A Legal Round-Up of The Insolvency & Bankruptcy Code, 2016 (IBC)

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A Legal Round-Up of The Insolvency & Bankruptcy Code, 2016 (IBC)

Dhir & Dhir Associates | September 2021

STATUTORY AMENDMENT

THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ACT, 2021 (No. 26 of 2021) • The Amendment includes the ‘Prepackaged Insolvency Resolution Process’ as a mechanism to tackle enterprises in duress.
- The Amendment modifies Section 4 IBC imposing a default “ceiling” of Rs.1,00,00,000/-
- As per Section 54C, the application filed before NCLT must have the written consent of a proposed RP and his report on the corporate debtors’ eligibility to pursue PIRP.
- The new Section 11A mandates, where there is a Section 54C application pending before the NCLT, such application shall be admitted/rejected prior to consideration of any Section 7, 9 or 10 application during the pendency of the Section 54C application regarding the same debtor.
- For PIRP, Section 54H stipulates that the management of the corporate debtor’s affairs shall continue to vet in the Board of Directors or the partners who shall make their utmost effort to preserve and protect the value of the corporate debtor’s property as a going concern.
- Section 10 of the Amendment modifies Section 65 of the Code to penalize any person who initiates PIRP process fraudulently, with malicious initiation, or with the intent to defraud persons.

SUPREME COURT

In DENA BANK (NOW BANK OF BARODA) V. C. SHIVAKUMAR REDDY AND ANR. (CIVIL APPEAL 1650/2020) Judgment dated 04.08.2021, the Hon’ble Supreme Court held that there is no bar in law to the amendment of pleadings in an application under Section 7 of the IBC, or to the filing of additional documents, apart from those initially filed along with application under Section 7 of the IBC in FORM-1. The Court also held that a final judgment, decree and/or a recovery certificate passed/ issued by a court or tribunal would give rise to fresh cause of action for a financial Creditor to initiate proceedings under Section 7 of the IBC.
In PRATAP TECHNOLOGIES (P) LTD. AND ORS. V. MONITORING COMMITTEE OF RELIANCE INFRATEL LTD. (CIVIL APPEAL 676/2021) Judgment dated 10.08.2021, the Supreme Court held that the “commercial wisdom” of Committee of Creditors is not justiciable and judicial review of CoC’s approval of resolution plan is available on very limited grounds as the NCLT/NCLAT has no residual equityjurisdiction while dealing with Resolution Plan approved by CoC.
In ORATOR MARKETING PVT. LTD. V. SAMTEX DESINZ PVT. LTD. (CIVIL APPEAL 223/2021) Judgment dated 26.07.2021, it was held that an interest free term loan constitutes a financial debt under IBC. The SC further held that the NCLT and NCLAT were guilty of not reading the IBC as whole but erred in reading Section 5(8) of the IBC in a disjoint fashion. Relying on various cases the SC held that the interpretation of the IBC has to be undertaken with its intent to support the resolution of companies as going concerns whilst ensuring creditors are repaid.
In KAY BOUVET ENGINEERING LTD. V. OVERSEAS INFRASTRUCTURE ALLIANCE INDIA PVT. LTD. (CIVIL APPEAL 1137/2019) Judgment dated 10.08.2021, the Court held that as long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application for CIRP.

NATIONAL COMPANY LAW APPELLATE TRIBUNAL (“NCLAT”)

In WEST BENGAL FINANCIAL CORPORATION V. BIJOY MURMURIA [COMPANY APPEAL (AT)(INS.) 536/2021]Order dated 02.08.2021, the NCLAT held that the orders of liquidation cannot be passed without considering the resolution plan, which had been approved by the CoC. The AA had exercised its discretion to not liquidate the CD, and the Appellate Tribunal declined to interfere with the discretion of the AA.
In MUKUL KUMAR R.P. INFRASTRUCTURE OF KTS INFRASTRUCTURE LTD. V. M/S RPS INFRASTRUCTURE [COMPANY APPEAL (AT)(INS.) 1050/2020]Judgment dated 30.07.2021, it was held that whenever any claim is filed after an extended period provided in Regulation 12(2) of the Regulations, the RP should reject the claim, and there is discretion with the RP in this regard. Thus, the appeal was allowed and the impugned order was set aside.
In VISTRA ITCL INDIA LTD & ORS. DINKAR T. VENKATASUBRAMANIAN [COMPANY APPEAL (AT)(INS.) 703/2020] Order dated 28.07.2021, it was held that an Application seeking clarification of judgment filed under Rule 31 read with Rule 11 of the NCLAT Rules, 2016 under the pretence of review/rehear is not maintainable as Rule 31 of the NCLAT Rules, 2016 is not applicable when the judgment has already been delivered and the matter has been disposed off.
In CHANDRAIAH SUBRAMANIYAN V. DIGJAM LTD. AND ORS. [COMPANY APPEAL (AT)(INS.) 522/2021] Order dated 29.07.2021, it was held that after approval of Resolution plan challenging the CIRP before AA is not as per provisions of IBC.

NATIONAL COMPANY LAW TRIBUNAL (“NCLT”)

In STATE BANK OF INDIA V. M/S WORLD WINDOW IMPEX PVT. LTD. [IB376(ND)/2020] Order dated 27.07.2021, the main petition, filed under Section 7 of the Code, was not admitted yet, and no moratorium was imposed under Section 14 of the Code, the tribunal held that the financial creditor had the right to institute or continue with the proceedings under the SARFAESI Act.
In SUPRIYO KUMAR CHAUDHURI V. STATE BANK OF INDIA [CP NO.(IB) 223/ ALD/2019] Judgment dated 26.07.2021, the application was filed by liquidator seeking grant to distribute the accumulated cash profits lying in the bank accounts of the CD to the stakeholders, in accordance with Section 53 IBC. NCLT allowed the liquidator to distribute the amount, less an applicable withholding tax, out of the accumulated cash profits lying in the bank accounts of the CD, to the stakeholders as per Section 53 of the Code.
In INSTA CAPITAL PVT. LTD. V. KETAN KUMAR VINOD SHAH [CP(IB) 1365(MB)/2020] Order dated 10.08.2021, it was held that an Application under Section 95 of the IBC can be filed by the Financial Creditor only against the personal guarantor of Corporate Debtor, which is already been undergoing CIRP or is in liquidation. An application is not maintainable unless that CIRP/Liquidation is ongoing against the Corporate Debtor.

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Dhir & Dhir Associates is a full-service Law Firm and brings to the table expertise and experience of more than two decades across various sectors and practice areas. The firm has been recognised as a leader in Restructuring and Insolvency and widely acclaimed for Banking & Finance, Capital Markets and Securities, Infrastructure, Corporate Advisory, Telecom and Dispute Resolution.

A Legal Round-Up of The Insolvency & Bankruptcy Code, 2016 (IBC)

STATUTORY AMENDMENT

SUPREME COURT

NATIONAL COMPANY LAW APPELLATE TRIBUNAL (“NCLAT”)

NATIONAL COMPANY LAW TRIBUNAL (“NCLT”)

About Dhir & Dhir Associates

Dhir & Dhir Associates

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A Legal Round-Up of The Insolvency & Bankruptcy Code, 2016 (IBC)

STATUTORY AMENDMENT

SUPREME COURT

NATIONAL COMPANY LAW APPELLATE TRIBUNAL (“NCLAT”)

NATIONAL COMPANY LAW TRIBUNAL (“NCLT”)

About Dhir & Dhir Associates

Dhir & Dhir Associates

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