Supreme Court delivered several significant rulings concerning the Insolvency and Bankruptcy Code (IBC). In Mohammed Enterprises (Tanzania) Ltd. v. Farooq Ali Khan & Ors., the SC held that the Karnataka High Court (HC) had overstepped its writ jurisdiction under Article 226 by intervening in an approved resolution plan, noting that IBC is a self-contained code with sufficient remedies. In Bank of Baroda v. Farooq Ali Khan & Ors., the SC set aside HC’s decision that had prematurely terminated personal guarantor insolvency proceedings based on a settlement, affirming that the Adjudicating Authority (AA) must first consider the resolution professional’s report as per the IBC framework. A writ challenging the constitutional validity of Section 101 (moratorium in personal guarantor cases) was also dismissed, with the SC upholding the distinct purpose of individual insolvency under IBC. In Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors., the SC ruled that consumer court execution proceedings against a real estate developer could not be automatically stayed under Section 96 IBC unless specifically covered. Additionally, in an international development, the High Court of Singapore recognised the Indian CIRP proceedings of Compuage Infocom Ltd. as a “foreign main proceeding” under the UNCITRAL Model Law on Cross-Border Insolvency. The court recognised the Indian Resolution Professional as a “foreign representative” and confirmed that procedural requirements under Article 15 were satisfied. These rulings collectively underscore the SC’s stance on judicial discipline in insolvency matters and the growing international recognition of India’s insolvency proceedings.
Insolvency and Bankruptcy News
1 Supreme Court
Mohammed Enterprises (Tanzania) Limited Vs. Farooq Ali Khan & Ors. [Civil Appeal No. 48 of 2025]
In a writ petition filed by the promoters, Karnataka HC had set aside the resolution plan approved by the AA in the matter of Associate Décor Limited-CD on the ground that adequate notice for the CoC meeting was not given to the promoters. The decision of HC was challenged before SC by successful resolution applicant (SRA), CoC and the RP. The issue before the SC was whether the HC was justified in exercising its supervisory and judicial review powers under Article 226 of the Constitution of India? SC while allowing the appeals held that “High Court should have noted that Insolvency and Bankruptcy Code is a complete code in itself, having sufficient checks and balances, remedial avenues and appeals. Adherence of protocols and procedures maintains legal discipline and preserves the balance between the need for order and the quest for justice. The supervisory and judicial review powers vested in High Courts represent critical constitutional safeguards, yet their exercise demands rigorous scrutiny and judicious application. This is certainly not a case for the High Court to interdict CIRP proceedings under the Insolvency and Bankruptcy Code.”
Bank of Baroda Vs. Farooq Ali Khan & Ors. [Civil Appeal No. 2759 of 2025]
A FC had lent various credit facilities to the Associate Décor Limited-CD which were secured by a deed of guarantee by Mr. Farooq Ali Khan, promoter and director of the CD and few other individuals. As the CD defaulted in making repayments to the FC, CIRP against CD was initiated. Subsequently, the FC invoked the deed of guarantee against the PG and a settlement was reached between the FC and the promoter. Thereafter, the FC filed section 95 application for initiating IRP against the PG. AA, vide order dated 16.02.2024, appointed a RP and directed him to submit report in terms of section 99 of the Code. AA further observed that objections raised by the guarantor shall be entertained after the receipt of RP’s report. Aggrieved by the AA’s order, the PG filed a WP before the Karnataka HC which held that the liability of the PG stood discharged in view of the settlement between the FC and the PG, and thus, the insolvency proceedings against PG stood disposed of before the AA. On appeal filed by the FC, the issue before SC was whether the HC correctly exercised its writ jurisdiction to interdict the personal insolvency proceedings against the PG? SC while disposing of the appeal, held that the HC incorrectly exercised its writ jurisdiction on two grounds. Firstly, it precluded the statutory mechanism and procedure under the Code from taking its course, and secondly, the HC arrived at a finding on the existence of the debt, which is a mixed question of law and fact which falls within domain of the AA under section 100 of the Code. SC while allowing the appeal, explained that the existence of the debt will first be examined by the RP in his report and will then be judicially examined by the AA in terms of provisions of the Code. It held that the HC had erroneously exercised its jurisdiction even prior to the submission of the RP’s report, thereby precluding the AA from performing its adjudicatory function under the IBC. Accordingly, the SC allowed the appeal and restored the personal insolvency process of the PG before the AA.
Unsuccessful resolution applicant/ appellant filed the above appeal challenging the resolution plan approved by AA in favour of AGI Greenpac (combination of HNGIL and Greenpac). The key issue was whether obtaining prior approval of Competition Commission of India (CCI) was mandatory before seeking CoC’s approval for the resolution plan involving combination. RP contended that NCLAT in its judgement had held that while CCI approval is mandatory, obtaining the same prior to CoC’s approval is directory. This was based on the understanding that the resolution applicant may not control the CCI’s timeline, potentially causing undue delays. However, SC noted that when the language used in the provision is clear, courts must give effect to the meaning inferred from a statute, irrespective of consequences. The use of the word ‘prior’ in the proviso to sub-section (4) of section 31, must be given some meaning as by virtue of the same, the statute requires that the CCI approval for resolution plans containing combination proposals must be obtained prior to CoC’s approval. SC while disposing the appeal referred to the Report of the Insolvency Law Committee, recommending specific timelines for seeking approval from Government authorities and the CCI.
Mukund Choudhary Vs. Union of India & Ors. [Writ Petition (Civil) No. 114 of 2025]
A writ petition before SC was filed challenging the constitutional validity of section 101 of the Code which provides moratorium of 180 days in the insolvency proceeding of a personal guarantor. SC while dismissing the WP, held that the purpose of individual insolvency is different under the Code from that of the corporate insolvency resolution process which aims to examine whether the CD can be rehabilitated and revived by taking recourse to resolution plans during moratorium.
Saranga Anilkumar Aggarwal Vs. Bhavesh Dhirajlal Sheth & Ors. [Civil Appeal No(S). 4048 of 2024]
The National Consumer Disputes Redressal Commission (NCDRC) allowed various complaints against Saranga Anilkumar Aggarwal, a real estate developer, and directed him to hand over the possession of completed residential properties and imposed several penalties on him for deficiency in service. The homebuyers filed execution petitions against the developer for non-compliance with the order of NCDRC. In the meanwhile, admission order was passed by the AA against the said developer being the PG under section 95 of the Code. The said PG, then, approached NCDRC seeking stay on pending/ ongoing execution proceedings against him in view of the moratorium under the IBC. On dismissal of the PG’s application by the NCDRC, appeal was filed before SC. Issue for consideration before SC was whether execution proceedings under the Consumer Protection Act, 1986 can be stayed during an interim moratorium under section 96 of the IBC. SC while dismissing the appeal has made following observations – 1. While civil proceedings are generally stayed as per moratorium under IBC, criminal proceedings, including penalty enforcement, do not automatically fall within its ambit unless explicitly stated by law. 2. The penalties
imposed by the NCDRC are regulatory in nature and arise due to non-compliance with consumer protection laws. 3. Scope of moratorium under section 14 of the Code is wider than that of section 96 which uses the terminology “any legal action or proceedings relating to any debt shall be deemed to have been stayed”. It was observed that “penalties arising from the regulatory infractions are not covered under the ambit of “debt” as envisioned under the Code.”. 4. The protection under the moratorium does not cover all forms of liabilities, particularly those classified as “excluded debts” under section 79(15) of the Code. It was also observed that damages awarded are covered under “excluded debts” as per section 79(15) of the Code, which does not get the benefit of the moratorium under section 96 of the Code, and their enforcement remains unaffected by the initiation of insolvency proceedings. 5. Staying of penalties that serve as deterrence against such unfair practices would render consumer protection mechanisms ineffective and erode trust in the regulatory framework. 6. All the criminal liabilities do not fall within the scope of the moratorium unless explicitly covered under the IBC. 7. Penalties imposed by regulatory bodies in the public interest cannot be stayed merely because insolvency proceedings are initiating.
Vishnoo Mittal Vs. Shakti Trading Company [Special Leave Petition (CRL) No. 1104 of 2022]
The suspended director of CD approached the Punjab & Haryana HC seeking to quash the proceedings initiated against him under section 138 of NI Act in view of the moratorium imposed under section 14 of the Code. HC, while dismissing the petition, held that the immunity granted by the moratorium under section 14 of the IBC can only be obtained by a CD and not by a natural person, who was the director of the CD. Aggrieved with the same, the suspended director filed the petition before SC. Apex Court observed that when the notice under the NI Act was issued to the director of the CD, he was not in charge of the CD but was suspended from his position as the director of the CD with the imposition of moratorium and appointment of IRP. It was not possible for the suspended director of CD to fulfil the demand raised by the OC respondent in view of section 17 of the Code. SC while allowing the SLP noted the OC-respondent who had initiated proceedings under section 138 NI Act, had also filed its claim in response to the public announcement inviting claims from the creditors.
Vaibhav Goel & Anr. Vs. Deputy Commissioner of Income Tax & Anr. [Civil Appeal No. 49 of 2022]
The issue before the SC was whether the SRA can be made liable for demand notices of income tax department served after the date of approval of the resolution plan. SC observed that the IT Department did not file any claim regarding income tax dues of the CD for the assessment years 2012-13 and 2013-14. SC while allowing the appeal held that all the dues including the statutory dues owed to the Central Government, if not a part of the resolution plan, shall stand extinguished and no proceedings could be continued in respect of such dues for the period prior to the date on which the plan received approval under section 31 of the Code.
2 High Court
Sanjay Kumar Agarwal Vs. Union of India, though the Directorate of Enforcement [Criminal Revision No. 728 of 2023]
In a trap arranged by the CBI, the petitioner/ RP was caught red- handed for accepting the bribe for manipulating the CIRP and forensic audit report. The said RP was charged under the provisions of Prevention of Corruption Act (PC Act), 1988, and PMLA. Subsequently, IBBI suspended his registration. A petition was filed by RP before the Session Court, Ranchi for discharge from the ECIR Case No. 05 of 2021, was dismissed and the Court held him guilty. Later, Criminal Revision Petition was filed before Jharkhand, HC. RP also placed reliance on the order dated 18.12.2023 of Delhi HC in the case of Dr. Arun Mohan vs CBI [W.P(Crl.) No. 544 of 2020] which had held that IP is not a public servant after considering the order dated 05.04.2023 of Jharkhand HC. The Jharkhand HC, while disposing of the present petition, examined whether RP under the Code is a public servant in terms of the PC Act. It noted that although the RP is not explicitly listed as a public servant under section 21 of the Indian Penal Code, RP’s duties are inherently public, given their involvement with public funds and financial institutions. However, the HC while dismissing the petition referred to the order dated 05.04.2023 of its own HC passed in the FIR (R.C.1(A)/2020-D, CBI, ACB, Dhanbad) that had held RP as a public servant under the Prevention of Corruption Act and further rejected RP’s claim for immunity from prosecution.
Stesalit Limited Vs. Union of India & Ors. [WPA 532 of 2025]
SRA in its resolution plan had proposed for partial payment of claim of an ex-employee of the CD towards dues of gratuity. On a petition by the ex-employee before the Assistant Labour Commissioner (Central) & Controlling Authority (Controlling Authority), the Controlling Authority directed for payment of gratuity along with interest till actual payment. CD challenged the order of competent authority before HC of Calcutta . The HC observed that the CD was never closed nor went into liquidation. However, no gratuity fund is maintained by the CD. It observed that such dues of the workers are not permissible to be included in the liquidation estate and to be utilized only for payment of dues, further such dues of workers have to be paid in full. While dismissing the writ, it held that the CD was taken over by the SRA in terms of the provisions of the Code and the CD remained functioning as a going concern. Therefore, the Controlling Authority has the jurisdiction over the CD to decide on the total dues of the workers.
Arena Superstructures Private Limited and Anr. Vs. State of U.P. & Anr. [WRIT – C No. – 6041 of 2024]
Subsequent to the approval of resolution plan by the NCLT, the RP wrote to NOIDA for revalidating plan for initiating construction as there was no stay on implementation of resolution on an appeal filed before the NCLAT against the order approving resolution plan. However, NOIDA through a letter rejected the application stating that CD has not constructed its share of sports city infrastructure within time stipulated and matter is pending with the State Government for directions. The said letter was challenged before Allahabad High Court by way of writ. The HC observed that the conditions of lease deed executed between the CD and the Noida Authority were flouted namely, non-payment of lease premium and no development of sport facility. It observed that the NCLT does not have the power to issue direction to the NOIDA to revalidate the map. The insolvency proceeding is an engineered insolvency to avoid the liabilities. The NCLT should verify the balance sheet and other documents to avoid such engineered insolvency proceedings. In an integrated project, the NCLT may keep in mind that project remains as an integrated project, and it is the duty of
consortium to ensure that entire sports facilities are being developed and IRP while choosing the developer should keep in mind the development of the project as contemplated. It disposed of the WP with the directions to the Registry, HC to refer the matter to ED to investigate and retrieve the siphoned/ laundered money by the erstwhile management of the company so that outstanding dues of NOIDA Authority, State Government, additional compensation to the farmers and the other dues may be paid off.
3 National Company Law Appellate Tribunal
Employees’ Provident Fund Organization, Regional Office, Vashi, Navi Mumbai Through Regional PF Commissioner-II (Legal) Vs. Jaykumar Pesumal Arlani, Resolution Professional of M/s. Decent Laminates Private Limited [CA(AT)(Ins) No. 1062 of 2024]
The issue for consideration before NCLAT was whether assessment proceedings can be carried by the EPFO after imposition of moratorium under section 14 of the Code. NCLAT observed that the expression in sub-section (1) of section 14 ‘suits or proceedings against the corporate debtor’ has been used. The word ‘proceeding’ is not qualified, so as to confine it to proceedings before the Civil Court. Thus, the proceedings which have an effect on the assets of the CD are hit by moratorium. NCLAT while dismissing the appeal held that the assessment proceedings cannot take place once CIRP is initiated against CD. Further, it observed that the expression “suit or other legal proceeding” in sub-section (5) of section 33, bar is only against the suit or legal proceedings and no bar against assessment proceedings. Thus, assessment proceedings can continue during liquidation process but not under CIRP.
Canara Bank Vs. Vivek Kumar [CA(AT)(Ins) No. 390 of 2023 & I.A. No. 1301, 1302 of 2023, 7105, 7610 of 2024]
In terms of a tripartite agreement, Canara Bank (FC) had lent funds to AVJ Developers (India) Private Limited (CD) for purchase of residential units by the individual homebuyers in the CD’s project. Owing to CD’s default in the execution of the project, CIRP was initiated against the CD. The Bank filed its claim in the process as a financial creditor. The RP rejected the claim on the ground that only individual homebuyers are entitled to file claims directly with the RP and that Bank’s claims were also not backed by proper authorisation of the homebuyers. Aggrieved with the same, the Bank approached the AA who held that the bank had not directly financed the CD, and the real financial creditors are the homebuyers. In the appeal filed by the Bank, the issues for consideration before NCLAT were (1) whether Bank’s claim should be considered as FC on the strength of tripartite agreement; (2) whether non-registration of mortgage in terms of section 77 of the Companies Act, 2013 impacts Bank’s claim for treatment as secured creditor; and (3) whether the recovery certificate issued by the Debts Recovery Tribunal be considered towards Bank’s claim as FC. NCLAT observed that the tripartite agreement is very categorical which states that the entire advance provided by the bank to the homebuyers shall be refunded by the builder to the bank. The clause 16 of the said agreement also provides that in case the builder fails to pay the amount as stated in this clause, the builder shall pay the entire loan amount with interest, including penal interest etc., in terms of loan agreement. It further observed that, while normally it is only the homebuyers who can file claims as FC, but a peculiar clause has been provided in the tripartite agreement which create the rights of the Bank for payment in terms of sub-section (6) of section 3 of the Code. Thus, the primary responsibility to repay in the present case lies with the CD and secondary responsibility with the homebuyers. On the issue of non-registration of charges as per section 77 of Companies Act, it relied on its own judgment in Canara Bank Vs, Rajendran [CA(AT)(Ins) No. 277 of 2023], and held that non-registration of charges will not adversely impact the rights of the Bank. Also, the recovery certificate issued by the DRT will strengthen the Bank’s claim as the same may fall within the definition of financial debt defined under sub-section (8) of section 5 of the Code.
The CD – Nivaya ASL Private Limited issued debentures (optionally convertible and non-convertible debentures) to the FC – Vistra ITCL (India) Limited and executed two Debenture Trust Deeds in favour of them. The Trust Deed provided for execution of personal guarantee by Ms. Anita Goel and Mr. Ayush Goel (PGs). On the failure of the CD to repay the creditors, the FC invoked guarantee and issued separate notices to PGs under section 95(4)(b) of the Code. The AA appointed RP to submit report under section 99. AA, after considering the said report admitted the application under section 100 of the Code. The PGs filed an appeal against this order of admission before the NCLAT. The key issue dealt by the NCLAT was- (i) whether the appointment of RP was done in contravention of sub-section (3) of section 97 of IBC. (ii) whether an application for personal insolvency against a PG must be filed before the AA, when no CIRP or liquidation proceedings of the CD is pending before the AA. The NCLAT observed that the AA has appointed the RP, relying on Form-C submitted by RP, which contains his consent certifying that there are no disciplinary proceedings pending against him. Further, it held that rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 read with sub-section (3) of section 97 provides for mechanism of nomination of RP from the panel of IPs provided by the IBBI. Thus, the appointment of RP by the AA was not found violative of subsection (3) of section 97 of the Code. On the second issue, the NCLAT relied on its decision in State Bank of India vs. Mahendra Kumar Jajodia [(2022)SCC Online NCLAT 58] and the judgment of the SC in the case of Lalit Kumar Jain vs. Union of India & Ors. [Transferred Case (Civil) No.245/2020], held that “the intimate connection between such individuals and Corporate entities to whom they stood guarantee, as well as the possibility of the two separate processes being carried on in different forums, with its attendant uncertain outcomes, led to carving out personal guarantors as a separate species of individuals, for whom the AA was common with the corporate debtor whom they had stood guarantee”. NCLAT while dismissing the appeals held that an application for personal insolvency against a PG shall be filed before the AA, even when no CIRP or liquidation proceeding of the CD is pending before the AA.
AA vide order dated 08.10.2021 directed the liquidation of the CD. FCs including IDBI Bank submitted a claim in the liquidation process of the CD. During the process, the liquidator declared Shakambhari Ispat & Power Limited as the successful H-1 bidder for the sale of the CD as a going concern. The liquidator proposed to distribute
the sale proceeds as per the security interest, which was opposed by IDBI Bank. IDBI Bank has filed IA praying that the proceeds should be distributed in proportion to their admitted claim on a pro-rata basis. The AA held that, as per section 53(1) of the Code, the distribution must be in proportion to the admitted claims of the secured creditors. In the appeals filed by other FCs, NCLAT relying on the judgment of SC in the case of India Resurgence Arc Private Limited vs. Amit Metaliks Limited & Anr. [(2021)19 SCC 672], held that distribution of sale proceeds as per the admitted claims of the FCs on a pro-rata basis is binding and must be followed.
HDFC Bank Limited Vs. Pratim Bayal, RP of Birla Tyres Limited & Ors. [CA(AT)(Ins) No. 1472 of 2023]
HDFC Bank, a dissenting financial creditor in the CIRP of Birla Tyres Limited, challenged the distribution mechanism approved by the Committee of Creditors (CoC), which was based on the value of security interest in the resolution approved by the AA. HDFC Bank claimed it was entitled to a higher amount based on its voting share. The issue before NCLAT was whether CoC was justified in approving the plan on the basis of security interest and not on the basis of vote share of the respective financial creditor. The NCLT observed that sub-section (4) of section 30 of the Code as amended w.e.f. 16.08.2019 empowers the CoC to take into account the feasibility and viability as also priority and value of security interest of secured creditors while considering a resolution plan. Further, section 30(2)(b) provides that dissenting financial creditors are entitled to an amount which shall not be less than the amount to be paid to such creditors in the event of liquidation of the CD. NCLAT while dismissing the appeal held that CoC has the commercial discretion under sub-section (4) of section 30 of the Code to determine distribution criteria, including security value; more so the resolution plan contained provision for payment to dissenting financial creditors which is more than the liquidation value.
State Bank of India Vs. Deepak Kumar Singhania [CA(AT)(Ins) No.191 of 2025]
The CD – LML Limited was extended financial facilities by the State Bank of India (FC). Deepak Kumar Singhania (PG to CD) executed a Multi-Partite Agreement and a Deed of Guarantee, wherein he undertook to pay to the FC in the event any default is committed by the CD, upon demand. Unable to clear the dues, the FC issued a demand notice under rule 7 of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 [Rules, 2019]. Since the dues were not cleared in response to the demand notice, the FC instituted action against the said PG to CD under section 95 of the Code. AA vide order dated 28.11.2024, dismissed the FC’s application on the ground that the FC has failed to invoke the personal guarantee, which is a mandatory pre-requisite for issuing a legally valid demand notice under rule 7(1) of the Rules. On appeal, the issue before the NCLAT was whether a demand notice in Form B issued under rule 7(1) of the Rules can be considered as invocation of the guarantee for the purposes of filing a section 95 application by a creditor. The NCLAT noted that for the purpose of initiating the IRP against PG to CD, the definition of ‘Personal Guarantor’ under section 5(22) of may not be applicable and the definition given in rule 3(1)(e) of Rules, 2019 has to be looked into. Further, it observed that the demand notice in Form B contemplate demanding payment of the default amount. Thus, the default on the part of guarantor has to exist on the date of issuance of demand notice in Form-B. Therefore, the personal guarantee will have to be invoked as per the terms of deed of guarantee to fasten the liability on the PG to CD. The NCLAT while dismissing the appeal, held that the date of default has to be reckoned with the default committed in response to the invocation of the guarantee as per the deed of guarantee and the demand notice issued in Form-B to the PG to CD demanding repayment of debt cannot be treated as notice of invocation of guarantee.
Santoshi Finlease Private Limited Vs. State Bank of India & Ors. [CA(AT)(Ins) No. 974 of 2023]
M/s Santoshi Finlease Private Limited (FC) had initiated action under section 7 of the Code against the CD for default in non-payment of loan dues. State Bank of India (SBI) another FC filed an intervention application seeking dismissal of CIRP against the CD, alleging malicious and fraudulent intent of the FC to stall the recovery proceedings initiated by SBI under SARFAESI Act, 2002. The AA, vide order dated 12.06.2023, allowed the application of SBI by dismissing the CIRP initiated against the CD and imposed a penalty of Rs. 10,00,000/- on the FC for malicious application. Aggrieved with the order, the FC filed appeal before NCLAT. The issues before the NCLAT were (i) whether there is a debt and default for section 7 petition to be admitted? (ii) whether the section 7 petition was filed with malicious intent or not? (iii) whether the penalty imposed on the FC is justified or not? The NCLAT observed that the directors of the CD and FC, who executed the loan agreement, were related party. The NCLAT further observed that the directors were responsible for default committed by the CD and the resignation of the directors from the board of CD within one month of the filing of the section 7 petition is an attempt to evade recovery proceedings under SARFAESI Act, 2002. Lastly, the NCLAT while dismissing the appeal held that investments made by the FC was intended to acquire a stake in the CD and was not in the nature of a disbursement against time value of money and did not satisfy the essential criteria of a financial debt under section 5(8) of the Code.
J.K. Paper Fibre Resources Vs. Sunit Jagdishchandra Shah [CA(AT)(Ins) No. 76 of 2025]
FC initiated CIRP against the CD – M/s. Shree Rajeshwaran and Paper Mills Limited under section 7 of the Code, for the default committed to repay the financial debt owed to the FC. During the CIRP, IRP has issued Form-G for inviting EOIs. Meanwhile, with the approval by CoC, the RP sought to extend the CIRP timeline to re-issue Form -G, which were accordingly approved by the AA. Resultantly, the CIRP period was extended beyond the 330 days. The OC filed appeal before NCLAT on the grounds of contravention of statutory timelines and abysmally low recovery of OC’s claim by the RP. The issues before the NCLAT were (i) whether there were material irregularities in the exercise of powers by the RP in the CIRP proceedings (ii) whether the claims of the OCs did not receive their dues. The NCLAT observed the extension of timelines approved by the CoC with in its commercial wisdom to approve the viable resolution plan was not questioned by the OC at the appropriate time nor was agitated before the AA. Further, it observed that mandatory requirements have been duly complied, as such judicial review cannot be extended to analyse and investigate the dissatisfaction evinced by any particular creditor or stakeholder. It held that since the liquidation value is nil and the amount disbursed to the OC is more than such value, the approved resolution plan did not contravene section 30(2)(b) of the IBC.
RBL Bank Limited Vs. Sical Logistics Limited & Ors. [CA(AT)(Ins) No. 36 of 2024]
The resolution plan for M/s Sical Logistics Limited -CD was approved by the AA which provided an amount of Rs. 42.09 Crores to the dissenting financial creditor – RBL Bank (DFC) an amount of Rs. 42.09 Crores, being 9.88% of its voting share. However, the DFC was paid Rs. 9.38 Crores i.e., 9.88% of the amount available for distribution (i.e., Rs. 94.93 Crores) in the first tranche. The AA held that the DFC shall be entitled to be paid in priority over the assenting FCs in accordance with section 53(1) of the Code. The aggrieved DFC filed an appeal before the NCLAT inter alia praying for full payment of Rs.42.09 crore in priority over the assenting FCs (i.e., 9.88% of 425.93 Crores being the resolution plan value). The issue before the NCLAT was whether the DFC’s share should be pegged to the liquidation value of Rs. 351.88 crores or to the resolution value of Rs.425.93 crore, which was higher. While allowing the DFC’s appeal, the NCLAT observed that Explanation (I) to section 30(2)(b)(ii) states that the distribution under this clause shall be fair and equitable to such creditors. Since the resolution value is higher than the liquidation value, it held that resolution plan is fair and equitable, and that the DFC gets a pro-rata share of the resolution value as per the tranches being paid by the SRA. Further, it concluded that priority in payment means that whenever an amount is distributed among creditors, the payment will be done on pro-rata basis, but the DFC shall be paid first before making payment to assenting FCs.
4 Other Courts
In re: Compuage Infocom Limited and Anr. [Originating Application No. 1272 of 2024]
Compuage Infocom Limited (CD) is a company incorporated in India specialising in IT distribution, with a subsidiary registered in Singapore. The CD had entered into a loan agreement with the FC for certain credit facilities. On default, the FC initiated CIRP against the CD, which was allowed by the AA vide order dated 02.11.2023. Subsequently, RP filed an application before the High Court of the Republic of Singapore (HC) seeking details concerning the bank accounts of the CD’s subsidiary, so that the assets of the CD’s subsidiary can be vested in the RP for repatriating to India. The RP sought recognition of CIRP proceedings in India under Article 15 of the UNICTRAL Model Law on Cross-Border Insolvency, in order to include the assets of the Singaporean-incorporated subsidiary in the CIRP of the CD. The issues before the said HC were as follows: (i) whether the CIRP is a foreign proceeding; (ii) whether the RP is a foreign representative, and whether he was appointed in the CIRP; (iii) whether the procedural requirements under Article 15 of the Model Law have been satisfied. The HC delineated five grounds to be fulfilled for a proceeding to qualify as a “foreign proceeding” under the Model Law. They should be collective in nature, must be a judicial or administrative proceeding in a foreign State, must be conducted under a law relating to insolvency or adjustment of debt, the property and affairs of the CD must be subject to control or supervision by a foreign court and that proceeding must be for the purpose of reorganisation or liquidation. The HC found that CIRP of the CD in India qualify as a foreign main proceeding under the Model Law as the COMI of CD was determined in India. On the second issue, the HC granted recognition to the RP as a foreign representative within the meaning of Article 2(i) of the Model Law. As regard the third issue, the HC held that procedural requirements in terms of Article 15 of the Model Law were met and also satisfied by the RP.
