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

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