1. Significant Supreme Court Judgments:

Arun Kumar Jagatramka vs. Jindal Steel and Power Ltd. & Anr. (15 March, 2021):

The prohibition placed by the Parliament in Section 29A and Section 35(1)(f) of the Code must also attach itself to a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013, when the company is undergoing liquidation under the auspices of the Code.

Kalparaj Dharamshi & Anr. Kotak Investment Advisors Ltd. & Anr. (10 March, 2021):

It is sought to be urged that since there has been a material irregularity in exercise of powers by RP, NCLAT can interfere with the exercise of power by RP u/s 61(3)(ii) of IBC, however, in the instant case, the court observed that all actions of RP have the seal of approval of CoC, and in view of the paramount importance given to the decision of CoC, the Apex Court held that NCLAT cannot interfere with the commercial decision of the CoC. The legislative scheme, as interpreted by various decisions of the Apex Court, is unambiguous. The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Sections 30 and 31 of IBC.

Gujarat Urja Vikas Nigam Limited vs. Mr. Amit Gupta & Ors. (8 March, 2021):

In the instant case, the power purchase agreement (PPA) was terminated solely on the ground of insolvency. The Supreme Court observed that the PPA is the sheet-anchor of the CD’s business and consequently of the CIRP, and its continuation assumes enormous significance for the successful completion of the CIRP. The termination of the PPA will have the consequence of cutting the legs out from under the CIRP as the same would certainly result in the corporate death of the CD.

Regarding jurisdiction of the NCLAT/ NCLT under Section 60(5)(c) to adjudicate such a matter, the Supreme Court held that the AA can invalidate the termination of the PPA as it is the forum vested with the responsibility of ensuring the continuation of the CIRP, which requires preservation of the CD as a going concern. As such, in all future cases, NCLT should be wary of setting aside valid contractual terminations which would merely dilute the value of the CD, and not push it to its corporate death.

P. Mohanraj & Ors. vs. Shah Brothers Ispat Pvt. Ltd (1 March, 2021):

The moratorium provision contained in Section 14 of the Code would apply only to the CD, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act.

Phoenix Arc Pvt. Ltd. vs. Ketulbhai Ramubhai Patel (3 February, 2021):

Where a person only has a security interest by virtue of a pledge created by CD over certain shares, such person will be secured debtor qua the security but shall not be a FC within the meaning of Section 5 sub-sections (7) and (8).

Phoenix Arc Private Limited vs. Spade Financial Services Limited & Ors. (1 February, 2021):

The default rule under the first proviso to Section 21(2) is that only those FCs that are related parties in praesenti would be debarred from the CoC. The exclusion under the first proviso to Section 21(2) is related not to the debt itself but to the relationship existing between a related party FC and the CD. As such, the FC who in praesenti is not a related party would not be debarred from being a member of the CoC, however, in case where the related party FC divests itself of its shareholding or ceases to become a related party in a business capacity, in order to circumvent the exclusion under the first proviso to Section 21(2), with the sole intention of participating in the CoC and sabotaging the CIRP, by diluting the vote share of other creditors or otherwise, it would be in keeping with the object and purpose of the first proviso to Section 21(2) to consider such related party creditor as one debarred under the first proviso.

Manish Kumar vs. Union of India & Anr. (19 January, 2021):

Section 32A provides immunity to the CD and its property when there is approval of the resolution plan resulting in the change of management of control CD. The real estate allottees (money lenders) challenged Section 32A of IBC as arbitrary, ultra vires and violative of the Constitution, since the said section granted immunity to the CDs and its assets acquired from the proceeds of crimes. The Apex Court observed that as far as protection afforded to the property is concerned there is clearly a rationale behind it, i.e. to ensure that a successful RA starts of on a fresh slate, by shielding them and immunizing them from prosecution and liabilities for offences that may have been committed prior to the commencement of the CIRP. Having regard to the object of the statute, the Apex Court held that no case whatsoever has been made out to seek invalidation of the provision.

Suo Motu Writ Petition (Civil) No(s). 3/202 (23 March, 2020):

The Apex Court took suo motu cognizance of the situation arising out of the challenge faced by the country on account of Covid-19 Virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/ appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under Special Laws (both Central and/or State). To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunals across the country including this Court, exercising their power under Article 142 read with Article 141 of the Constitution of India, the Apex Court directed all the tribunals/ authorities/ courts that a period of limitation be extended for all matters with effect from March 15, 2020 till further orders.

M/s. Marathe Hospitality vs. Mahesh Surekha & Ors. (10 July, 2020):

The NCLAT had closed its functioning as one of its employees is suffering from Covid-19. The Apex Court directed that the doors of justice cannot be closed and the NCLAT should find out a way for online hearing in such a situation.

2. Significant High Court Judgments:

Skillstech Services Private Limited vs. Registrar, NCLT, New Delhi & Anr. (13 January, 2021):

The question as to whether the NCLT has jurisdiction to entertain a particular case or not cannot be determined by the Registrar in the administrative capacity. The Registrar would have to place the matter before the appropriate bench of the NCLT, for the said question to be judicially determined. The appropriate bench of the NCLT would have to then, take a considered view as to whether notice is liable to be issued in the matter or not.

Venus Recruiters Private Limited vs. Union of India & Ors. (26 November, 2020):

RA whose Resolution Plan is approved itself cannot file an avoidance application. The purpose is clear from this itself i.e., that the avoidance applications are neither for the benefit of the RAs nor for the company after the resolution is complete. It is for the benefit of the CD and the CoC of the CD. The RP whose mandate has ended cannot indirectly seek to give a benefit to the CD, who is now under the control of the new management/RA, by pursuing such an application. The ultimate purpose is that any benefit from a preferential transaction should be given to the CD prior to the submission of bids and not thereafter. Once the CIRP itself comes to an end, an application for avoidance of transactions cannot be adjudicated.

Univalue Projects Pvt. Ltd. vs. The Union of India & Ors. (18 August, 2020):

On a harmonious reading of Section 215 of the Code with Section 7 of the Code along with the Rules and Regulation, the Calcutta High Court concluded that the legislature did not intend to make it mandatory for FCs to submit financial information to the IU, and held that Section 215 is not mandatory in nature. FCs can rely on either of the modes of evidences at hand to showcase a financial debt, that is, either a record of default from the IU or any other document as specified which showcases the existence of a financial debt.

3. Significant NCLAT Judgments:

Om Prakash Agrawal, Liquidator, S. Kumars Nationwide Limited vs. Chief Commissioner of Income Tax (TDS) & Anr. (8 February, 2021):

TDS, under Section 194 IA, is an advance capital gain tax, recovered through transferee on priority with other creditors of the CD, hence, inconsistent with the provision of Section 53 (1) (e) of the Code and by virtue of Section 238 of the Code, the provision of Section 53(1) (e) shall have overriding effect. The Chief Commissioner of Income Tax was directed to refund the amount of TDS to the Liquidator of CD which was deposited by the successful RA with the department.

Akshay Arun Shetty vs. Bank of India & Anr. (5 January, 2021):

Having regard to the economic hardship arising out of imposition of lockdown due to outbreak of COVID-19 declared as pandemic and ensuing disruption of economic activities and operations, relaxation in terms of settlement for clearing the liability by extending time till 31 December, 2020 was warranted. In the circumstances, mitigating of hardship arising out of imposition of lockdown and slowdown of economic activities as an aftermath of outbreak of COVID-19 would become meaningless if the Appellant is saddled with the liability of paying the interest as contemplated in the approved OTS proposal. NCLAT, therefore, waived the imposition of interest.

Pratap Technocrats (P) Ltd. & Ors. Vs. Monitoring Committee of Reliance Infratel Limited & Anr. (4 January, 2021):

OCs are different from the FCs and secured creditors, and are not entitled to the same treatment. It is futile to contend on their behalf that the FCs being lenders having huge financial resources can take a bigger hair cut as compared to the financial condition of the OCs. The distribution mechanism adopted being not only conformable to the mechanism envisaged under Section 53 of the Code but also according priority in upfront payment to OCs cannot be termed unfair or inequitable.

CoC of LEEL Electricals Ltd., Through State Bank of India vs. Leel Electricals Ltd. Through its IRP (21 December, 2020):

The decision in regard to appointment of IRP as RP or replacement of IRP by another RP falling within the ambit of Section 22 of the Code is a decision based on commercial wisdom of CoC which is not amenable to judicial review. It would be wise on the IRP’s part to bow to the commercial wisdom of the CoC and quit gracefully.

Rajnish Jain, Promoter, Stakeholder and MD of Suspended Board of Directors vs. Manoj Kumar Singh, I.R.P. & Ors. (18 December, 2020):

During CIRP, the IRP is authorised to collate the claims, and based on that he is empowered to constitute the CoC. The RP may add to existing claims of claimants already received, or admit or reject further claims and update list of creditors but after categorisation of a claim by the IRP/RP, they cannot change the status of a creditor. For example, if the RP has accepted a claim as a Financial Debt and creditor as a FC, then he cannot review or change that position in the name of updation of claim.

Rajendra Narottamdas Sheth, Suspended Board of Director & Anr. vs. Sh. Chandra Prakash Jain, IRP for R.K. Infratel Ltd. & Anr. (18 December, 2020):

Section 19 of the Limitation Act, 1963 is not subject to any such exception that after account is declared NPA, if the debtor makes payments on account of debt, the Section would not be applicable. This would not merely be repayments but also acknowledgments.

Mohan Lal Jain, Liquidator of Kaliber Associates Pvt. Ltd. vs. Lalit Modi & Ors. (16 December, 2020):

Allegations of preferential transactions as also fraudulent trading/ wrongful trading carried on by the CD during the insolvency resolution can be inquired into by the AA. The AA is required to take cognizance of the complaint emanating from the Liquidator in regard to the alleged preferential transactions and fraudulent trading/wrongful trading having occurred qua the CD, and inquire into such alleged dealings in accordance with law.

Muhamad Yavar Dhala vs. Kavita Surana, Liquidator of Forward Shoes (India) Pvt. Ltd. (8 December, 2020):

Without liquidator taking steps no application to obtain certificate of MSME could have been filed by the promoter of the CD. The promoter could not have moved the authorities for certificate under MSME by-passing the liquidator and such action must be held as illegal.

Apya Capital Services Private Limited vs. Guardian Homes Private Limited (8 December, 2020):

Once the liability was admitted and the same was not discharged by the CD, dispute in regard to quantum of debt would be immaterial at the stage of admission of application under Section 7 unless the debt due and payable falls below the minimum threshold limit prescribed under law.

Diwan Chand Arya vs. Government of Sikkim & Ors. (23 November, 2020):

In in the instant case, the CoC decided to remove the RP as the CoC was not satisfied with the conduct of CIRP by him. The NCLAT held that if the conduct of CIRP was disapproved by the CoC and the RP lost their confidence, the RP has no vested right of foisting himself on the CoC for his continuance. The removal having the requisite majority vote shares cannot be held to be flawed in any manner.

Hindustan Oil Exploration Company vs. Erstwhile CoC, JEKPL Pvt. Ltd. (17 November, 2020):

If the terms of the approved Resolution Plan of successful RA have been varied or time extended to facilitate its implementation and the creditors have not claimed any prejudice on that count and the CoC has not objected to same rather been privy to it on account of hardship due to prevailing circumstances, the unsuccessful RA cannot be permitted to cry foul. Outbreak of COVID-19 pandemic has slowed down the economic activity and operations have been adversely impacted. Viewed in that context some necessary changes in the agreed terms and extension of time for implementation would not be uncalled for. Be that as it may, the unsuccessful RA has no locus to maintain that the change in terms of the approved Resolution Plan in regard to extension of time for induction of upfront amount as also implementation of the Resolution Plan has jeopardized its legal rights qua consideration of its Resolution Plan which has been rejected.

The Dy. Commissioner of Customs DEEC (Monitoring Cell) vs. Ms. Vandana Garg (10 November, 2020):

The claim has been filed at a highly belated stage after approval of the Resolution Plan. In these circumstances, the AA rejected the application for condonation of delay in submitting proof of claim against the CD as being non maintainable. The NCLAT upheld the said order.

UCO Bank vs. Mr. G. Ramachandran (3 November, 2020):

Once CIRP was initiated and Section 14 of IBC applied, fixed deposit adjustment with demand loans by banks cannot be maintained. Lack of knowledge of initiation of CIRP shall not be relevant.

Volkswagen Finance Private Limited v. Shree Balaji Printopack Pvt. Ltd. & Anr. (19 October, 2020):

The mere fact that a charge was registered through a hypothecation registration with the Regional Transport Office in accordance with Section 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 Code, unless such charge has been registered under section 77 of the Companies Act, 2013.

In the Matter of Sudip Bhattacharya, RP of Reliance Naval and Engineering Ltd. (8 October, 2020):

The period of lockdown w.e.f. 25 March, 2020 till 31 August, 2020 shall be excluded while computing the period of CIRP.

See Also: (1) In the Matter of Hemant Sharma, RP of Global Softech Ltd. (2 November, 2020); (2) CoC of Rosewood Trexim Pvt. Ltd. Through RP (15 December, 2020); and (3) Bhim Sain Goyal vs. The American Swan Lifestyle Co. Pvt. Ltd.- Under CIRP (15 December, 2020); and Dreamz Infra India Ltd. vs. Pratap Chandra Padhy (24 February, 2021).

Kundan Care Products Ltd. vs. Mr. Amit Gupta (30 September, 2020):

The sanctity of resolution process has to be maintained and the RA whose resolution plan has been approved by CoC cannot be permitted to withdraw its resolution plan.

C. John vs. Jitender Kumar Jain & Ors. (1 August, 2020):

It is not appropriate for the AA to quash the suit which is filed in the civil court. It would be for the liquidator to move the concerned civil court pointing out the provision of IBC or to move the district court in the hierarchy for quashing of the suit concerned.

Andal Bonumalla vs. Tomato Trading LLP & Anr. (20 August, 2020):

Advance payment by OC for supply of goods cannot be treated to be an operational debt and the application under Section 9 of Code was not maintainable.

Vistara ITCL (India) Ltd. & Ors. vs. Mr. Dinkar Venkata Subramanian & Ors. (24 August, 2020):

Creation of pledge of shares by the CD does not tantamount to a guarantee or indemnity so as to bring it within the meaning of financial debt. The Appellants not having advanced any money to the CD as a financial debt would not be coming within the purview of FC of the CD.

Park Energy Pvt. Ltd vs. Syndicate Bank & Anr. (24 August, 2020):

The CD having performed his part of the contract by placing its entire collection in the Trust Retention Account (TRA) in accordance with the terms of the agreement cannot be said to be in default. In the inter-se dispute of FCs, Respondent No. 1 may have faced discrimination as regards release of money from TRA Account but that would not render the CD accountable for default. Triggering of CIRP is, thus, unwarranted.

CoC of Educomp Solutions Ltd. vs. Ebix Singapore Pte. Ltd. & Anr. (29 July, 2020):

Notwithstanding the fact only upon the approval of the AA the resolution plan would be binding on all the parties and further that the application for withdrawal was filed by the RA earlier to the stage of approval by the AA, the NCLAT held that the AA, in law cannot enter into the arena of the majority decision of the CoC other than the grounds mentioned in Section 32 (a to e) of the Code. Moreover, after due deliberations, when the RA had accepted the conditions of the resolution plan especially keeping in mind the ingredients of Section 25(2)(h) of the Code to the effect that no change or supplementary information to the resolution plan shall be accepted after the submission date of resolution plan then it is not open to the RA to withdraw the approved resolution plan.

V Nagarajan, RP in respect of Cethar Limited- under Liquidation vs. SKS Ispat and Power Ltd. & Ors. (13 July, 2020):

The moratorium order passed under Section 14(1) of the Code does not apply to the surety in a contract of guarantee to a CD. Therefore, there can be no interim relief w.r.t. the invocation of bank guarantee given by bankers on behalf of the CD.

State of Haryana vs. Uttam Strips Ltd. (23 June, 2020):

Since the Excise & Taxation Officer-cum-Assessing Authority failed to submit its claim before the RP and the Resolution Plan was implemented after approval from the AA. Therefore, relying on the case of CoC of Essar Steel India Limited vs. Satish Kumar Gupta & Ors., the NCLAT held that the successful resolution applicant cannot be burdened with the past liabilities. Such an act will make it impossible for the successful resolution applicant to run the business of the CD. It will ultimately defeat the entire purpose and mechanism set out under the Code.

Srikanth Dwarakanath, Liquidator of Surana Power Limited- In Liquidation vs. Bharat Heavy Electricals Limited (18 June, 2020):

In the instant case, the Respondent’s charge on the secured assets was not exclusive. Therefore, the Respondent could realise a security interest as per provision Section 13(9) of the SARFAESI Act. Since the Respondent does not have a requisite 60% value in secured interest, therefore, the Respondent does not have right to realize its security interest, because it would be detrimental to the liquidation process and the interest of the remaining secured creditors.

Savan Godiawala, Liquidator of Lanco Infratech Ltd. vs. Mr. G. Venkatesh Babu & Ors. (29 May, 2020):

In the instant case, the MD of the CD had committed the offence under Section 276 -B read with Section 278-B of the Income Tax Act. While Section 35(1)(k) of the Code stipulates that liquidator has to defend the CD once he has taken the charge of the CD, the NCLAT observed that in a criminal proceeding, the prosecution is launched against the CD as well as against the officer in charge of the CD in his personal capacity. Therefore, even after the liquidation proceedings have been started the MD of the CD has to face the trial in his personal capacity and ultimately if the offence is proved he will be punished.

Chhatisgarh Distilleries Ltd. vs. Dushyant Dave, RP of Anand Distilleries Pvt. Ltd. & Ors. (29 May, 2020):

When the resolution plan is filed before the AA, then the AA has to satisfy that the resolution plan approved by the CoC fulfils the requirements as specified in Section 30(2). However, the AA cannot direct the CoC to consider the second resolution plan submitted before the AA although the second RA is ready to invest more amount in comparison to first RA.

See Also: Kalinga Allied Industries India Pvt. Ltd. vs. Hindustan Coils Ltd. (11 January, 2021).

Indian Oil Corporation Ltd. vs Mr. Ashish Arjun Kumar Rathi, Liquidator of SBQ Steels Pvt. Ltd (22 May, 2020):

In the instant case, the liquidator had not assigned detailed reasoning in respect of the non-admissibility of the claim. As per Section 40 of the Code, a liquidator being an authority decides the matter in a quasi-judicial manner, and his decision is open to challenge u/s 42 of the Code. An unreasoned order may be just and valid from the point of view of an authority who passes the same but to the affected, the said order is not a valid one. A reasoned order will have an appearance of justice. A decision by judicial or quasi-judicial authority not informed of reasons provides room for arbitrariness and such decision cannot be supported. In terms of the ingredients of Section 40 of the Code, reasons are to be spelt out for rejecting the claims. An AA can interfere when a liquidator has not exercised its discretion in a bonafide manner or he had proposed a thing which no reasonable person would act.

State Bank of India vs. M/s. Metenere Ltd. (22 May, 2020):

The proposed RP had a long association of around four decades with FC, serving under it, and currently drawing pension, raised an apprehension in the mind of CD that the proposed IRP was unlikely to act fairly. The AA observed that an IRP should act as an Independent Umpire acting fairly qua the discharge of his statutory duties. On appeal, the NCLAT opined that the apprehension of bias expressed by the CD qua the appointment of the proposed IRP at the instance of the FC cannot be dismissed offhand and the AA was perfectly justified in seeking substitution of the proposed IRP to ensure that CIRP was conducted in a fair and unbiased manner. This was notwithstanding the fact that the proposed IRP was not disqualified or ineligible to act as an IRP.

Gradient Nirman Private Limited & Anr. vs. IFCI Ltd. & Ors. (22 May, 2020):

Suit for recovery based upon a cause of action even if it is within limitation, it cannot in any manner impact the separate and independent remedy of a winding-up proceeding. A suit for recovery is a separate and independent proceeding distinct from the remedy of winding-up and therefore the period spent while pursuing SARFAESI proceedings cannot extend the period of limitation, as the intent of the court is not to give a new lease of life to the debt which is already time barred.

Allahabad Bank vs. Poonam Resorts Limited (22 May, 2020):

Application under Section 75 of the Code on behalf of the CD cannot be permitted to frustrate the provisions of the Code when the matter is at the stage of admission. Section 75 is a penal provision which postulates an enquiry and recording of finding in respect of culpability of the Applicant regarding commission of an offence. The same cannot be allowed to thwart the initiation of CIRP unless in a given case forgery or falsification of documents is patent and prima facie established.

Raj Kumar Garg & Anr. vs. Health Care At Home India Pvt. Ltd. & Anr. (22 May, 2020):

The offer of payment of a part of the claim with a condition attached having the effect of OC relinquishing its claim in respect of the balance amount payable in law cannot be envisaged as a payment in compliance to statutory notice under Section 8(1) of the Code. A combined reading of Sections 8 and 9 of the Code leaves no room for doubt that the payment of unpaid operational debt has to be unqualified and evidenced by electronic transfer from Bank account of the CD to the Bank account of the OC and that the OC can initiate CIRP only if he does not receive payment from the CD. Even the payment of the admitted part of the claim has not been received by the OC, if the default is in excess of Rupees One Lac, the same would warrant initiation of CIRP at the instance of OC.

Hussan Kadri vs. Edelweiss Asset Reconstruction Co. Ltd. & Anr. (22 May, 2020):

Acknowledgment in writing before expiry of period of limitation by the CD through a series of written communications in the form of letters, settlement, proposal, settlement agreement and payments made in pursuance thereof extends the limitation as each of these has the effect of giving a fresh lease of life to the liability with fresh period of limitation commencing from such acknowledgment in writing having been made within limitation period.

Suo Moto- Company Appeal (AT) (Insolvency) No. 01 of 2020 (March 30, 2020):

The period of lockdown ordered by the Central Government and the State Governments, including the period as may be extended either in whole or part of the country, where the registered office of the CD may be located, shall be excluded for the purpose of counting of the period for resolution process under Section 12 of the Code, in all cases where CIRP has been initiated and pending before any Bench of the NCLT or in appeal before NCLAT. It further ordered that any interim order/ stay order passed by the NCLAT in any one or the other appeal under the Code shall continue till next date of hearing.

Author Bio

Qualification: LL.B / Advocate
Company: Sumedha Management Solutions Pvt. Ltd.
Location: Howrah, West Bengal, India
Member Since: 22 Mar 2021 | Total Posts: 2

My Published Posts

More Under Corporate Law

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

April 2021
M T W T F S S
 1234
567891011
12131415161718
19202122232425
2627282930