Supreme court observed that as per Regulation 38 (3) of the CIRP Regulations, 2016, the resolution plan must demonstrate that it is feasible and viable; also it has provisions for approvals required and the timeline for the same.
The court also observed that when the resolution plan envisages the necessary approvals of the statutory authority, then the plan must reflect such approval as per the CIRP Regulations. The resolution plan did not meet all the parameters laid down in sub-section (2) of Section 30 of the IBC read with Regulations 37 and 38 of the CIRP Regulations,2016, Court is of the view that the appeals of the appellant are entitled to be allowed and are accordingly allowed”, the court added. Accordingly, the appeals preferred by the Resolution Applicant are allowed, and the resolution plan is sent back to the COC for resubmission after satisfying the parameters set out by the Code.
An order passed by the National Company Law Tribunal (‘NCLT’) Kochi Bench was ‘preposterous’ and ‘untenable’. NCLT Kochi had held an Assessment Order by Kerala Value Added Tax (‘KVAT’) Works Contract Authorities against Albana Engineering (India) Pvt. Ltd. to be void ab initio in violation of Section 14(1) (a) of IBC. “The Company Law Tribunal has no power and authority under the IBC to declare an assessment order as void ab initio and non-est in law. Such an order only reflects he competence of the persons who are manning such an important Tribunal. The Order shows the lack of basic understanding of the law. Instead of considering the application by the 2nd respondent for permission to file an appeal against the assessment order, the National Company Law Tribunal, Kochi Bench, has assumed the jurisdiction of the Constitutional Court to declare the assessment order as void ab initio.”
The Lender Banks must provide a reasonable opportunity to the Borrower by furnishing a copy of Audit Reports and allowing him to submit a representation before classifying the account as fraud. In 2021, the Corporate Debtor (Company) was admitted into a Corporate Insolvency Resolution Process (‘CIRP’) under Insolvency and Bankruptcy, Code, 2016. The Company’s loan accounts were declared as fraud by the consortium banks.
The Appellant alleged that the Section 7 petition was not filed by 100 ‘valid’ allottees which is the requirement under Section 7(1) of IBC and the affidavits filed by allottees were false and fabricated. Proceedings under Section 340 of CrPC can be initiated when a person intentionally gives a false statement or fabricates false evidence at any stage of the judicial proceedings. The NCLT held that it could not decide on the issue of forged affidavits and declined to initiate proceedings under Section 340 of CrPC. NCLAT has upheld the rejection of an application seeking initiation of proceedings under Section 340 r/w Section 195 of the Criminal Procedure Code, 1973 (“CrPC”) against allottees, for allegedly filing false affidavits before NCLT in Section 7 of IBC proceedings.
The application was filed by the Resolution Professional for the exclusion of 90 days based on the resolution of the Committee of creditors. The Adjudicating Authority (NCLT) rejected the application observing that there is no ground mentioned in the application on which period can be excluded from the CIRP. The NCLAT Delhi disposed of the appeal and held that the NCLT ought to have granted an exclusion/extension of time when the Resolution Plan received in the process was required to be considered to fulfil the object of the IBC. It granted an extension of 60 days’ period from the date of the Order to complete the entire CIRP process setting aside NCLT’s Order.
NCLAT set aside an NCLT order whereby a petition under Section 9 of IBC was admitted and CIRP was initiated without serving a copy of the petition to the Corporate Debtor. NCLAT has directed that the petition under Section 9 of IBC be revived before the NCLT for fresh consideration and the Corporate Debtor has been granted time to file a Reply.
The Appellant contended that all transactions happened between Respondent 1 and the Promoters with no involvement of the Corporate Debtor since no financial assistance was availed by the Corporate Debtor from Respondent No.1. The Appellant who is the Ex-Director and one of the Shareholders of the Corporate Debtor has filed the present appeal against NCLT New Delhi’s Order allowing the Corporate Insolvency Resolution Process (‘CIRP’) application filed by Respondent 1 against the Corporate Debtor. NCLAT held that raw material is to be treated as forming part of working capital. Further, any financial assistance towards working capital is to be treated as “financial debt” only and not as “operational debt”. NCLAT held that NCLT New Delhi’s Order is valid and the Appellant’s contention that the Corporate Debtor was not a party to the agreement cannot be accepted.
The resolution plan was approved by the Committee of Creditors (COC) and the claim which was filed by the Appellant was after approval of the plan by the CoC. When the plan was already approved by the CoC, then no error has been committed by the Resolution Professional in refusing to admit the claim. The NCLT has rightly rejected the interim application 2023 filed by the appellant for acceptance claim which has been filed post-approval of the resolution plan by the CoC. NCLAT held that a claim submitted post-approval of the resolution plan by the Committee of Creditors (“CoC”) is not liable to be admitted.
NCLT ordered that Suspended Director was given opportunity to enter settlement during the pendency of application filed by Resolution Professional for approval of Resolution Plan. The NCLT granted another opportunity to Suspended Director to enter settlement with COC and kept the application for approval of resolution plan in abeyance. NCLAT set aside this order.
The CIRP (insolvency resolution) is in question since the Resolution Plan filed by the Resolution Professional has been approved by the Committee of Creditors and one of the assets of the Corporate Debtor i.e. the registered trademark which is an intangible asset. Now the question arises whether the trademark is the property of the Corporate Debtor.
NCLAT observed that the NCLT has jurisdiction to adjudicate and entertain any question of law or facts, arising out of or concerning the insolvency or liquidation proceedings relating to the Corporate Debtor or Corporate Person, and also the Adjudicating Authority has jurisdiction under Section 60(5) of IBC to decide concerning a question of law or fact as to whether the trademark is the property of the Corporate Debtor.
NCLAT held that exceptions cannot be made to the requirement of law as contained in Section 33(5) of the IBC i.e. legal proceedings may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority i.e. The liquidator can pursue a Writ Petition on behalf of the Corporate Debtor as per Sec. 33(5) of IBC and will be considered as approval by NCLT.
It was contended by the corporate debtor that the application lacks a threshold limit as prescribed under Section 7 of the IBC. NCLT held that the number of allottees has to be seen on the date of the filing of the petition and subsequent withdrawal of certain allottees because the settlement that arose between settled allottees and the corporate debtor would not affect the maintainability of the present petition. It also held the corporate debtor that the allottees who approached RERA or NCDRC cease to be considered ‘financial creditors’ under 0Section 5(8) (f) of the Code does not hold any ground and the status of the home buyers being financial creditors under Section 5(8)(f) of the Code remains the same.
It is a settled law that ownership of the Trust property is vested in the beneficiary and not in the trust or trustees. NCLT held that the Applicant is a trustee and neither in its individual capacity nor the beneficiary of the transaction, thus, no documents substantiate the Applicant’s claim as an assignee or transferee and does not constitute ‘Operational Creditor’. A clear distinction is required between the Owner, Lessor, Assignee, Trustee, concerning being recognized as an Operational Creditor in terms of the provision of IBC. Thus, the CIRP petition is not maintainable.
“whether the provisional order of attachment under Section 5(1) of the PMLA, in respect of the properties of the corporate debtor covered under the approved resolution plan, would wipe out the protection available to such properties under Section 32A of the IBC?”
Section 32A stipulates that once the Resolution Plan is approved by the Adjudicating Authority after completion of CIRP, there cannot be attachment or confiscation of assets of the Corporate Debtor, as otherwise same will defeat objects of the Insolvency Regime.
The applicant files this application under Sections 32A and 60(5) of the IBC with the prayer of obtaining a declaration asserting that the assets and/or properties belonging to the corporate debtor, as outlined in the resolution plan, are not subject to attachment by the Enforcement Directorate. Secondly, the applicant seeks the annulment of the provisional order of attachment issued under Section 5(1) of PMLA. The property that formed part of the resolution plan duly approved under the provisions of the IB Code enjoys the protection enshrined in Section 32A of the IBC. protection of Section 32A needs to be ‘extended’ to the ‘provisional order of attachment made under the provisions of the PML Act. Therefore, the limit of NCLT is extended and this Tribunal can exercise its jurisdiction as enshrined in subsection 5(c) of Section 60 of the IBC.
The Tribunal holds that all the assets and properties of the corporate debtor, which formed part of the approved resolution plan for the resolution of the insolvency of the corporate debtor, are immune from the provisional order of attachment made vide dated October 15, 2020, under Section 5(1) of PMLA.
The date of default by the Principal Borrower is not relevant to determining the date of default by the Corporate Guarantor. It observed that there is a settled position of law that a claim is not barred by Section 10A in case of a corporate guarantee payable on demand since the date of default by the principal borrower is not relevant to determine the date of default by the Corporate Guarantor. Thus, the demand notice presently was issued by the financial creditor on the failure to pay the amount under the guarantee and the same is outside the Section 10A period.
NCLT took note that under Regulation 44(1) of the IBBI (Liquidation Process) Regulations, 2016, the Liquidator has been directed to liquidate the Corporate Debtor within one year from the date of commencement of the liquidation proceedings. Further, the Regulation 44(2) stipulates that, after the expiry of one year, the liquidator shall file an application to the Authority to continue the liquidation period along with a report and explain why the liquidation has not been completed.
The NCLT observed that the claim by the Applicant was not filed before the Liquidator within the time period. The claim has been filed post the Liquidator has distributed the amount to the stakeholders as per Section 53 of IBC and has also filed an Application seeking dissolution of the Corporate Debtor. The NCLT dismissed the application and held that Liquidation is a time-bound process and the Liquidator being made accountable is required to explain if there is any delay caused in the liquidation process.
After dissolution all liabilities of Corporate Debtor are automatically extinguished. The company ceases to exist as the liquidation process is completed under the supervision of NCLT. Post dissolution, the liquidator has been discharged from his duties as Liquidator also the appeal under section 42 of IBC, 2016 can only be filed against the decision of a Liquidator. As far as the issue of whether amount under 14B of the EPF & MP Act, 1952 is outside liquidation estate of the Corporate Debtor may be decided in an appropriate case.” The Bench observed that since the Corporate Debtor has been dissolved, there is no question of priority in payment or recovery of EPFO dues.
NCLT Mumbai held that the Corporate Insolvency Resolution Process (‘CIRP’) under Section 7 of IBC cannot be initiated based on a Transfer Agreement/promise for the purchase of Debentures from Financial Creditors.
NCLT pointed out that the Tribunal under its Summary Jurisdiction is constrained to take into account only the existence of an admitted debt and corresponding default as satisfied by the facts. Moreover, there is no dispute about the existence of debt in question. In conclusion, NCLT held that the Operational Creditor has satisfied all the legal requirements including the pecuniary, territorial, and subject matter jurisdiction, and the same is also filed well within the limitation period of 3 year.
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