Summary: This collection of judgments delves into recent Supreme Court and High Court rulings concerning the Insolvency and Bankruptcy Code (IBC). In BRS Ventures vs. SREI Infrastructure, the Supreme Court held that while resolution plans extinguish claims against a corporate guarantor, creditors retain the right to pursue the principal borrower. In Vijay Kumar Singhania vs. Bank of Baroda, the Court clarified that financial creditors may submit proof of default beyond records held by information utilities (IU). In Palanivel vs. Sriram, the Court treated liquidation payment timelines as mandatory, yet granted COVID-related exclusions. State Bank of India vs. India Power addressed appeal filing timelines, ruling that free copies can suffice as certified copies if filed within condonable periods. Su-Kam vs. Himachal Pradesh clarified that the clean slate principle applies during liquidation sales, barring tax charges on corporate debtor (CD) properties. Additional cases discuss the powers of Committees of Creditors (CoC) to modify approved plans and the enforcement of asset attachment releases under Section 32A of IBC, as ruled in Vantage Point Asset vs. Alchemist Infra Realty. In Siddharth Satish Katariya vs. Central Bank of India, the NCLAT reviewed corporate guarantees, while SBS Holdings vs. Mohan Lal Jain discussed shareholder agreements and arbitration proceedings. These cases underscore the Court’s interpretations on resolution plans, liquidation protocols, and creditor rights, guiding stakeholders on handling complex IBC proceedings.
Supreme Court Orders
FC had granted a loan of Rs. 100 crore to Gujarat Hydrocarbon and Power SEZ Limited (CD), for setting up a special economic zone project (SEZ project). The said loan was secured by the corporate guarantee furnished by Assam Company India Limited (ACIL), which is the holding company of the CD. On default, CIRP was initiated by the FC against corporate guarantor i.e. ACIL. BRS Ventures Investments Limited (SRA) had paid a sum of Rs. 38.87 crore to the FC against the admitted claim of Rs. 241.27 crore in the resolution plan. Later, the FC initiated CIRP against the CD. On appeal by SRA of ACIL challenging the admission order of the CD, date of the issuance of the SCN to 60 days from the due date for receipt of reply to the SCN
NCLAT upheld the admission order against the CD. On further appeal by SRA before SC, the issue before SC was whether such application under section 7 is maintainable against the CD for the same debt and default against which CIRP has already been initiated against corporate guarantor which has resulted in successful resolution towards full and final settlement of all its dues. While dismissing the appeal, SC clarified that the approval of resolution plan for corporate guarantor extinguishes the right of FC to recover anything further from the corporate guarantor; however, principal borrower will not be discharged. SC held that the FC can still proceed against the principal borrower i.e. CD to recover the balance amount. While applying the concept of subrogation, as per section 140 of the Indian Contract Act, 1872, SC observed that “…The subrogation will be only to the extent of the amount recovered by the creditor from the surety. Notwithstanding the subrogation to the extent of the amount paid on behalf of the corporate guarantor by the resolution applicant, the right of the financial creditor to recover the balance debt payable by the corporate debtor is in no way extinguished.”
Vijay Kumar Singhania Vs. Bank of Baroda & Anr. [Civil Appeal Diary No (s). 5768 of 2024]
The issue involved was whether an FC can file any other proof of default other than record of default with the IU for evidencing default by the CD? The SC did not interfere with the finding of the NCLAT that record of default with the IU is not the only document which can be furnished by the FC. The FC is at liberty to file evidence of record of default as contemplated by regulation 2A of CIRP Regulations read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
V.S. Palanivel Vs. P. Sriram, CS Liquidator & etc. [Civil Appeal Nos. 9059-9061 of 2022]
During liquidation, an asset of the CD was sold in the auction. On an application filed by the SRA, AA had extended the timeline for the auction purchaser to deposit the balance sale consideration due to the extraordinary circumstances of Covid-19. The suspended director filed an appeal before the NCLAT against the order of AA and sought cancellation of sale. Upon dismissed of appeal, the suspended director filed an appeal before the SC. The issue for consideration before SC was whether the timeline in clause 12 of Schedule I of the Liquidation Regulations which mandates payment of balance sale consideration coupled with interest within 90 days, is mandatory. The SC examined the provision and noted that the law provides for the consequence of non-compliance of the said provision leading to cancellation of sale. Accordingly, it held that the timeline, thus provided must be treated as mandatory. However, in the facts of the case, considering the unprecedented Covid-19 situation, and the fact that SC extended statutory timelines for all the proceedings including the liquidation processes, in the Suo Moto WP(C) 3 of 2020, the SC dismissed the appeal holding that the auction purchaser was entitled to the exclusion of timeline on account of lockdown period in terms of regulation 47A of the Liquidation Regulations.
State Bank of India Vs. India Power Corporation Limited [Civil Appeal No. 10424 of 2024]
An appeal was preferred against order of AA before NCLAT after 3 days beyond 30 days, with an application for condonation of such delay. This application was supported with a free copy of the order of the AA provided under rule 50 of the National Company Law Tribunal Rules, 2016 (NCLT Rules, 2016). On the issue as to whether a free copy provided under rule 50 of the NCLT Rules, 2016 can be construed as a “certified copy’’ in terms of rule 22(2) of the National Company Law Appellate Tribunal Rules, 2016 (NCLAT Rules, 2016), for the purposes of filing of an appeal under section 61 of the IBC, there were divergent views between the two members of the NCLAT. On reference to a third member of NCLAT, it was observed that a free copy under rule 50 of NCLT Rules, 2016 cannot be treated as ‘certified copy’under rule 22(2) of NCLAT Rules, 2016. The NCLAT relied on the SC judgment in V Nagarajan Vs SKS Ispat and Power Limited & Ors. [Civil Appeal No. 3327 of 2020] wherein it was held that the mandate of a free copy was not to enable litigants to take “two bites at the apple where they could compute limitation from either when the certified copy is received on the litigant’s application or received as a free copy from the Registry —whichever is later”. On further appeal, SC, distinguished the instant case with that of V. Nagarajan’s case and in the light of facts, it held that the “provisions of Rule 50 of the NCLT Rules place both the free certified copy as well as the certified copy which is applied for on payment of fees on the same footing. The appeal in the present case was filed within the condonable period of 15 days, which should have been condoned.” Accordingly, the appeal was allowed.
High Court
Su-Kam Power System Limited & Anr. Vs. State of Himachal Pradesh & Ors. [CW.P. No. 422 of 2024]Himachal Pradesh (HP) State Tax Department filed a claim for pre-CIRP dues under various tax laws, including the HP VAT Act, CST Act, and HP GST Act, during liquidation. The said claim was admitted by the liquidator. During liquidation, the tax department also created a charge against the property of CD. Later, AA allowed the sale of the CD as a going concern on the basis of the acquisition plan submitted by the successful bidder which inter-alia contained a prayer for extinguishment of the tax claims. The successful auction purchaser being aggrieved by such creation of a charge on CD’s property by HP State Tax Department preferred a writ petition before the High Court of Himachal Pradesh. The HC held that this action of creating a charge on the CD’s property during liquidation had violated provision of section 33(5) of the Code. It clarified that the “clean slate principle” as applicable while taking over a CD under a resolution plan, also applies to an acquisition during liquidation.
Sarish Mittal & Anr. Vs. Insolvency & Bankruptcy Board of India & Ors. [CW.P. No. 19562 of 2023 & CW.P. No. 8750 of 2023]
During the CIRP of the CD, on a complaint filed before IBBI by the suspended directors, IBBI had issued SCN to RP for certain contraventions. Thereafter, the said SCN was disposed by the DC vide order dated 22.08.2022 whereby, the DC cautioned RP to be more careful in future while handling with the process under the Code. Suspended directors of CD challenged the DC order dated 22.08.2022 before Hon’ble High Court of Punjab and Haryana on the ground that RP should have been removed immediately and all proceedings carried out by him till date should be declared illegal and non-est by the Board, and further contended that such order has been passed by a single-member DC and not by a properly constituted ‘Committee’ in terms of section 220(1) of the Code. HC held that merely because in the opinion of the Court another alternate punishment would be more appropriate, cannot be a ground to interfere with the discretion of disciplinary authorities. It also noted that there is no definition of “Disciplinary Committee” in the Code. While dismissing such petition, it observed that “….in order to plan effective implementation of provisions of IBC, Ministry of Corporate Affairs constituted four working groups in July 2016. First working group was entrusted with the task to ‘Recommend the design of the IBBI.’As per its recommendation in respect to constitution of the ‘Committee,’ it is duly observed that once IBC neither explicitly permits nor prohibits the possibility of one-member Disciplinary Committee, the word ‘Committee’ used in Section 220(1) IBC can be interpreted to be inclusive of one member Committee.”
Sandeep Kumar Bhatt Vs. Insolvency & Bankruptcy Board of India & Ors. [W.P.(C) 15588 of 2023, CM APPLs. 62380 of 2023 and 65667 of 2023]
RP challenged the order of DC, whereby the registration of the RP was suspended for a period of two years, before the Hon’ble High Court of Delhi, on the ground that the order of DC was passed by only a single member committee and not by a properly constituted ‘Committee’ in terms of section 220(1) of Code. The HC emphasized that its jurisdiction under Article 226 of the Constitution is limited to reviewing the decision-making process and not re-evaluating the facts or substituting its conclusions for those of expert bodies. HC while relying on section 13(2) of the General Clauses Act, 1897. It also held that section 220 of Code only postulates that the Board shall constitute the committee and the committee can also be a one-member committee. While dismissing the writ petition, it clarified that the proviso to sub-section (1) of section 220 of the Code does not indicate that there should be always more than one member in the committee.
Post approval of resolution plan of CD on 06.05.2020 by AA, Assistant Commissioner of Income Tax (Tax authority) issued communication under Income Tax Act, 1961 (IT Act) for initiating proceedings against the CD. Aggrieved by this action, the CD filed a writ petition before the High Court of Bombay for quashing and setting aside of the impugned proceedings including all the notices and communications received from the Tax authority. On this issue of extinguishment of the tax proceedings post approval of plan under the Code, the HC allowed the WP relying on judgment of Hon’ble Supreme Court in the matter of Ghanshyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited, and held that “once a resolution plan is duly approved under Section 31(1) of the IBC, the debts as provided for in the resolution plan alone shall remain payable and such position shall be binding on, among others, the Central Government and various authorities, including tax authorities.”
Rohit J. Vora Vs. Insolvency & Bankruptcy Board of India [W.P. (Lodging) No. 20352 of 2023]
DC while disposing SCN against the RP, suspended the registration for a period of one year under section 220 of the Code. RP filed a writ petition challenging such suspension being contrary to the proviso of section 220 of Code, on the basis that the DC comprised of a single whole-time member. HC observed that the proviso to sub-section (1) of section 220 of the Code merely requires that the members of the DC should be whole-time members of the IBBI and the said proviso does not seek to provide the number of members who should constitute the DC. The constitution of the DC as regards the number of its members is provided by clause 2(1)(c) of the IBBI (Inspection and Investigation) Regulations of 2017. While dismissing the writ, it held that “…This would indicate that the Disciplinary Committee could consist of either a single whole-time member or more than one whole-time member. Restricting the sweep of the word “members” appearing in the proviso to Section 220(1) of the Code to its plural effect would result in a position that would be against the spirit of Clause 2(1)(c) of the Regulations of 2017 as the expression “member(s)” indicates that the Disciplinary Committee can comprise either of a single whole-time member or more than one whole-time member. Thus, the context in which the word “members” is used in the proviso to Section 220(1) of the Code does not limit its operation only to its plural meaning. “Members” of the Disciplinary Committee would include a singular whole-time member too, as plural would include the singular in view of Section 13(2) of the Act of 1897.”
Gateway Investment Management Services Limited Vs. Reserve Bank of India & Ors. [W.P.(C) 13278 of 2024 & CM APPL. 55477 of 2024]
One of the RAs and the petitioner herein (H1 bidder), submitted the highest bid of Rs. 109 crores payable over 12 months. However, the CoC rejected the plan of H1 bidder and voted in favour of a plan which had proposed payment of Rs. 99 crores payable within 30 days. The H1 bidder challenged the CoC’s decision before the Delhi HC on the ground that it lacked financial prudence and are in violation of guidelines for CoC issued by IBBI and further sought a direction to RBI for development of a framework under the Banking Regulation Act, 1949 for the financial institutions to act in a fair, transparent and reasonable manner while exercising decision making power in approving a resolution plan to ensure maximization of recovery. HC while disposing the writ petition, directed the unsuccessful bidder to take appropriate recourse before AA who alone shall decide such objections.
National Company Law Appellate Tribunal
Mr. Anuj Bajpai Vs. Employees’ Provident Fund Organization (EPFO) & Ors. [CA(AT)(Ins.) No. 1141 of 2023]
During CIRP, EPFO filed their claim of Rs. 1,24,86,750/- (i.e. section 7A – Rs. 34,47,599/-, section 7Q – Rs. 28,64,318/-, section 14B – Rs. 61,38,551/- and provisional cost and charges – Rs. 36,282/-) under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act). The CD was subsequently directed to be liquidated. The EPFO claimed priority in payments of all dues under section 36(4)(a)(iii), whereas the liquidator stated that since CD did not maintain a separate fund, the treatment will be as per section 53 of the Code. Later, a charge was created by EPFO regarding the dues. The liquidator challenged this creation of charge before AA, which ordered to create a separate fixed deposit of Rs. 1 ,24,86,750/-. Aggrieved by the same, the liquidator approached the NCLAT on the ground that the AA failed to examine the different components of the claim filed by EPFO and has treated everything as ‘contribution’ under the EPF Act and has also failed to consider the treatment of interest under section 7Q and damages under section 14B of EPF Act as being government dues under section 53 of the Code. The NCLAT observed that an amendment was made in the EPF Act vide Amendment Act, 1988, which stated that any amount due from an employer, will have ‘first charge’ on the assets of the CD. It relied on the Hon’ble SC’s judgment in Maharashtra State Cooperative Bank Vs. Assistant Provident Fund Commissioner & Ors. [(2009) 10 SCC 123] and observed that there is no reason to give a restricted meaning to the phrase ‘if any amount is due from an employer’ and confine it to the amount determined under section 7A or the contribution payable under section 8. It held that it will also include the interest payable by the employer under section 7Q and damages levied under section 14B of EPF Act. Accordingly, it held that all these dues will not form part of the liquidation estate of a CD and will be outside of the scope of distribution under section 53 of the Code.
In the CIRP of CD who was carrying on construction of residential project named ‘Sanskriti’, RP managed the CD’s operations by providing maintenance services and electricity to those homebuyers who had received possession of their respective apartments during February 2018 and January 2020. However, considering the huge accumulated outstanding electricity charges, CoC decided to increase the maintenance charges. Against such an increase, homebuyers have filed an interlocutory application (IA) before AA seeking to quash CoC’s decision. AA while dismissing the application, directed homebuyers to pay the increased amount and further directed the RP not to disconnect electricity connection of the residents. However, on default by homebuyers to pay the increased electricity bill, AA modified its previous order by allowing RP to take coercive measures against the defaulting homebuyers. On an appeal filed by the homebuyers against the order of AA, the issue for consideration before NCLAT was whether payment of electricity charges being an essential service, would amount to CIRP costs and that the CD is not liable to pay the amount till the completion of the period of moratorium? NCLAT while dismissing the appeal, held that the homebuyers were precluded from filing objections on the CoC’s authority to the increased bills as they had participated in CoC meetings through their AR. Further, NCLAT while upholding the AA’s decision observed that “…There is no prohibition or bar imposed by the IBC towards payment of dues arising from essential services supply during CIRP period nor is there any statutory provision which stipulates that the Corporate Debtor is not liable to pay such amounts till completion of the period of moratorium.”
Swan Energy Limited Vs. Chandan Prakash Jain, RP of E-Complex Private Limited & Ors. [CA (AT) (Ins.) No. 313 of 2024]
CoC approved the resolution plan of Invent Assets Securitization & Reconstruction Private Limited (SRA). Pending approval of resolution plan by AA, RBI issued a circular restricting the ARCs from commencing or carrying on any business other than that of the securitization or asset reconstruction, without prior approval of the RBI. Pursuant to this circular, the SRA being an ARC became ineligible from being the SRA. ARC filed an application before AA seeking its substitution with that of Westend Investment and Finance Consultancy Private Limited. AA while allowing the application provided liberty to the ARC to make representation before the CoC. Later, CoC with 100% votes approved the substitution of ARC by Westend Investment, as resolution applicant (RA) and thus, allowing the resolution plan with a modification of RA. Thereafter, RP submitted the modified plan before AA, which was approved. Aggrieved by the process adopted by the RP and the CoC, another PRA filed an appeal challenging approved resolution plan. CoC and SRA challenged the contravention against them, relied upon the clause 1.1.4 (iii) & (iv) of proposed plan stating that infusion of equity can be infused by RA indirectly or directly through its subsidiary, special purpose vehicle, limited liability partnership nominee of RA into the company from its own fund. The first issue that arose before NCLAT was whether CoC had jurisdiction to substitute the SRA with another entity who was not part of the CIRP process? Second, whether CoC has jurisdiction to modify a resolution plan already approved by the CoC and pending for approval before AA? NCLAT while allowing the appeal held that the CoC has no jurisdiction to modify the resolution plan already approved by CoC, which is pending for approval before AA. It clarified that infusion of equity is entirely different from nominating other entity as SRA. Further, it held that the clause for infusion of equity in the substituted resolution plan cannot be read to mean that SRA can nominate its nominee as SRA.
The resolution plan submitted by the SRA inter alia sought release of charges held by the Enforcement Directorate on assets of CD. AA approved the resolution plan but denied the prayer to SRA for lifting the attachments made by Enforcement Directorate. In the appeal filed by the SRA, NCLAT relied on the judgment of the SC in the case of Manish Kumar Vs. Union of India [(2021) SCC1] wherein the constitutionality of section 32A of the Code was upheld and also the judgment of Bombay HC in the case of Shiv Charan & Ors. vs. Adjudicating Authority & Anr. [W.P. (L) No. 9943 of 2023] The NCLAT, while allowing the appeal, held that SRA is entitled to the benefit of section 32A of the Code and no action can be taken against the properties of CD in relation to an offence committed prior to the commencement of CIRP.
Siddharth Satish Katariya (Ex-Director) Superfine Profile and Extrusions Private Limited Vs. Central Bank of India & Anr. [CA(AT)(Ins.) No. 78 of 2024]
Credit facilities were extended to the CD by the consortium of Central Bank of India and other banks (FCs) under various sanction letters and corporate guarantees in year 2015-2016. Further, additional credit facilities, including an ad-hoc limit and Funded Interest Term Loan (FITL) scheme, were sanctioned by consortium of banks in 2019-20. AA admitted the application of FC for initiation of insolvency proceedings filed by the FCs against CD for the outstanding amount. Suspended directors of CD challenged such order of AA before NCLAT. Issue for consideration before the NCLAT was whether the guarantees issued in 2015-2016 were still enforceable, given that there were new guarantees and additional credit facilities/ loans sanctioned in 2019-20 on pretext that the earlier guarantees had been novated (replaced) by the subsequent agreements. NCLAT observed that clause 4 of sanction letter executed on 09.09.2020 clearly mentions that all existing securities in the captioned facilities will continue to be the security for the existing facilities with the revised repayment schedule. It was further included that the said securities will also cover the fresh FITL facility. Considering the facts of the case and the terms of credit facilities, NCLAT dismissed the appeal, and held that the original guarantees from 2015 and 2016 were still binding and had been properly invoked by the FCs.
In the matter of Mr. Vikash Gautamchand Jain RP of M/s. Kethos Tiles Private Limited [CA(AT)(Ins.) No. 1173 of 2024]
AA rejected the application filed by RP for extension of PPIRP period. RP filed an appeal against order of AA. NCLAT ruled that while the 120-day timeline for PPIRP completion is part of the statutory scheme, it should not be interpreted to mean that the AA has no jurisdiction to extend the time when sufficient cause is shown. NCLAT held that the AA has the discretion to extend the PPIRP period beyond 120 days in appropriate cases, considering that PPIRP is a beneficial provision for resolving distressed MSMEs. Consequently, it allowed extension of 60 days.
Indiabulls Asset Reconstruction Company Limited Vs. Pawan Kapoor [CA(AT)(Ins.) No.192 of 2021]
FC/Appellants had taken physical possession of personal guarantor’s mortgaged property in terms of the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) on 27.01.2021 for default committed by the CD. Meanwhile, AA vide order dated 03.02.2021 admitted section 95 application against the personal guarantor to CD and held that moratorium had commenced in relation to all the debts effective from 07.01.2021 i.e. the application date and the property to be restored to the RP. Aggrieved by AA’s directions, the FC filed an appeal before NCLAT. The issue before NCLAT was whether the moratorium under section 96 of the Code would affect the right of FC in respect of a possession taken under SARFAESI Act. NCLAT observed that the issue in the matter is no longer res integra and that the provisions of IBC would prevail notwithstanding anything inconsistent therewith, contained in any other law for the time being in force. It relied on judgment of Delhi HC in the matter of Sanjay Dhingra Vs IDBI Bank Limited & Ors. [W.P. (C) No. 8131 of 2020 and CM Appl. 26390 of 2020] and held that once the interim moratorium is in existence, FC is prohibited from continuing any further actions under the SARFAESI Act regarding the property mortgaged by the PG.
Asha Chopra & Ors. Vs. Hind Motors India Limited & Ors. [CA (AT) (Ins.) No. 1425 – 1428 of 2024 & I.A. No. 5180 – 5183 of 2024]
Post liquidation order passed by the AA, the promoters/ suspended directors filed an application under section 12A for withdrawal of the process, which was rejected by AA on the ground that it is not maintainable during the liquidation process. On appeal, the NCLAT while dismissing the appeal, clarified that the CoC exist till the conclusion of the CIRP. During liquidation process, the CoC does not exist so as to take a decision on withdrawal of a CIRP application filed under sections 7, 9 or 10. It observed that “…the statutory scheme of IBC thus clearly contemplates that withdrawal of Application is permissible only during CIRP period with the approval of 90% vote shares of the CoC. The Scheme of Liquidation and the Liquidation Regulations do not contemplate any withdrawal under Section 12A.”
Madhya Pradesh Commercial Tax Department filed an appeal against the approved resolution plan proposing nil payment against a claim of Rs. 2.61 crore, and for not considering it as a ‘secured creditor’ in terms of section 33 of the Madhya Pradesh Value Added Tax Act, 2002 (MPVAT Act). The issue for consideration in the appeal was whether the judgment passed by the SC in the case of Rainbow Papers is applicable to this case? NCLAT, while dismissing the appeal, observed that section 33 of MPVAT Act is subject to the provisions of section 530 of the Companies Act, 1956 which governs preferential payments and subordinate tax claims. Further, it noted that the Rainbow Papers judgment is applicable to the specific facts of that case and is not applicable to all the statutory claims. It also held that section 33 of the MPVAT Act and section 48 of the GVAT Act are not pari materia.
Truvisory Insolvency Professionals Private Limited Vs. Employees’ Provident Fund Organization & Ors. [CA(AT) (Ins.) No. 580 of 2023]
Pre-ICD, two regional offices of EPFO had attached 17 bank accounts of the CD for failing to pay the employer’s contribution to the Provident Fund (PF). During CIRP, RP filed an application before the AA seeking to recall the said attachment of accounts for smooth functioning of CIRP. AA disposed the application holding that PF dues shall not form part of the CD’s estate, and the moratorium does not apply to such statutory dues. Subsequently, during the liquidation process, an appeal was preferred against the order of AA by the liquidator on the ground that similarly placed provident funds are being treated differentially. NCLAT held that the claims of all the eight EPFO’s are to be treated on par and the entire amount of claim under section 7A, 7Q and 14B of the EPF Act had to be paid to respective PF authority from the funds available in the attached bank accounts of CD. NCLAT further emphasized that if the amount available is not sufficient, same shall be met from disposal of other assets of the CD. Thereafter, the balance left, after meeting the claims of the EPFO authorities, shall form part of the liquidation estate.
SBS Holdings, Inc. Vs. Mohan Lal Jain [CA(AT)(Ins.) No. 624 of 2024]
A Memorandum of Understanding and a shareholder’s agreement were executed between the group companies of SBS Holdings and the CD. Thereafter, arbitration proceedings were initiated by the promoter of CD against Global Enterprise Logistics Pte. Ld. (Global Enterprise), one of the group companies of SBS Holdings. Meanwhile, CIRP was admitted against CD. During liquidation proceedings of the CD, an arbitral award to the tune of Rs. 9.5 Cr. was concluded in favour of Global Enterprise. SBS Holdings filed its claim before the liquidator of CD, which was rejected by the liquidator on two grounds; firstly, that such claims were filed after due date for filing claims and secondly, that no such claim existed on the liquidation commencement date as per regulation 12(2)(a) of Liquidation Regulations. SBS Holdings challenged the said rejection of claim before the AA. AA upheld the decision of the liquidator. On appeal, the issue before NCLAT was whether Liquidation Regulations, prohibits acceptance of any claim, arising after the liquidation commencement date? NCLAT emphasizing the statutory scheme provided under the Liquidation Regulations, while dismissing the appeal held that “A formula is also provided under sub-regulation (2) of Regulation 28 for distribution with regard to claim, which is to become due in future date. Regulation 28 is only Regulation, which deals with a claim, which claim is not due on the liquidation commencement date, but the claim has to be filed, by such claimant. Regulation 28 being the only Regulation, which deals with a payment not due on the liquidation commencement date and the distribution has been provided in a manner as contained in sub-regulation (2) of Regulation 28, it is clear that no other claim is contemplated to be considered, which is not available on the liquidation commencement date. The statutory scheme delineated by Regulation 12 and Regulation 16, clearly contemplate that a claim has to be filed on the liquidation commencement date.”
Uttarakhand Power Corporation Limited Vs. M/s Shirdi Industries Limited & Anr. [CA (AT) (Ins.) No. 799, 803 and 832 of 2024]
After commencement of CIRP on 18.05.2017, an amount of ` 1.76 crore towards pre-ICD electricity bills was paid by the RP on 19.05.2017 and 19.06.2017. During the process, no claim was filed by Uttarakhand Power Corporation Limited (UPCL) regarding electricity dues. The resolution plan provided for payment of the pre-CIRP dues of electricity in 8 instalments beginning from June 2022. After approval of resolution plan by AA on 12.12.2017, it was communicated to UPCL that amount already paid towards electricity dues have to be adjusted against current bills for the month of Sept – Oct, 2020. UPCL disconnected the electricity of CD on account of non-payment of current bills and as a result, an application was preferred before AA which was decided against UPCL. On appeal, the NCLAT dismissed the appeal and held that payment made by the CD after commencement of insolvency proceedings cannot be appropriated towards electricity charges which have arisen prior to ICD and thus, are required to be adjusted towards current CIRP dues. NCLAT while upholding AA’s decision held that “…The schedule and calendar of payment of pre-CIRP dues of the Appellant as given in the resolution plan is sacrosanct and cannot be allowed to be superseded simply because payment thereto had been voluntarily done earlier by the Corporate Debtor. If the payment of pre-CIRP dues is insisted upon being made in any manner which is not specified and factored in the resolution plan, that would amount to be an infraction of the resolution plan and cannot be countenanced.”
National Company Law Tribunal
Variant Commercial Private Limited Vs. Indian Mining Works Private Limited [I.A. (IB) No. 1132 of 2022 In CP(IB) No. 1852 of 2019]
In the CIRP of Indian Mining Works Private Limited (CD), the resolution plan of Elite Enterprises (SRA) was approved by CoC with 100% majority and was filed before AA, for its approval. AA, while relying on SC decision in Rainbow Papers case rejected the resolution plan and noted that CGST is an actual creditor in terms of section 82 of the CGST Act. It observed that allocation of Nil amount towards OC’s total admitted claim of Rs. 96.52 cr. in the resolution plan, is not in consonance with the fair and equitable distribution to the creditors as contemplated in Explanation I of section 30(2)(b) of the Code.
Nitin Batra & Ors. Vs. M/s. Anand Infoedge Private Limited & Ors. [IA 293 and 2497 of 2024 in C.P. (IB) 682 of 2021]
Allottees of Festival City Project (real estate project) filed a section 7 application against M/s. Anand Infoedge Private Limited (CD -1), M/s. Mist Avenue Private Limited (CD – 2), and M/s. Mist Direct Sales Private Limited (CD-3) for the default committed by these CDs in delivering the units. AA considered the fact that CDs have consistently failed to fulfil their obligations to complete the project. The report of the CAG and the statutory auditors further underscore the CD’s financial instability due to substantial accumulated losses and frozen bank accounts. Thus, these factors collectively indicate mismanagement and incompetence in managing the project along with severe breach of trust leading to the project’s failure. AA, while initiating the CIRP against the CDs, along with the appointment of IRP, also appointed a senior retired IAS officer as ‘monitor’ for 6 months to coordinate with NOIDA and other government agencies.
