then the benefit of the doubt has to be given to the accused and he essentials for circumstantial evidence are that it should be conclusive and the guilt has to be proved beyond any reasonable doubt, but this was not the situation in this present case.

3. PNC Infratech Limited v Deepak Maini

Citation: Whether the Adjudicating Authority Vikram Puri vs Universal Buildwell Pvt. Ltd.: 2022 SCC OnLine NCLAT 495 Company Appeal (AT) (Ins)
– 1018/2021, NCLAT New Delhi, decided by Hon’ble Justice Ashok Bhushan (Judicial) Hon’ble Dr. Ashok Mishra (Technical), Dr. Alok Srivastava (Technical
Ratio: The National Company Law Appellate Tribunal (NCLAT) states that once the Committee of Creditors (CoC), consisting of the sole member with 100% voting share, approves a resolution plan, neither the NCLT nor the NCLAT can interfere with or substitute their views for the commercial wisdom of the CoC.

The CoC’s decision is based on business considerations, feasibility, and expert evaluations, taking into account the viability of the Corporate Debtor. Unless the resolution plan is contrary to the law or against public interest, the technical complexities and merits of the plan should not be scrutinized. The NCLAT also states that there is no provision in the Insolvency and Bankruptcy Code (“Code”) that allows an unsuccessful resolution applicant to challenge the score granted as per the evaluation matrix prepared by the CoC and the Resolution Professional. Appeals against the orders of the Adjudicating Authority can be filed under Section 61 of the Code, including appeals against the approval of a resolution plan under Section 31, but these appeals must be based on specific grounds such as contravention of the law or material irregularities by the Resolution Professional. The NCLAT’s decision is a significant development in the IBC as it clarifies the scope of judicial review of the CoC’s decisions. The decision also sends a message to unsuccessful resolution applicants that they cannot challenge the CoC’s decisions simply because they do not agree with them.

4. Jindal Power Ltd. v Dushyant C. Dave Liquidator of Shirpur Power Pvt. Ltd

Citation: Jindal Power Ltd. v. Dushyant C. Dave Liquidator of Shirpur Power Pvt. Ltd: IA/594(AHM)2022, NCLT Ahmedabad Bench. Decided by Mr.
Kaushalendra Kumar Singh (Technical) and Hon’ble Justice Madan B Gosavi (Judicial).

Ratio: The National Company Law Appellate Tribunal (“NCLAT”) has held that a bidder who accepted the bid to purchase a corporate debtor as a slump sale cannot convert the slump sale into a sale as a going concern. The NCLAT has held that once a bidder accepts a bid to purchase a corporate debtor, they cannot change their mind and ask for a different type of sale. This is because the sale price of a corporate debtor as a going concern is typically much higher than the sale price of a corporate debtor in a slump sale. If the applicant’s request was allowed, it would mean that the applicant would be able to purchase the corporate debtor at a much lower price than what was originally agreed upon. This would unfairly disadvantage the other members of the stakeholders’ committee who had already accepted the applicant’s bid.

The NCLAT’s decision is a significant development in the law of insolvency and bankruptcy. It clarifies that once a bidder accepts a bid to purchase a corporate debtor, they are bound by the terms of their offer. This will help to ensure that insolvency and bankruptcy proceedings are conducted in a fair and orderly manner.

5. Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs

Citation: Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs: (2023) 1 SCC 472 Civil Appeal No. 7667 of 2021, Supreme Court of India. Decided by Hon’ble Justice CJI NV Ramana, Justices JK Maheshwari, Hima Kohli.

Ratio: The Supreme Court considered two questions in the above appeal: (a) Whether the IBC prevails over the Customs Act, and to what extent, and (b) Whether the respondent can claim title over goods and issue a notice to sell them under the Customs Act during the liquidation process.

The Supreme Court concluded that the IBC would prevail over the Customs Act, to the extent that once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act. The two acts operate in their own spheres and any conflict must be harmoniously resolved unless a clear conflict arises.

6. Noida Infratech (Two) Pvt. Ltd. v Enforcement Directorate Kolkata Zone Office & Ors

Citation: Noida Infratech (Two) Pvt. Ltd. v. Enforcement Directorate Kolkata Zone Office & Ors.: Company Appeal (AT)(Insolvency) No. 877 of 2022, NCLAT New Delhi. Decided by Hon’ble Justice Ashok Bhushan (Chairperson), Hon’ble Justice M. Satyanarayana Murthy (Judicial) and Mr. Barun Mitra (Technical).

Ratio: The issue in this appeal is whether the limitation period for filing the appeal starts from the date of knowledge of the appellant or from the date of the order by the Adjudicating Authority. The NCLAT referred to Supreme Court judgments stating that the limitation period begins from the date when the order is pronounced, and the appellant can exclude the time taken to obtain a certified copy of the order. The argument that limitation starts from the date of knowledge was rejected.

The appellant relied on a NCLAT judgment that allowed appeals filed within 30 days from the date of knowledge, but the NCLAT stated that it is bound by the Supreme Court rulings. In this case, the appeal was filed beyond the limitation period, and the delay was not condonable. Therefore, the delay condonation application was dismissed, and the appeal was rejected.

7. Amit Jain v Siemens Financial Services Pvt. Ltd

Citation: Amit Jain Vs. Siemens Financial Services Pvt. Ltd: 2022 SCC OnLine NCLAT 2558, Company Appeal (AT) (Insolvency) No. 292 of 2022, NCLAT New Delhi. Decided by Justice Ashok Bhushan (Chairperson), Hon’ble Justice M. Satyanarayana Murthy (Judicial), Mr. Barun Mitra (Technical)

Ratio: The National Company Law Appellate Tribunal (NCLAT) has held that the suspension of the insolvency resolution process (CIRP) under Section 10A of the Insolvency and Bankruptcy Code (IBC) does not apply to personal guarantors. Section 10A was inserted in the IBC in March 2020 to provide relief to corporate debtors during the COVID-19 pandemic. The section prohibits the initiation of CIRP against a corporate debtor for any default arising on or after March 25, 2020.

The NCLAT also noted that the legislature did not amend Section 95 of the IBC, which deals with the insolvency resolution process for individuals and partnership firms. This, the NCLAT said, suggests that the legislature did not intend to extend the suspension of CIRP to personal guarantors.
The NCLAT’s decision is a significant development in the law of insolvency and bankruptcy. It clarifies that the suspension of CIRP under Section 10A does not apply to personal guarantors. This means that personal guarantors can still be subject to CIRP for defaults arising on or after March 25, 2020.

8. Maitreya Doshi v Anand Rathi Global Finance Ltd. and Anr

Citation: Maitreya Doshi Vs. Anand Rathi Global Finance Ltd. and Anr: 2022 SCC OnLine SC 1276 Comp. App. (AT) (Ins) No. 191 of 2021, NCLAT,
Principal Bench, New Delhi. Decided by Hon’ble Justice Ms. Indira Banerjee, J.K. Maheshwari

Ratio: The NCLAT stated that being a pledgor does not disqualify a party from initiating proceedings under Section 7 of the IBC. The Appellate Authority’s finding that Doshi Holdings is a borrower based on the interpretation of the Loan- cum-Pledge Agreements is valid and should not be interfered with. While a pledgor may not be a financial debtor per se, in this case, Doshi Holdings was found to be a borrower, and the approval of a resolution plan for one borrower does not discharge a co-borrower.

Therefore, proceedings under Section 7 can be initiated against multiple corporate debtors, but the claim cannot be realized twice. The Tribunal dismissed the appeal, finding no grounds to interfere with the Appellate Authority’s decision.

9. Ashok G. Rajani v Beacon Trusteeship Ltd & Ors

Citation: Ashok G. Rajani Vs. Beacon Trusteeship Ltd & Ors: Civil Appeal No. 4911 of 2021, Supreme Court of India, Decided by Hon’ble Justice Indira Banerjee and Hon’ble Justice J.K.Maheshwari

Ratio: The Supreme Court held that Section 12A of the IBC allows the withdrawal of an application admitted under Section 7, 9, or 10, with the approval of 90% voting shares of the Committee of Creditors. The withdrawal can be made before the Committee of Creditors is constituted. The objective of the IBC is to promote timely resolution of insolvency and bankruptcy for economic growth.

The NCLT has the power to permit withdrawal for the ends of justice and to facilitate the business of the corporate entity. Settlement should not be stifled before the constitution of the Committee of Creditors. The withdrawal does not prevent other creditors from pursuing proceedings under the IBC. The appeal was dismissed, and the NCLT was directed to consider the settlement application based on the observations made.

10.Edelweiss Asset Reconstruction Company Ltd. v Perfect Engine Components
Pvt. Ltd

Citation: Edelweiss Asset Reconstruction Company Ltd. Vs. Perfect Engine Components Pvt. Ltd.: 2022 SCC OnLine NCLAT 2218, Company Appeal (Appellate Tribunal) (Insolvent) No. 840 of 2021 (22.12.2022 – NCLAT New Delhi); Decided by Hon’ble Justice Anant Bijay Singh (Judicial), Hon’ble Member Ms. Shreesha Merla Member (Technical).

Ratio: In the above case, the question was whether the application filed under Section 7 of the Insolvency and Bankruptcy Code (IBC) was barred by limitation and whether there was a default. The Tribunal referred to a previous judgment stating that a judgment/decree for money or certificate of recovery in favor of a financial creditor constitutes an acknowledgement of debt and gives rise to a fresh cause of action within three years of the default. The Tribunal also clarified that the date of default does not strictly mean the date of classification as a non-performing asset (NPA), but rather the non-payment of a debt that has become due and payable.

In this case, there were consent terms and correspondence acknowledging the debt and default by the corporate debtor. The Tribunal held that the application was not barred by limitation and there was a debt and default, following the principles laid down in the previous judgment. The appeal was allowed, and the adjudicating authority was directed to proceed accordingly.

11.Vemula Amarchand Vs. Krishna Mohan Gollamudi RP for Priyadarsini Ltd.

Citation: Vemula Amarchand Vs. Krishna Mohan Gollamudi RP for Priyadarsini Ltd.: Company Petition (Insolvency Bankruptcy) No. 369/10/HDB of 2019 (23.12.2022 – NCLT Hydrabad); Decided by Hon’ble Justice Dr. Venkata Ramakrishna Badarinath Nandula (Judicial) Hon’ble Member Shri. Ajai Das Mehrotra (Technical).

Ratio: The Adjudicating Authority found that the applicant did not sign the necessary documents for the settlement, making it non-binding. The Supreme Court ruled that only wages of workmen who worked during the corporate insolvency resolution process (CIRP) are included in CIRP costs. Other wage claims are governed by different sections. Workmen’s dues related to provident fund, gratuity fund, and pension fund are kept separate from the liquidation process.

Therefore, the applicant was deemed to be employed until liquidation and is entitled to wages and benefits until the liquidation order. The Liquidator was directed to distribute the amount due to the applicant as per the order, following Section 53(1)(a) of the Insolvency and Bankruptcy Code (IBC).

12.Excise and Taxation Commissioner v Hitesh Goel, Liquidator for Anandtex International Pvt. Ltd

Citation: Excise and Taxation Commissioner Vs. Hitesh Goel, Liquidator for Anandtex International Pvt. Ltd.: Compant Petitiom (Insolvent Bankruptcy) No.152/Chd/Hry of 2018 (23.12.2022 – NCLT Chandigarh); Decided by Hon’ble Justice Mr. Harnam Singh Thakur (Judicial) Hon’ble Member Mr. Subrata Kumar Dash, (Technical).

Ratio: The Adjudicating Authority, citing a Supreme Court decision, determined that the Taxation Department is not obligated to file a claim for statutory dues already communicated to the corporate debtor. Such claims are considered debts owed to secured creditors due to the creation of security interest by law. The liquidator is instructed to consider the claim of the Excise and Taxation Authorities accordingly. Regarding the assessment order, it was noted that the Input Tax Credit (ITC) was blocked for the demand related to a specific assessment year. The Excise and Taxation Authority did not clarify the section under which the charge on the corporate debtor’s ITC was created.

However, since the claim of the Excise and Taxation Authorities is already directed to be considered by the liquidator under the relevant provisions of the Insolvency and Bankruptcy Code (IBC), the attachment of the ITC by the authorities is unjustified. The respondent is ordered to remove the charge on the corporate debtor’s ITC under GST. This was done to avoid negatively affecting the debtor’s business and align with the objectives of the IBC.

13.Alliance Broadband Services Pvt. Ltd. v Manthan Broadband Services Pvt. Ltd
Citation: Alliance Broadband Services Pvt. Ltd. Vs. Manthan Broadband Services Pvt. Ltd.:2022 SCC OnLine Cal 4114 Civil Suit 54 of 2019 (19.12.2022 – High Court of Calcutta); Decided by Hon’ble Justice Krishna Rao.

Ratio: In the above case, the petitioner initially filed a civil suit seeking a decree and declaration regarding the respondent’s equity shares. Subsequently, the petitioner invoked Section 7 of the IBC, which was admitted by the NCLT, and a similar claim was filed before the liquidator. The petitioner was concerned that the liquidator will take control and possession of the shares currently held by the petitioner. However, as per Section 60(5) of the IBC, the petitioner can approach the NCLT instead of filing the instant application before the Hon’ble High Court.

The Court stated that Section 238 of the IBC has an overriding effect on any other existing law. The Court concluded that it could not issue an interim order at that stage, and the matter would be more appropriately adjudicated by the NCLT. Additionally, it was also reiterated that Section 430 of the Companies Act itself imposes a bar on granting injunctions by civil courts in matters within the purview of the NCLT.

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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