The Insolvency and Bankruptcy Code, 2016 since its inception, has seen constant amendments, regulatory changes as well as active judicial interpretation to ensure the applicability of the Code in line with its object and purpose. The IBC interacts with and affects various stakeholders on a day to day basis operating across sectors. Dhir & Dhir Associates, a firm of high repute in the insolvency domain has encapsulated the critical legislative, regulatory as well as the judicial interpretation of the Code to provide a snapshot at a glance for all.
On 13.11.2020, Insolvency and Bankruptcy Board of India (“IBBI”) notified the IBBI (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2020 (“CIRP Amendment Regulations”); IBBI (liquidation Process) (Fourth Amendment) Regulations, 2020 (“Liquidation Amendment Regulations”); and IBBI (Information Utilities) (Amendment) Regulations, 2020 (“IU Amendment Regulations”) The key changes in the aforesaid regulations are as follows: 1. CIRP Amendment Regulation specifies two other record or evidence of default, namely (a) certified copy of entries in the relevant account in the bankers’ book, and (b) order of a court or Tribunal that has adjudicated upon the non-payment of a debt.
2. As per the CIRP Amendment Regulations, the IRP/RP is required to submit the list of creditors on an electronic platform for dissemination on its website, including ongoing CIRP Process.
3. The CIRP Amendment Regulations mandate the RP to intimate each claimant the principle or formulae for payment of debts under a Resolution Plan, within 15 days of the Order of the Adjudicating Authority approving the Resolution Plan.
4. The Liquidation Amendment Regulations enables the Liquidator to assign or transfer a ‘not readily realizable asset’ to any person in consultation with the stakeholders’ consultation committee in order to facilitate quick closure of the liquidation process.
5. The Liquidation Amendment Regulations has enabled a creditor to assign or transfer the debt due to it to any other person in accordance with the laws for the time being in force dealing with such assignment or transfer, during the continuation of liquidation process.
6. The IU Regulations have been amended to the effect to specify public announcement made under the provisions of the IBC as ‘financial information’. It has now mandated the Information Utilities to disseminate the public announcement to its registered users, who are creditors of the Corporate Debtor (CD) undergoing insolvency proceeding. This is in addition to publishing the public announcement in the newspapers and websites as required in the Regulations.
a) In GOURI SHANKAR CHATTERJEE V. STATE BANK OF INDIA (C.O/1257/2020) ORDER DATED 15.10.2020, the Calcutta High Court while quashing the admission order and also liquidation order held that (i) the NCLT does not have the jurisdiction to entertain an application under Section 7 of the IBC, which was filed more than 3 years of declaration of account of the Corporate Debtor as NPA; and (ii) in the present case, the limitation period under Article 137 was to be calculated from the date of declaration of the Corporate Debtor’s bank account as NPA.
a) PROMILA TANEJA V. SURENDRI DESIGN PVT. LTD., COMPANY APPEAL (AT) (INSOLVENCY) NO. 459 OF 2020, ORDER DATED 10.11.2020, Hon’ble NCLAT held that while relying on the judgment passed by Hon’ble NCLAT in the matter of Mr. M. Ravindranath Reddy v. Mr G. Kishan & Ors. that rent due cannot be treated as a Operational Debt under IBC.
b) THE DY. COMMISSIONER OF CUSTOMS DEEC (MONITORING CELL) V. MS. VANDANA GARG, COMPANY APPEAL (AT) (INSOLVENCY) NO. 964 OF 2020, ORDER DATED 10.11.2020, Hon’ble NCLAT held that the Successful Resolution Applicant cannot be faced with claims filed or admitted after a Resolution Plan has been submitted. In the instant case, the claim has been filed by the Appellant not only at a highly belated stage but also after the approval of the Resolution Plan. In these circumstances, the Appeal was dismissed.
c) VOLKSWAGEN FINANCE PRIVATE LIMITED V. SHREE BALAJI PRINTOPACK PVT LTD., COMPANY APPEAL (AT) (INSOLVENCY) NO. 02 OF 2020, ORDER DATED 19.10.2020, the Hon’ble NCLAT held that the mere fact that a charge was registered through a hypothecation registration with the Regional Transport Office in accordance with S.51 of the Motor Vehicles Act, 1988 would not accord the creditor, the status of a ‘secured creditor’ with respect to liquidation proceedings under the IBC, unless such charge has been registered u/s 77 of the Companies Act, 2013.
d) HEMANT SHARMA, RESOLUTION PROFESSIONAL OF GLOBAL SOFTECH LTD., COMPANY APPEAL (AT) (INSOLVENCY) NO. 942 OF 2020, ORDER DATED 02.11.2020, Hon’ble NCLAT held that the period commencing from 25.03.2020 till 15.09.2020 shall be excluded while computing the period of 180 days for the purposes of bringing the CIRP & the extended period of 90 days beyond 180 days shall commence only after the prescribed period of 180 days after exclusion of aforesaid period.
a) JASUBHAI INTERNATIONAL FZCO V. ASHOK KUMAR GULLAH, CP(IB) NO. 75/ALD/2019, ORDER DATED 16.10.2020, Hon’ble NCLT Allahabad Bench held that an interest free earnest money deposit (“EMD”) would not qualify as financial debt u/s 5(8) of the IBC. Hon’ble NCLT noted that the lack of an interest clause or assured return on the EMD, ruled out lack of time value of money as consideration for advancing EMD, making the Applicant’s claim u/s 5(8) unsustainable.
b) MKM TECHNOLOGIES V. M/S LEEL ELECTRICALS LTD., CP(IB) NO. 189/ ALD/2019, ORDER DATED 16.10.2020, Hon’ble NCLT Allahabad Bench held that Section 238 of the IBC will override the Customs Act, 1962. The NCLT issued the order pursuant to an application by the RP, to direct the Commissioner of customs to hand over the Corporate Debtor’s assets that were lying with the commissioner as on the date of initiation of CIRP.
c) LIQUIDATOR OF PRECISION FASTENERS LIMITED V. SIDDHI EDIBLES PRIVATE LIMITED, CP. (IB) NO. 1339/2017, ORDER DATED 27.10.2020, NCLT, Mumbai held that the recovery of rent from the tenant and the eviction of tenant from the property of the Corporate Debtor are in the exclusive domain of the civil courts and cannot be dealt with by the Tribunal through an invocation of Section 60(5) of the IBC. The Tribunal, while, inter alia, dealing with the question of whether it could pass directions concerning the recovery of rent from the tenant, the eviction of the tenant from and the sale of the property of the Corporate Debtor u/s 60(5)(c) of the IBC, expounded on the nature of the jurisdiction of the Tribunal under the IBC.
d) SREI INFRASTRUCTURE FINANCE LTD. V. ARCELOR MITTAL INDIA PVT. LTD., CP. (IB) NO. 39 & 40 OF 2017, ORDER DATED 10.11.2020, Hon’ble NCLT, Ahmedabad Bench directed Arcelor Mittal India, the Successful Resolution Applicant of Essar Steel, to pay CIRP cost of almost Rs. 1300 Cr. to Odisha Slurry Pipeline Infrastructure by 15.12.2020. SREI Infrastructure in its application under Section 33(3) and 34(4) read with Section 60(5) of IBC contended that Arcelor Mittal contravened the Resolution Plan for Essar Steel when it failed to pay the “right to use charges” to the Odisha Slurry Pipeline infrastructure Ltd. for its pipeline asset. These usage charges were hypothecated to the Applicant by Odisha Slurry Pipeline Infrastructure Ltd. Therefore, after analyzing the relevant document and the material on record, the NCLT held that the usage charges for the use of the slurry pipeline for running Essar Steel as a going concern constituted as CIRP Costs.
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