Deepak
Gupta v. Ved Contracts Private Limited [Co. Appeal (AT) (Insolvency) No.
1262/2019]
The NCLAT, while relying on Innoventive
Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407, reiterated its position
that disputed questions relating to claims and counter claims cannot be
determined by the Adjudicating Authority in an application under Section 9 of
the Code.
The
Karoli Co-operative Multi Purpose Society Ltd. v.UG Hotels and Resorts Ltd. [Co.
Appeal (AT) (Insolvency) No. 1302/2019]
The NCLAT dismissed an appeal for
being put of limitation in view of the fact that the invoices raised by the operational
creditor on the corporate debtor were more than 3 (three) years old.
Meka
Dredging Company Private Limited v. Sapura Engineering & Construction
(India) Private Limited [Co. Appeal (AT) (Insolvency) No. 1289/2019]
The NCLAT reiterated the position
of law enshrined under Section 11 (d) of the Code that a Corporate Debtor
(undergoing liquidation) is illegible to prefer an application (for initiation
for CIRP) against another corporate debtor.
DBS
Bank India Limited v. Edu Smart Services Pvt. Ltd. [Co. Appeal (AT)
(Insolvency) No. 466/2019]
The NCLAT reaffirmed the position
of law set out in Export Import Bank of India v. Resolution Professional
JEKPL Ltd. Ltd., Co. Appeal (AT) (Ins) No. 304/2017 (Exim Judgement).
In the Exim Judgement, various banks were inducted into the committee of
creditors by the NCLAT (post declaring them to be financial creditors of the
concerned corporate debtor). The NCLAT further directed such banks to
consider/reconsider the potential resolution plans of the corporate debtor.
The NCLAT also discussed its
previous judgement in Dr. Vishnu Kumar Agarwal v. Piramal Enterprises
Limited, Co. Appeal (AT) (Ins) No. 346/2018, which held it is impermissible
for a financial creditor to file claims for ‘the same set of debt’ in 2 (two)
separate corporate insolvency resolution processes.
Yogesh
Baliram Vargantwar v. Vighnaharta Health Visionaries Private Limited [Co.
Appeal (AT) (Insolvency) No. 479/2019]
The NCLAT opined that an
acknowledgement of an amount in the balance sheets of the Corporate Debtor can
be taken into account for ascertaining the quantum of debt or liability of the
said Corporate Debtor.
Jyoti
Limited v. Prasad and Company (Project Works) Limited [Co. Appeal (AT)
(Insolvency) No. 288/2019]
The following principles may be
deduced from the said case law:
(a)
Tribunals
(under the Code) loathe at a detailed examination and analysis of the factual
matrix of the case while deciding whether an application for initiation of CIRP
against a corporate debtor should be admitted or not. The issues which are
normally examined by the tribunals are whether there exists a ‘debt’ which is
payable, existence of a ‘dispute’ (for Section 9 applications), whether a
‘default’ has been committed by the corporate debtor and whether the
application is barred by limitation.
(b)
The
instrumentality of the Code (especially Section 9 thereof) should not be
invoked for the purpose of recovery of dues.
Kotak
Mahindra Prime Limited v. Bijay Murmuria [Co. Appeal (AT) (Insolvency) No. 47/2019]
The NCLAT observed that once a
creditor files its claim with the resolution professional and the same is taken
into account by the ‘successful resolution applicant’ in the resolution plan
(and further the said creditor is afforded the same treatment as is given to
similarly situated creditors) then such creditor cannot thereafter take the
benefit of Section 60 (6) of the Code or seek to initiate/continue any legal
proceedings qua the same claim.
The NCLAT further observed that
once a resolution plan is found to be in accordance with Section 30 (2) of the
Code, and is approved by the Adjudicating Authority, it becomes binding on all
stakeholders including the creditors and the corporate debtor.
Urban
Infrastructure Trustee Limited v. Neelkanth Realty Private Limited [Co. Appeal
(AT) (Insolvency) No. 286/2019]
The NCLAT upheld the view of the
Adjudicating Authority that, in the context of repayment of debentures, a
‘default’ is constituted only when (upon maturity of the debentures), the
debenture holder files the necessary documents with the corporate debtor to
enable it to process the payment as per the due process of law.
SEITZ
GmbH v. Simran Technologies Private Limited [Co. Appeal (AT) (Insolvency) No.
776/2019]
The NCLAT discussed a critical
aspect relating to existence of a ‘dispute’ (under Section 5 (6) of the Code)
i.e. it must exist strictly between the operational creditor and the corporate
debtor. A dispute between the corporate debtor and a third party or aspects
such as ‘unilateral transfer of liability’ by the corporate debtor to a third
party may not constitute a ‘dispute’ under the provisions of the Code.
SBF
Pharma v. Gujarat Liqui Pharmacaps Private Limited [Co. Appeal (AT)
(Insolvency) No. 883/2019]
The NCLAT opined that in case the
operational creditor continues to pursue his application (under Section 9 of
the Code) only for recovery of the interest amount, despite an offer from the
corporate debtor to settle the principal amount (of the claim), then the same
qualifies to be ‘malicious intent’ on the part of the operational creditor, (in
terms of Section 65 of the Code), thereby warranting a rejection of the said
application.
Prayag
Polytech Private Limited v. Good Marketing and Sales Private Limited [Co.
Appeal (AT) (Insolvency) No. 1307/2019]
The NCLAT upheld the view of the
Adjudicating Authority which held that allegations of fraud cannot be
determined by it, such aspects being in the exclusive jurisdiction of the
criminal courts.
Uniexcel
Developers Private Limited v. Uniexcel Limited [Co. Appeal (AT) (Insolvency)
No. 962/2019]
The NCLAT reiterated its position
(in the context of a Section 7 application) that, once the Adjudicating
Authority concludes that a ‘default’ of the ‘financial debt’ has not yet been
made by the corporate debtor, then in such case, the only option available is
rejection of the said application. It is improper for the Adjudicating
Authority to keep the said application in abeyance pending or awaiting a
‘default’ by the corporate debtor.
The NCLAT did not interfere with
the position adopted by the Adjudicating Authority as to whether ‘share
application money’ (which does not get converted into equity) qualifies to be a
‘financial debt’ under the provisions of the Code. The Adjudicating Authority
observed that ‘share application money’ which is converted into a ‘deposit’ by
virtue of operation of the Companies Act, 2013 and the Companies (Acceptance of
Deposit) Rules, 2014 can be categorised as a ‘financial debt’ under the Code in
as much as, there exists an element of ‘time value of money’ therein.
State
Bank of India v. Scotts Garments Limited & Others [Co. Appeal (AT)
(Insolvency) No. 1169/2019]
The NCLAT clarified that an
interlocutory application preferred during the course of the corporate
insolvency resolution process ought to be filed under Section 60 (5) of the
Code failing which the said application may be dismissed by courts on technical
grounds.
Sanjay
Chemicals India Private Limited v. Sharon Bio-Medicine Limited [Co. Appeal (AT)
(Insolvency) No.1190/2019]
In the said matter, an
operational creditor of a corporate debtor undergoing CIRP did not prefer a
claim with the resolution professional (for its outstanding dues), but chose to
subsequently prefer an application (under Section 9 of the Code) post
successful completion of the CIRP and approval of the resolution plan. The
NCLAT upheld the view of the Adjudicating Authority which had concluded that,
in view of the above explained factual situation, an application by the
operational creditor for such outstanding dues (which had accrued prior to the
CIRP) was not maintainable.
Smart
Timing Steel Limited v. National Steel and Agro Industries Limited [Co. Appeal
(AT) (Insolvency) No. 4/2019]
The NCLAT observed that it is not
open for an operational creditor (having not succeeded once against the
corporate debtor) to file a second application (under Section 9 of the Code)
for the same cause of action.
Tirumala
Balaji Alloys Private Limited v. Sumit Binani [Co. Appeal (AT) (Insolvency) No.
600/2019]
In the said matter, a corporate
debtor (undergoing CIRP) had, made a repayment of a loan procured from a
‘related party’ within a period of 40 (forty) days from its procurement. The
transaction had taken place 1 (one) year prior to commencement of the CIRP. The
resolution professional preferred an application before the Adjudicating
Authority claiming a refund of such payments on the premise that such payments
fell within the definition of the expression ‘preferential transactions’ under
Section 43 of the Code. The promoter of the corporate debtor had however
contented that the such transactions had taken place ‘in the ordinary course of
business’ thereby falling within the exceptions category of Section 43 of the
Code.
The NCLAT, while examining the
merits of the matter, discerned that the transaction in question was not in the
ordinary course of business in as much as a clear preference had been given to
the ‘related party’ (beneficiary) towards repayment of dues, when compared with
other unrelated creditors.
Anil
Syal v. Sanjeev Kapoor, Proprietor Kapoor Logistics & Another [Co. Appeal
(AT) (Insolvency) No. 961/2019]
The NCLAT held that a demand
notice (issued under Section 8 of the Code) against a corporate debtor for dues
of a sister concern (which is an separate corporate entity), cannot be treated
as a valid notice.
Gouri
Prasad Goenka v. Punjab National Bank [Co. Appeal (AT) (Insolvency) No.
28/2019]
The NCLAT, in the said judgement,
examined various aspects pertaining to limitation of applications preferred by
creditors under the Code for initiation of CIRP. It was observed that the
question of limitation can be considered by the tribunals at any stage
(including the appellate stage) regardless of whether such issue had been
pressed into service before the lower forum or not.
The NCLAT reiterated the position
laid down by the Supreme Court of India in Gaurav Hargovindbhai Dave v.
Asset Reconstruction Company (India) Limited, Civil Appeal No. 4952/2019,
that an application preferred under Section 7 of the Code falls under the
Residuary Article No. 137 of the Limitation Act 1963 which prescribes a
limitation of 3 (three) years from the date the right to sue accrues.
Ashok
Kumar M Lulla v. Suryaa Chamball Power Limited [Co. Appeal (AT) (Insolvency)
No. 1054/2019]
The NCLAT (exercising its
inherent power under Rule 11 of the NCLAT Rules 2016) permitted a settlement
(between the operational creditor and corporate debtor) to proceed post
constitution of the committee of creditors, in view of the peculiar situation that
the only claim received by the interim resolution professional (pursuant to a
publication) was that of the operational creditor itself.
Accord
Life Spec Private Limited v. Orchid Pharma Limited [Co. Appeal (AT)
(Insolvency) No. 761/2019]
The NCLAT observed that a
resolution plan which offers an amount less than the liquidation value of the
corporate debtor is impermissible in law (in view of Section 30 (2) (b) of the
Code). In the process, the NCLAT also dismissed a contention that the expression
‘liquidation value’ as defined under Regulation 2 (k) of the IBBI (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016 is only a notional
value and unrealisable in actuality.
Digvijay
Tanwar Singh v. Sonia Rani & Others [Co. Appeal (AT) (Insolvency) No.
1189/2019]
The NCLAT reiterated
its earlier position that it has no jurisdiction to condone delay beyond 15
(fifteen) days after the conclusion of the 30 (thirty) day filing period, in
terms of Section 61 (2) of the Code. In other words, under Section 61 (2) of
the Code, the NCLAT is empowered to condone delay in preferring appeal by not
more than 15 (fifteen) days. A similar view has been taken by the NCLAT in Premco
Rail Engineers Ltd. v. Korba West Power Company Ltd. [Co. Appeal (AT)
(Insolvency) No. 1105-1106/2019] & Excise and Taxation Department
Haryana Panchkula v. Marmagoa Steel Ltd. [Co. Appeal (AT) (Insolvency) No.
1077/2019].
Please separately
note that, typically, once an appeal of an operational creditor (assailing an
order of rejection of its application for CIRP by the Adjudicating Authority) is
allowed by the NCLAT, the matter is remanded back to the Adjudicating Authority
for admitting the said application. In some situations, the NCLAT directs the
Adjudicating Authority to admit the application after issuance of notice to the
corporate debtor so as to give the corporate debtor one opportunity to settle
the matter with the operational creditor.
