The Supreme Court in the captioned judgment addressed whether the set-off could be claimed in the Corporate Insolvency Resolution Process (“CIRP”) under the IBC. The Court distinguished between contractual, statutory, equitable, and insolvency set-offs. Bharti Airtel sought to adjust dues payable to Aircel against its claims, arguing for a contractual and insolvency set-off. The Court held that the insolvency set-off is not applicable under CIRP, distinguishing it from the Liquidation Process where mutual dealings are recognised under Regulation 29 of the Liquidation Regulations. However, it allowed contractual and transactional set-offs under specific conditions, such as when they are expressly agreed upon or arise from closely connected transactions. The ruling reinforced that set-off rights cannot override the pari passu principle of equitable treatment of creditors in insolvency. The appeals were dismissed.
Hon’ble Supreme Court declined to entertain the SLP, holding that since the impugned order of the NCLAT is amenable jurisdiction of the Supreme Court under Section 62 of the Code. The bar of limitation cannot be bypassed or avoided by invoking Article 136 of the Constitution when a statutory appeal remedy is available.
Hon’ble Supreme Court approved the view taken in the case of P. Mohanraj & Ors. v. Shah Brothers Ispat Pvt. Ltd. Civil Appeal No. 10355 of 2018 that notwithstanding the moratorium, the liability, if any, of the directors/officers will continue. The Hon’ble Court further held that the protection of the moratorium will not be available to the directors/officers of the Company.
The Hon’ble NCLAT set aside the order of Ld. NCLT wherein the NCLT allowed Hinduja Leyland Finance Ltd. (Respondent) to realise its security interest over movable assets of the Corporate Debtor under Section 52 of the Code. The Hon’ble NCLAT held that the UCO Bank Consortium had the first pari-passu charge over the movable assets, and the Respondent failed to obtain a No Objection Certificate (NOC) from the UCO Bank Consortium while refinancing. The Hon’ble Tribunal emphasized that the Respondent’s charge was subservient to the UCO Bank Consortium’s first charge, and the registration of the charge with the Registrar of Companies (ROC) did not establish priority. The appeal was allowed, and the Impugned Order was set aside.
The Section 9 petition was withdrawn following a settlement between the parties, formalized in a Settlement Agreement dated 23.11.2023. Based on this agreement,the proceedings were closed on 01.12.2023. However, a Restoration Application was later filed, alleging that the Corporate Debtor had failed to honour the settlement. The Corporate Debtor opposed the application, but after considering the parties’ submissions, the Adjudicating Authority allowed the application and reinstated the Section 9 petition. The Hon’ble NCLAT upheld this decision, stating that the NCLT had likely considered all relevant aspects and had rightly restored the petition.
Hon’ble NCLAT holds that: (i) There is no doubt that at the time when the Liquidator rejected the claims, there was a timeline and the window was open till 26.12.2020 whereas Form C was submitted on 01.03.2021 but the decision of the Hon’ble Supreme Court, which is a declaration of law, rendered on 06.09.2022 categorically says that the filing of dues within the prescribed period does not apply to the Respondent as in that case also there was a claim of the taxation department and it was held that as per Section 26 of Haryana Value Added Tax, 2003 the first charge on the dues under the said act, on the property of the defaulter, is of the department. (ii) But the important aspect of the matter has not been looked into by the Tribunal while issuing the directions. The Tribunal has not taken into consideration the practical difficulties to be faced by the Liquidator for the purpose of recovering the amount from the 29 stakeholders after the entire proceedings were over.
The Hon’ble NCLT held that the essence of proceedings against a Personal Guarantor remains a recovery proceeding, which is clear from the words “Repayment Plan” as against a “Resolution Plan”, which is so generic a word meant for resolving a Corporate Person.
The Hon’ble NCLT, Hyderabad Bench, held that properties forming part of an approved resolution plan under the I&B Code are protected under Section 32A. The Tribunal is duty-bound to uphold this protection against any encroachment, including a provisional attachment under the PMLA, to preserve the legislative intent of Section 32A. Under Section 60(5)(c) of the I&B Code, the Tribunal has jurisdiction to examine whether this protection extends to the corporate debtor’s assets until resolution or liquidation. However, the Tribunal refrains from ruling on the supremacy of the I&B Code over the PMLA or the maintainability of the attachment order. It further holds that quashing the attachment order is unwarranted, and it is for the applicant or the erstwhile Resolution Professional to seek impleadment in the writ petitions and challenge the order before the appropriate judicial forum.
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