1. Arjab Kumar Jena v. Utsa Jena Pattnaik

Citation: Arjab Kumar Jena v. Utsa Jena Pattnaik: Civil Appeal No.151 of 2022, Supreme Court, Decided by Hon’ble Justice Sanjiv Khanna and Hon’ble Justice Bela M Trivedi.

Ratio: The Supreme Court held that comments made during the course of the mediation or settlement proceedings should not be taken on record, as the same would impede conciliation and will be contrary to the principle of confidentiality. Therefore, settlement offers, or negotiations held, or submissions made by the parties such as during mandatory pre-mediation proceedings under the Commercial Courts Act should or cannot be used against them during the court proceedings which has to be decided on merits of the case.

2. Essjay Ericsson Private Limited vs Frontline (NCR) Business Solutions Pvt. Ltd

Citation: Essjay Ericsson Private Limited vs Frontline (NCR) Business Solutions Pvt. Ltd: Company Appeal (AT) [Insolvency] No.936 of 2021, NCLAT; Decided by Hon’ble Justice Jarat Kumar (Judicial) Hon’ble Justice Ashok Bhushan (Judicial Hon’ble Dr. Alok Srivastava (Technical)

Ratio: NCLAT holds that when the Hon’ble Supreme Court has granted extension of period of limitation passed in Suo Motu WP-03/2020 due to COVID19, it cannot be said that appeal, suit or application which is filed during the relevant period is barred by time so as requiring an Application under Section 5 of the Limitation Act, 1963 for condonation of delay.

Parties can use the ratio held in this judgement to file claims, applications, suits etc though the last cause of action arose before 3 years as the period from 15th March 2020 till 28th Feb 2022 is excluded for the purposes of calculating limitation.

3. Everest Organics Ltd. vs. Leesa Lifesciences Pvt. Ltd. and Ors.

Citation: Everest Organics Ltd. vs. Leesa Lifesciences Pvt. Ltd. and Ors. (05.01.2022 – NCLAT)

MANU/NL/0015/2022; Decided by Hon’ble Justice M. Venugopal (Judicial) and Hon’ble Mr. Kanthi Narahari (Technical)

Ratio: COC has the power to decide and approve the Resolution Plan of the Resolution Applicants. Further, the COC also can consider the eligibility/ineligibility of the Resolution Applicants under Section 29(A)(e) of the Code.

Parties cannot challenge the decision of the COC before the NCLT and that NCLT had rightly directed the COC to consider eligibility/ineligibility of the Resolution Applicants.

4. Kalpesh Dineshbhai Patel, Director of Kingston Paptech Pvt. Ltd. vs. Krishna Paper Trading Co. and Ors.

Citation: Kalpesh Dineshbhai Patel, Director of Kingston Paptech Pvt. Ltd. vs. Krishna Paper Trading Co. and Ors. (06.01.2022 – NCLAT): MANU/NL/0023/2022; Decided by Hon’ble Justice Ashok Bhushan (Judicial) and Hon’ble Mr. Alok Srivastava (Technical)

Ratio: NCLAT stated that the existence of debt has to be clearly stated in section 7 application for which a detailed format is provided in the IBC. The application has to be submitted in the stipulated format and the Financial Creditor has to furnish record of the default with the information utility or such other record or evidence of default as may be specified. Further, under section 7 application, the satisfaction of the Adjudicating Authority is necessary to establish that default has occurred, and financial debt is due and payable.

5. Devas Multimedia Private Ltd. vs. Antrix Corporation Ltd. and Ors.

Citation: Devas Multimedia Private Ltd. vs. Antrix Corporation Ltd. and Ors. (17.01.2022 – SC): MANU/SC/0046/2022; Decided by Hon’ble Justice Mr. Hemant Gupta and Hon’ble Justice Mr. V. Ramasubramania

Ratio: The Supreme Court held that the motive behind the victim of fraud coming up with a petition for winding up, is of no relevance when fraud, as a matter of fact, has been established. If the seeds of the commercial relationship were a product of fraud, every part of the plant that grew out of those seeds, like the Agreement etc, is infected with the poison of fraud.

6. Amsons Communication Pvt. Ltd. vs. ATS Estates Pvt. Ltd.

Citation: Amsons Communication Pvt. Ltd. vs. ATS Estates Pvt. Ltd. (17.01.2022 – NCLAT): MANU/NL/0049/2022; Decided by Hon’ble Justice Ashok Bhushan (Judicial) Hon’ble Justice Jarat Kumar (Judicial) Dr. Alok Srivastava

Ratio: NCLAT held that the provisions of Code cannot be allowed as a recovery mechanism or to recover the claim of interest by an Operational Creditor. An Application under Section 9 cannot be converted into proceedings for recovery of interest by Operational Creditor on delayed payment, that is not the object of IBC. The object of the IBC is to resolve the insolvency of the Corporate Debtor and to bring the Corporate Debtor back on its feet.

It is important to note that the principal amount of 18 lakhs was paid by the Corporate Debtor and there was no agreement or document on record to show that interest was payable by the Corporate Debtor and that the Corporate Debtor had raised a dispute with regards to payment of interest in their earlier emails.

7.Varrsana Ispat Ltd. vs. Varrsana Employee Welfare Association and Ors.

Citation: Varrsana Ispat Ltd. vs. Varrsana Employee Welfare Association and Ors. (19.01.2022 – NCLAT): MANU/NL/0067/2022

Ratio: NCLAT upheld the NCLT order stating that the distribution of funds from working capital and profit to the stakeholders until assets have been liquidated, and till the liquidator realises the complete liquidation value is not in conformity with the provisions of the Code and Regulations.

It was also revealed that IBBI in its interim order dated 29.10.2020 has found that the Liquidator has made distribution without complying with the provisions of the Code and related Regulations and has debarred him from undertaking any new assignments for a period of 90 days from the date of said order.

8. Bank of Baroda and Ors. vs. MBL Infrastructures Limited and Ors.

Citation: Bank of Baroda and Ors. vs. MBL Infrastructures Limited and Ors. (18.01.2022 – SC): MANU/SC/0060/2022; Decided by Hon’ble Justice Sanjay Kishan Kaul and Hon’ble Justice M.M. Sundresh

Ratio: Supreme held that the word “such creditor” in Section 29A(h) has to be interpreted to mean similarly placed creditors after the insolvency application is admitted by the adjudicating authority. A personal guarantee that stands invoked by a single creditor, will be disqualified, notwithstanding the application being filed by any other creditor seeking initiation of insolvency resolution process. There cannot be ineligibility qua one creditor as against others.

Therefore, the guarantor is barred from being a Resolution Applicant under Section 29A(h) of IBC if Guarantee is invoked and insolvency proceedings are initiated by similarly situated creditors.

9. Jotun India Private Limited vs. Orvis Paints India Private Limited

Citation: Jotun India Private Limited vs. Orvis Paints India Private Limited (14.12.2021 – NCLT – Chennai): MANU/NC/3357/2021, Decided by Hon’ble Justice Sucharitha R (Judicial) and on’ble Sameer Kakar (Technical)

Ratio: NCLT held that issuance of Demand Notice u/s 8 of IBC after receipt of a summon of civil suit issued by the Corporate Debtor on the Operational Creditor amounts to a pre-existing dispute between the parties as there were several emails showing a pre-existing dispute between the parties. Thereby applications filed subsequently by the Operational Creditor will be dismissed.

10. M. Financial Assets and Reconstruction Co Ltd (third party applicant) in Bank of India vs National Steel & Agro Industries Ltd:

Citation: J.M. Financial Assets and Reconstruction Co Ltd (third party applicant) in Bank of India vs National Steel & Agro Industries Ltd: IA 2862/2021 IN C.P.(IB)2067/MB/2019, NCLT Mumbai; Decided by Hon’ble Justice Pradeep Narhari Deshmukh (Judicial) Hon’ble Mr. SH Kapal Kumar Vohra (Technical)

Ratio: A bench of the National Company Law Tribunal (NCLT) allowed an interlocutory application by JM Financial ARC Limited, a third party, to substitute Bank of India (BoI) as a petitioner in insolvency proceedings against a BSE listed steel company.

According to the order passed by a bench led by Justice Pradeep Nahar Deshmukh, JM Financial is now the financial creditor pursuant to the assignment of debt from BoI in the plea to admit National Steel & Agro Industries Limited in the CIRP.

11. State Bank of India vs. Mahendra Kumar Jajodia, Personal Guarantor to Corporate Debtor and Ors.

Citation: State Bank of India vs. Mahendra Kumar Jajodia, Personal Guarantor to Corporate Debtor and Ors. 27.01.2022 – NCLAT): MANU/NL/0081/2022; Decided by Hon’ble Justice Ashok Bhushan (Chairperson) and Hon’ble Dr. Alok Srivastava (Technical)

Ratio: It is not a mandatory requirement that CIRP has to be initiated against the Corporate Debtor to initiate insolvency proceedings against the Corporate Guarantor under Section 95.

NCLAT stated that “The purpose and object of Section 60 (2) of the Code is that when proceedings are pending in ‘a’ National Company Law Tribunal, any proceeding against Corporate Guarantor should also be filed before ‘such’ National Company Law Tribunal. The idea is that both proceedings be entertained by one and the same NCLT. The sub-section 2 of Section 60 does not in any way prohibit filing of proceedings under Section 95 of the Code even if no proceedings are pending before NCLT.”

12. CBRE South Asia Private Limited vs. United Concepts and Solutions Private Limited

Citation: CBRE South Asia Private Limited vs. United Concepts and Solutions Private Limited (19.01.2022 – NCLT – New Delhi): MANU/NC/0103/2022; Decided by Hon’ble Justice Abni Ranjan Kumar Sinha (Judicial) and Hon’ble Mr. L.N. Gupta (Technical).

Ratio: NCLT held that the Interest amount cannot be clubbed with the principal amount of debt to arrive at the minimum threshold of Rs.1 Crore for complying with the provision of Section 4 of IBC, 2016.

While examining the definition of ‘debt’, it also stated that it can be inferred that the “interest” can be claimed as the Financial Debt, but neither there is any provision nor there is any scope to include the interest to constitute as the Operational Debt. There is a marked difference between the definitions of ‘financial debt’ and the ‘operational debt’.

However, the provision of interest was only written on the invoice with no proof of acceptance by the debtor and it will be interesting to see how a similar issue will be dealt with in the future if there is an agreement or contract between the parties allowing the creditor to claim interest from the debtor in case of failure to make payments on time.

Find Part II of our January Newsletter HERE.

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.