STATUTORY UPDATES

On 14.07.2021, the IBBI inserted Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2021 to amend the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, hereinafter referred to as the ‘Principal Regulation’.

• Under Regulation 3,4,4A and 19(1), clarity was given with regards to whether the professional being referred to is a resolution professional, or an interim resolution professional.
• Regulation 4B as added regarding disclosure of change in name and address of corporate debtor.
• In the principal regulations, in Regulation 9A (1) [Claims by other creditors], for the word and figures “regulation 7, 8 or 9,”, the word and figures “regulation 7, 8, 8A or 9,” shall be substituted.
• In the principal regulations, in Regulation 13(2)(b), it was clarified that the list of creditors shall be available for inspection by CD or their authorized representatives.
• Regulation 27 was substituted with ‘Appointment of Professionals’, wherein, it was added that the insolvency professional may appoint any professional, in addition to registered valuers under sub-regulation (1).
• In the principal regulations, in Regulation 35A, in sub-regulation (2), the words “under intimation to the Board” shall be deleted.
• In Regulation 40B, after sub-regulation (1A), -“(1B) The resolution professional shall file Form CIRP 8 intimating details of his opinion and determination under regulation 35A, on or before the one hundred and fortieth day of the insolvency commencement date: Provided that the filing of Form CIRP 8 shall not become due unless a period of thirty days has elapsed from the date of commencement of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2021.” was inserted.
• In Form H;
  • Under item 9, in the table, the entry ‘Regulation 35A’ shall be deleted.
  • After item 14, the following item shall be inserted, namely:-“14A. Whether the resolution professional has, in accordance with regulation 35A,- (a) applied to the Adjudicating Authority on or before the one hundred and thirty-fifth day of the insolvency commencement date: Yes / No (b) filed Form CIRP 8 with the Board on or before the one hundred and fortieth day of the insolvency commencement date: Yes / No”

RELEVANT JUDGMENTS

• SUPREME COURT
  • FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED AND ANR. V. AMRUTA GARG AND ORS. ETC., CIVIL APPEAL NOS. 498-501 OF 2021 DATED 14/07/2021The Hon’ble Supreme Court held that the Homebuyers are different from the unit-holders as the Homebuyers are treated as creditors till the ownership rights in the immovable property are transferred to them, but they do not take the risks and are not entitled to benefit profits or suffer losses, as are taken by the unit-holders who invest in the mutual funds without any guarantee of returns and know that the investment, including the principal, are subject to market risks. The Hon’ble Court further held that to equate the unit-holders with either the creditors or the home buyers will be unsound and incongruous.
• HIGH COURT
  • IDEAL SURGICALS VS. NATIONAL COMPANY LAW TRIBUNAL AND ORS., WP(C) NO. 8257 OF 2021 ORDER DATED 02/07/2021Hon’ble High Court of Kerala held that the writ petition under Article 226 before High Court against an order of the NCLT is not maintainable, as petitioners have effective alternative remedy of appeal under u/s 61 of the IBC.
  • GOURI PRASAD GOENKA V. SBI, WPO NO. 171 OF 2021 DATED 21/06/2021The Hon’ble High Court of Calcutta held that the moratorium envisaged under Section 14 of the IBC creates no hindrance to a willful defaulter declaration proceeding. The Court further held that the declaration of a whole-time director/ promoter/guarantor as a willful defaulter cannot adversely affect the resolution process in any manner whatsoever.
• NATIONAL COMPANY LAW APPELLATE TRIBUNAL (“NCLAT”)
  • MANIPAL MEDIA NETWORK LTD. V. VISHWAKSHARA MEDIA PVT. LTD. CA (AT) (INS) NO. 369 OF 2020 DATED 21/06/2021,The Hon’ble NCLAT on the issue of whether the appellant can invoke the provisions of the Code if the underlying agreement provides for arbitration under the Arbitration and Conciliation Act, 1996, held that it is not for the Adjudicating Authority to direct the parties to go for arbitration if the matter was not referred to arbitration by either of the parties.
  • HYTONE MERCHANTS PVT. LTD. V. SATABADI INVESTMENT CONSULTANTS, COMPANY APPEAL (AT) (INSOLVENCY) NO. 258 OF 2021 DATED 30/06/2021The Hon’ble NCLAT held that even an application that is otherwise compliant with the requirements of S. 7 of the Code can be dismissed by the National Company Law Tribunal (NCLT), under S. 65 of the Code, if the said application is found to be filed collusively
• NATIONAL COMPANY LAW TRIBUNAL (“NCLT”)
  • KNIGHT RIDERS PVT LTD V. GLOBAL FRAGRANCES PVT. LTD. COMPANY PETITION NO. IB-1112-ND-2018 DATED 05/07/2021The Hon’ble NCLT, New Delhi held that the Guaranteed Minimum Royalties to be paid quarterly by the Corporate Debtor as a consideration to grant of license and right to use the Trademark of the Operational Creditor on its Licensed Product (for manufacture and sale purpose) is an Operational Debt.
  • PRATIKSH PRAMOD RAI V. MYLAW LEARNING RESOURCES PVT. LTD., C.P. (IB) 195/MB/2019 DATED 16/06/2021The NCLT, Mumbai refused to admit a company into CIRP on the grounds that while the company had time and again tried to settle the dues owed to the operational creditor, it was the operational creditor which refused to enter into any settlement. The NCLT, Mumbai held that the Code cannot be used as a recovery mechanism and is only for the purpose of insolvency resolution. With no record of the company being financially unsound and unable to repay its debts, the NCLT, Mumbai dismissed the petition of the operational creditor.
  • JOSE PRADEEP V. CA, JASIN JOSE AND ORS., IA/37/(KOB)/2021 IN IBA/21/ KOB/2019 DATED 30/06/2021Hon’ble NCLT, Kochi while relying on the judgment of the Supreme Court in Rahul Jain v. Rave Scans Pvt. Ltd. and the NCLAT, New Delhi in QVC Exports Ltd. v. United Tradeco FZC, held that there can be no modification to the terms of a resolution plan that has been approved by the NCLT.
  • ALTICO CAPITAL INDIA LTD. V. RAJESH PATEL AND ORS. I.A. 1062/2021 IN C.P. 293/2020 DATED 09/07/2021The Hon’ble Court held that the Corporate Debtor for which the personal guarantee has been given is not under CIRP, and therefore held that prosecution is not maintainable under Application filed under Section 95 of IBC against the personal guarantor.