25 Supreme Court Judgments on Insolvency and Bankruptcy Code 2016

VINAY SONPAL 17 Aug 2019 8,325 Views 0 comment Print Corporate Law | Articles

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Article summarises 25 Landmark Supreme Court Judgments On Insolvency And Bankruptcy Code 2016

SUPREME COURT JUDGMENTS ON INSOLVENCY AND BANKRUPTCY CODE 2016
Sr No	Date of Judgment	Name Of The Parties	Citation/Dt of Judgment	Ratio
1	21-02-2017	Bank Of New York Mellon London Branch. Vs Zenith Infotech Limited	AIR2017SC1735	If the reference made by an applicant to BIFR is rejected at threshold by Registrar without adjudication by a Bench on the ground that the applicant company is not “industrial company”, such rejection is non est and without jurisdiction , therefore such reference is deemed to be pending since such order is without jurisdiction and hence application to NCLT can be filed as per section 252 of SICA.
2	24-07-2017	Lokhandwala Kataria Construction Vs Nisus Finance And Investment Managers Llp	2019(1)CTC238	There is no power with NCLT orNCLAR to record the compromise once the Application is admitted. But Supreme Court exercising powers under Article 142, recorded the compromise and put a quietus to litigation.
3	31-08-2017	Innoventive Industries Ltd. Vs. Icici Bank & Anr.	(2018) 1 SCC 407	Maharashtra Relief Undertakings (Special Provisions Act),1958 cannot stand in the way of the corporate insolvency resolution process under the Code. The non-obstante clause, in the widest terms possible, is contained in Section 238 of the Code, so that any right of the corporate debtor under any other law cannot come in the way of the Code.
4	19-09-2017	Surendra Trading Company Vs. Juggilal Kamlapat Jute Mills Co. Ltd. & Ors.	Judgment dt.19.09.2017	Proviso to sub-section (5) of Section 7 or proviso to sub-section (5) of Section 9 or proviso to sub-section (4) of Section 10 to remove the defects within seven days is directory and on failure, applications can not to be rejected.
5	21-09-2017	Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited	2018(1)SCC353	Without going into the merits of the dispute, If appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence and if the defense is not spurious, or mere bluster, or plainly frivolous or vexatious , dispute does truly exist in fact between the parties, which may or may not ultimately succeed, on the ground that the dispute does not exist, the Application can not be allowed to proceed u/s (5)(ii)(d) of Section 9 of code.
7	23-10-2017	Alchemist Asset Reconstruction Company L. Vs. Hotel Gaudavan	AIR2017SC5124	Whether arbitration proceedings can be continued once the Insolvency Petition is admitted and moratorium starts. The mandate of the new Insolvency Code is that the moment an insolvency petition is admitted, the moratorium that comes into effect under Section 14(1)(a) expressly interdicts institution or continuation of pending suits or proceedings against Corporate Debtors. And Arbitration proceedings will also be hit by moratorium.
8	13-11-2017	Uttara Foods And Feeds Private Limited Vs. Mona Pharmachem	Judgment dt.13.11.2017	Whether, in view of Rule 8 of the I&B (Application to Adjudicating Authority) Rules, 2016, the National Company Law Appellate Tribunal could utilize the inherent power recognized by Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 to allow a compromise before it by the parties after admission of the matter. In case of compromises, Supreme Court may utilise its powers under Article 142 of the Constitution of India. Therefore the relevant Rules may be amended by the competent authority so as to include such inherent powers to record compromise by NCLT or NCLAT.
9	15-12-2017	Macquarie Bank Limited Vs. Shilpi Cable Technologies Ltd.	AIR2018SC498	i)Expression “an operational creditor may on the occurrence of a default deliver a demand notice…..” under Section 8 of the Code must be read as including an operational creditor’s authorized agent and lawyer, as has been fleshed out in Forms 3 and 5 appended to the Adjudicatory Authority Rules. ii) that the provision of removing the defects within seven days is directory and not mandatory in nature. However, the applicant while refilling the application after removing the objections, file an application in writing showing sufficient case as to why the applicant could not remove the objections within seven days.
10	09-08-2018	Chitra Sharma Vs UOI	2018(145)CC425	As a result of the amendment brought about in the definition of ‘financial debt’, amounts raised from allottees under real estate projects are deemed to be amounts “having a commercial effect of a borrowing”. Hence outstanding amounts to allottees in real estate projects are statutorily regarded as financial debts. Such allottees are brought within the purview of the definition of ‘financial creditors’.
11	10-08-2018	Pr. Commissioner Of Income Tax Vs Monnet Ispat And Energy Ltd	Judgment dt.10.08.2018	Income-tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons.
12	14-08-2018	K. Kishan Vs. Vijay Nirman Company Pvt. Ltd.	2018(4)Comp.L.J. 165	Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code”) can not be invoked in respect of an operational debt where an Arbitral Award has been passed against the operational debtor, which has not yet been finally adjudicated upon and when matter which are pending in a Section 34 petition challenging the said Award.This is because thus there is a dispute which exists.
13	14-08-2018	State Bank Of India Vs V. Ramakrishnan & Anr	Judgment dt. 14.08.2018	Section 14 of the Insolvency and Bankruptcy Code, 2016, which provides for a moratorium for the limited period mentioned in the Code, on admission of an insolvency petition, will not apply to a personal guarantor of a corporate debtor. The moratorium referred to in Section 14 can have in no manner of application to personal guarantors of a corporate debtor.
6	04-10-2018	Arcelormittal India Private Limited Vs Satish Kumar Gupta & Ors	AIR2018SC5646	Certain class of persons are Ineligible f to submit resolution plans after the introduction of Section 29A into the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code”), with effect from 23.11.2017. Any person who wishes to submit a resolution plan, if he or it does so acting jointly, or in concert with other persons, which person or persons happen to either manage or control or be promoters of a corporate debtor, who is classified as a non-performing asset and whose debts have not been paid off for a period of at least one year before commencement of the corporate insolvency resolution process, becomes ineligible to submit a resolution plan. Any person who wishes to submit a resolution plan acting jointly or in concert with other persons, any of whom may either manage, control or be a promoter of a corporate debtor classified as a non-performing asset in the period above mentioned, must first pay off the debt of the said corporate debtor classified as a non-performing asset in order to become eligible under Section 29A(c).
14	11-10-2018	B.K. Educational Services Private Limited Vs Parag Gupta And Associates	Judgment dt. 11.10.2018	The Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code. Article 137 of the Limitation Act gets attracted. “The right to sue”, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application.
15	23-10-2018	Transmission Corporation Vs Equipment Conductors	Judgment dt. 23.10.2018	IBC is not intended to be substitute to a recovery forum. It is also laid down that whenever there is existence of real dispute, the IBC provisions cannot be invoked.
16	12-12-2018	Jaipur Metals & Electricals Employees Organisation Vs. Jaipur Metals & Electricals Ltd.	2019(213)CC25	Cases that fall under Section 20 of the SICA, are dealt with separately under Rule5 (2), they cannot be treated as petitions that have been filed under Section 433(f) of the Companies Act, 1956, which are separately specified under Rule 6. The High Court is therefore not correct in treating petitions that are pursuant to Section 20 of the SIC Act as being pursuant to Section 433(f) of the Companies Act, 1956 and applying Rule 6 of the 2016 Transfer Rules. The effect of the omission of Rule 5(2) is not to automatically transfer all cases under Section 20 of the SIC Act to the NCLT, as otherwise, a specific rule would have to be framed transferring such cases to the NCLT, as has been done in Rule 5(1). It is thus clear that under the scheme of Section 434 (as amended) and Rule 5 of the 2016 Transfer Rules, all proceedings under Section 20 of the SIC Act pending before the High Court are to continue as such until a party files an application before the High Court for transfer of such proceedings post 17.08.2018. Once this is done, the High Court must transfer such proceedings to the NCLT which will then deal with such proceedings as an application for initiation of the corporate insolvency resolution process under the Code. It is thus clear that under the scheme of Section 434 (as amended) and Rule 5 of the 2016 Transfer Rules, all proceedings under Section 20 of the SIC Act pending before the High Court are to continue as such until a party files an application before the High Court for transfer of such proceedings post 17.08.2018.
18	22-01-2019	Forech India Ltd Vs Edelweiss Assets Reconstruction Co. Ltd	Judgment dt 22.01.2019	Rules 26 and 27 clearly refer to a pre admission scenario as is clear from a plain reading of Rules 26 and 27 of Companies (Court)Rules , which make it clear that the notice contained in Form No. 6 has to be served in not less than 14 days before the date of hearing. Hence, the expression “was admitted” in Form No. 6 only means that notice has been issued in the winding up petition which is then “fixed for hearing before the Company Judge” on a certain day. Even if the Notice is served u/r 26 , any party can apply to High Court for transfer of proceedings to the NCLT. It is therefore correct to interpret that the notice referred to in Rules 26 and 27 must be after admission.
19	25-01-2019	Swiss Ribbons Pvt. Ltd. & Anr. Vs UOI	AIR2019SC739	Financial creditors are clearly different from operational creditors and therefore, there is obviously an intelligible differentia between the two which has a direct relation to the objects sought to be achieved by the Code. Constitutional validity of different provisions upheld.
17	29-01-2019	Swaraj Infrastructure Pvt. Ltd.Vs Kotak Mahindra Bank Ltd.	2019(3)SCC620	Even when award for recovery is obtained from DRT in OA, winding up Petition can be filed under Companies Act.
20	31-01-2019	Vijay Kumar Jain Vs Standard Chartered Bank & Ors	Judgment dt.31.01.2019	Resolution professional is required to provide all relevant documents including the insolvency resolution plans in question to members of the suspended Board of Directors of the corporate debtor in each case so that they may meaningfully participate in meetings held by the committee of creditors [“CoC”]. The meeting of the CoC will include the members of the suspended Board of Directors of the corporate debtor as participants.
21	05-02-2019	K Sashidhar Vs Indian Overseas Bank & Ors	Judgment dt.5.2.2019	Resolution plan of the concerned corporate debtor not being approved by requisite percent of voting share of the financial creditors; and in absence of any alternative resolution plan presented within the statutory period of 270 days, the inevitable sequel is to initiate liquidation process under Section 33 of the Code.
22	02-04-2019	Dharani Sugars And Chemicals Ltd. Vs. Union Of India & Ors.	2019(5)SCC480	The Reserve Bank of India [“RBI”] Circular issued on 12.02.2018, by which the RBI promulgated a revised framework for resolution of stressed assets is struck down and declared as *ultra* *vires* Section 35AA of the Banking Regulation Act as a whole, and be declared to be of no effect in law. Consequently, all actions taken under the said circular, including actions by which the Insolvency Code has been triggered must fall along with the said circular. As a result, all cases in which debtors have been proceeded against by financial creditors under Section 7 of the Insolvency Code, only because of the operation of the impugned circular will be proceedings which, being faulted at the very inception, are declared to be non-est.
23	30-04-2019	Jk Jute Mill Mazdoor Morcha Vs Juggilal Kamlapat Jute Mills Company Ltd	AIR2019SC2138	A trade union would come within the definition of “person” under Section 3(23) of the Code. A trade union would be an operational creditor, joint petition could be filed under Rule 6 read with Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, with authority from several workmen to one of them to file such petition on behalf of all.
24	23-07-2019	Bikram Chatterji & Ors. Vs. Union Of India & Ors.	Judgment dt. 23.07.2019	Authorities who leased the plots can not recover the outstanding dues by sale of flats to third parties or by demolishing buildings on leased lands which have been booked for selling to home buyers. Inaction on the part of authorities to recover their dues can not be ground to sell the flats and realize their dues which have been booked for sale by home buyers and part consideration paid. The Banks also can not lay hands on flats booked by home buyers due to their lack of monitoring of use of funds provided for construction of flats.
25	09-08-2019	Pioneer Urban Landand Infrastructure Ltd Vs UOI	Judgment dt.09.08.2019	The amendments by inserting Explanation to Section 5(8)(f) made deem allottees of real estate projects to be “financial creditors” so that they may trigger the Code, under Section 7 thereof, against the real estate developer id upheld. In addition, being financial creditors, they are entitled to be represented in the Committee of Creditors by authorised representatives are constitutionally valid. Remedies that are given to allottees of flats/ apartments are therefore concurrent remedies, such allottees of flats/apartments being in a position to avail of remedies under the Consumer Protection Act, 1986, RERA as well as the triggering of the Code. Section 5(8)(f) as it originally appeared in the Code being a residuary provision, always subsumed within it allottees of flats/apartments. The explanation together with the deeming fiction added by the Amendment Act is only clarificatory of this position in law