Insolvency And Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017, Dated 05.04.2022
The Hon’ble Supreme Court held that the wages/salaries of the workmen/ employees of the Corporate Debtor for the period during CIRP can be included in the CIRP cost as defined under Section 5(13) of the IB Code only when the concerned workmen/employees of the Corporate Debtor actually worked during the CIRP and when it is established that the Interim Resolution Professional/ Resolution Professional managed the operations of the Corporate Debtor as a going concern during the CIRP and shall be paid treating it and/or considering it as part of CIRP costs and the same shall be payable in full first as per Section 53(1)(a) of the IB Code. Hon’ble Apex Court further observed that when the provident fund, gratuity fund and pension fund are kept out of the liquidation estate as per Section 36(4) of the IB Code, the share of the workmen dues shall be kept outside the liquidation process and the concerned workmen/ employees shall have to be paid the same out of such provident fund, gratuity fund and pension fund as available and the Liquidator shall not have any claim over such funds.
Hon’ble High Court held that once a Resolution Plan is duly approved by the Adjudicating Authority as per Section 31(1)of I&B Code, the claims as provided in the Resolution Plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of Resolution Plan by the Adjudicating Authority, all such claims, which are not a part of Resolution Plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings with respect to a claim, which is not part of the Resolution Plan.
Hon’ble NCLAT held that the amount given as the share application money on which no share was allotted by the Corporate Debtor cannot be treated as a Financial Debt as it does not fall under the ambit of Section 5(8) in order to initiate Corporate Insolvency Resolution Process (“CIRP”) under Section 7 of the IBC. Therefore, the application filed by the Appellants in this matter was dismissed on the ground that the said application is not maintainable.
Hon’ble NCLAT held that the territorial jurisdiction of NCLT to decide case under Insolvency and Bankruptcy Code, 2016 cannot be taken away by the agreement between parties. Therefore, the Hon’ble Tribunal was of the view that there is no error to admit an Application under Section 7 on the ground of lack of jurisdiction.
Hon’ble NCLAT held that once a Resolution Plan is approved by COC and attained finality, such finality cannot be taken by NCLT on account of late and unsolicited bids by Resolution Applicants after the original bidder becomes public upon passage of the deadline for submission of the Resolution Plan’ is a reason for deviation of the original objective and timeline under the IBC. Therefore, Hon’ble NCLAT was of the view that there was no valid reason indicated in the order of the Adjudicating Authority dated 18.01.2022 for permitting the CoC to consider the Resolution Plan of the Respondent.
Hon’ble NCLAT held that there is no infirmity or illegality in the Resolution Plan getting approved by a majority vote of COC in which provisions were made for payments as per Section 53 of IBC that provides for payment of CIRP Cost, Workmen’s dues and Financial Creditors dues but no payments have been earmarked to any other category including the Operational Creditors and shown as nil. Hon’ble Tribunal was of the view that there is no discrimination amongst the Operational Creditors, for the reason that no amounts earmarked for any of the Operational Creditors and the question of discrimination would have arisen when some of the Operational Creditors were paid their dues by excluding some of the Operational Creditors. In the present case no such situation arises. Therefore, no such ground has been made out by the Appellants.
Hon’ble NCLAT held that the Resolution Professional is not entitled to take a decision regarding the ineligibility of the Resolution Applicant under Section 29 A of IBC but only to form its opinion because it is the duty of the Resolution Professional to find out as to whether the Resolution Plan is in compliance with the provisions of the Code or not. The Resolution Professional can give his opinion to each plan before the CoC and it is for CoC to take decision as to whether the plan is to be approved or not.
Hon’ble NCLAT held that the timeline prescribed in Regulation 35A of CIRP Regulations is directory and not mandatory. Further, it was held that the time period of Regulation 35A ought not to be read restrictively to keep undervalued and fraudulent transactions out of reach from the provisions of IBC. The Tribunal was of the view that the proceedings under Sections 49 and 66 for transactions defrauding creditors and fraudulent trading or wrongful trading cannot create any prohibition from consideration of the issues by the Adjudicating Authority which is competent under the Code to take decision on such transaction.
Hon’ble NCLT held that the Corporate Insolvency Resolution Process (“CIRP”) cannot be initiated based on undecided claims and/or unstamped and unregistered agreement which otherwise require compulsory registration in law. Further Hon’ble NCLT observed that as per Section 5(21) of the IBC, Operational Debt means debt due towards the supply of goods or service rendered, however in the instant matter the Petitioner has claimed amount arising out of breach of contract, which does not come under the definition of ‘Operational Debt’ as per the provisions laid down by the Insolvency and Bankruptcy Code.
Hon’ble NCLT held that Corporate Insolvency Resolution Process (“CIRP”) can be initiated based on an Arbitral Award if the said Award has not been challenged. The Hon’ble NCLT observed that the Corporate Debtor had neither raised any dispute with respect to the services of the Operational Creditor nor challenged the Arbitral Award by way of Section 34 petition under the Arbitration and Conciliation Act, 1996. Therefore, the debt is undisputed. Hon’ble Tribunal further observed that in a petition under Section 9 of IBC, the prime point of defence is the existence of the dispute; and/or pendency of a suit or Arbitration prior to the receipt of the demand notice under Section 8 of IBC.
Hon’ble NCLT held that the entire Performance Bank Guarantee of ₹30 crore submitted by the Successful Resolution Applicant, which was invoked by the Applicant/Chairman of the Monitoring Committee, shall stand forfeited in favour of the Corporate Debtor immediately, since there is knowing and wilful contravention that will tick every parameter that can be applied to satisfy the test laid down in Section 74(3) of the Code which states the provisions for punishment in contravention of moratorium or the Resolution Plan on a reasonable construction of the approved Resolution Plan. Hon’ble Tribunal was of the view that a strong message needs to go to the Successful Resolution Applicant that the majesty of law needs to be respected at all costs, and that Indian judicial processes cannot be taken for a ride like this. Further, it was observed that the Corporate Debtor has been kept as a going concern by the Chairman of the Monitoring Committee, and every effort should be made to give one more chance at resolution before we order liquidation as a last resort.
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