RELEVANT JUDGMENTS

• SUPREME COURT

• Asset Reconstruction company (India) Ltd Vs. Tulip Star Hotels Ltd. & Ors. Civil Appeal 84-85 of 2020, date of judgment 01.08.2022; The Hon’ble Supreme Court held that the entries in Books of Account/Balance sheet of a company can be treated as acknowledgement of liability in respect of debt payable to a Financial Creditor. The Apex Court was further of the opinion that an application for initiation of CIRP against the Corporate Debtor under Section 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years in which case the period of limitation would get extended by a further period of three years.
• Kotak Mahindra Bank Limited Vs. Kew Precision Parts Private Limited & Ors. Civil Appeal No. 2176 of 2020, date of judgment 05.08.2022; The Hon’ble Supreme Court held that an Appeal being the continuation of original proceedings, the provision of Section 7(5)(b) of the IBC, of notifying the Financial Creditor before rejection of a claim, would be attracted. If notified of the proposal to close the proceedings, the Appellant’s Financial Creditor might have got the opportunity to rectify the defects in its application under Section 7 by filing additional pleadings and/or documents
• Sundaresh Bhatt, Liquidator of ABG Shipyard Vs. Central Board of Indirect Taxes and Customs Civil Appeal No. 7667 of 2021, date of judgment 26.08.2022; The Hon’ble Supreme Court held that the Insolvency and Bankruptcy Code 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 authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under Customs Act. Therefore, after such assessment, the authority has to submit its claims (concerning customs dues/ operational debt) in terms of the procedure laid down, in strict compliance of the time periods prescribed under the Code, before the Adjudicating Authority.

• HIGH COURT

• Jalgaon Janta Sahakari Bank Ltd. Versus Joint Commissioner of Sales Tax Nodal 9, Mumbai & Anr. [WP No. 2935 OF 2018 with other writ petitions, date of judgment 30.08.2022; The Hon’ble Bombay High Court held that the dues of a secured creditor would rank superior to the dues of a state government department upon sale of secured asset. The Court was further of the view that the priority in payment under Recovery of Debt Due to Bank Act and SARFAESI Act would not apply only if the immovable property of the defaulter is attached and proclamation issued in accordance with law by any of the State Government prior to Chapter IV-A of SARFAESI and Section 31B of RDDB Act coming in force.
• Sanjay Sarin Vs. The Authorised Officer, Canara Bank & Ors. W.P.(C) 2983/2022 & CM APPL. 8630/2022, date of judgment 08.08.2022; The Hon’ble Delhi High Court held that that approval of a resolution plan does not ipso facto discharge a Personal Guarantor (of a Corporate Debtor) his liabilities under the contract of guarantee. As held by this court, the release or discharge of a Principal Borrower from the debt owed by it to its creditor, by an involuntary process, i.e. by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract.

• National Company Law Appellate Tribunal (NCLAT)

• M/s IDBI Bank Limited Vs. C.J. Davi Company Appeal (AT) (CH) (Ins) No. 116 of 2022, date of judgment 02.08.2022; The Hon’ble NCLAT held that the commercial wisdom of CoC is paramount and can only be interfered by the Tribunal if the same is arbitrary, illegal, irrational and dehors the IBC. The Hon’ble Tribunal was of the view that in the instant matter the Appellant is having 98% voting share in the Committee of Creditors hence, the voting share of the Appellant in passing a Resolution for change of Resolution Professional is much more than the required voting percentage i.e. 66%. Therefore, Ld. Adjudicating Authority cannot interfere with the decision taken by the CoC in their commercial wisdom.
• Sudhir Kumar Goel & Anr. Vs. M/s Shashi Oils and Fats Pvt. Ltd & ors. Company Appeal (AT) (Ins) No. 676 of 2021 and Company Appeal (AT) (Ins) No. 99 of 2022, date of judgment 04.08.2022; The Hon’ble NCLAT held that after the completion of liquidation, an application filed by the Liquidator of the Corporate Debtor for its dissolution, the Adjudicating Authority has no option but to pass an order of dissolution. In the present case the Adjudicating Authority has simply complied with the provisions under Section 54(2) of the Code.
• Somesh Choudhary, Vs. Knight Riders Sports Private Limited & Anr. Company Appeal (AT) (Insolvency) No. 501 of 2021; date of judgment 18.08.2022; The Hon’ble NCLAT held that granting an exclusive right and license to the ‘Corporate Debtor’, to use manufacture, sell, distribute and advertise the licensed products and to use the trademark in association with the licensed products as well as on packaging, promotional advertising material has a direct nexus with the business operations and sales and also with the actual product supplied by the ‘Corporate Debtor.’ Hence, claim in respect of such provisions of ‘goods and services’, under the terms of the Agreement, fall within the ambit of the definition of ‘Operational Debt’ as defined under Section 5(21) of the Code.
• Amit Jain Vs. Siemens Financial Services Private limited Company Appeal (AT) (Insolvency) No. 292 of 2022, date of judgment 21.08.2022; The Hon’ble NCLAT held that suspension of initiation of Corporate Insolvency Resolution Process under Section 10A of the Code is not applicable to proceedings against the Personal Guarantors under Section 95 of the Code because when Section 10A IBC was inserted in Chapter II of Part I which deals with Corporate Insolvency Resolution Process of Corporate Debtor, no corresponding amendment was made in Chapter III of Part III of the Code which deals with Insolvency Resolution Process for individual.
• Mr. Praful Nanji Satra Vs. Vistra ITCL (India) Limited & Ors. Company Appeal (AT) (Ins.) No. 713 of 2020, date of judgment 02.08.2022; The Hon’ble NCLAT held that existence of Financial Debt can be proved from other documents. The Tribunal was of the view that the issue of stamp duty defects are irrelevant for challenging Section 7 application and the Petitioner/Corporate Debtor were at liberty to raise the issue of insufficient stamping before the appropriate authority in front of whom the Financial Creditor would present these documents for enforcing their claim.
• Raj Singh Gehlot Vs. Vistra (ITCL) India Ltd. & Anr. Company Appeal (AT) (Ins) No. 06 of 2021, date of judgment 02.08.2022; The Hon’ble NCLAT held that there must be disbursal of fund against consideration of time value of money by the Financial Creditor to the Corporate Debtor in terms of Section 5(8) of IBC. Therefore, in the instant case, the disbursal by the Creditor to the Special Purpose Vehicle does not make Creditor a Financial Creditor upon decree being granted against the Corporate Debtor.

• National Company Law Tribunal (NCLT)

• Sudhir T Deshpande Vs. Dhanada Corporation Limited in CP (IB) 4671- MB-2018, date of judgment 26.08.2022; The Hon’ble NCLT held that without proof of evidence of any liability owned to the Corporate Debtor, amount disbursed cannot be claimed as financial debt, as a disbursement is a sine qua non for any debt to fall within the ambit of the definition of financial debt.
• Sauria Corporation Vs. Kohinoor Pulp & Paper Private Limited in I.A (IB) No. 892-KB-2022 In C.P. (IB) No. 511- KB-2018, date of judgment 31.08.2022; The Hon’ble NCLT held that the Liquidator is empowered to decide mode of sale of the Corporate Debtor which is in best interest for maximization of asset value. The Ld. Tribunal was of the view that the Liquidator may not be bound by the recommendations/ advice of Stakeholder’ Consultation Committee, however, in exercise of process of consultation if something better transpires, he can take the same into consideration.
• State Bank of India Vs. Shirpur Power Pvt. Ltd in CP(IB) 487 of 2018, date of judgment 02.08.2022; The Hon’ble NCLT held that once the sale of the Corporate Debtor has been concluded as a slump sale, the same cannot be converted into a sale of the Corporate Debtor as a going concern unilaterally upon request of the bidder without consultation of the stakeholders’ committee.
• Edelweiss Asset Reconstruction Vs. Octaga Green Power and Sugar Company Limited in CP (IB) 2987-MB-C-II-2018, date of judgment 26.08.2022; The Hon’ble NCLT held that the prime objective of the Code is to rescue the Corporate Debtor in distress and to provide revival of the Corporate Debtor. The Ld. Tribunal observed that the Corporate Debtor is a going concern and there are workmen and employees whose livelihood would be affected in the event of liquidation. Therefore, every attempt has to be first made to revive the concern and make it a going concern with liquidation being the last resort.