The Insolvency and Bankruptcy Code, 2016 ( IBC, 2016 ) was recommended on 31st May 2005. The code deals with time-bound proceedings, applicability and accessibilities, moratorium and suspension of the proceedings, setting up of operating agencies, the appointment of administrators and their duties, committee of creditors and liquidators, cross-border insolvency and so on. By the introduction of code, the new process that replaced the concept of winding up was termed as the Corporate Insolvency Resolution Process ( CIRP ).
The CIRP process can be initiated by means of filing an application before the Adjudicating Authority in the provided manner. CIRP may be initiated by either:
Section 7 of the Code provides for initiation of corporate insolvency resolution process ( CIRP ) against a Corporate Debtor (‘CD’) by a financial creditor (FC). Section 7(5) of the Code states that, where adjudicating authority [ National Company Law Tribunal ( NCLT ) ] is satisfied that a default has occurred and that the application is complete, it may, by order, admit such application.
The ambit and scope of Section 7(5) of the Code came up for consideration before the Supreme Court in several landmark cases, such as, Innoventive Industries Ltd. v. ICICI Bank, Swiss Ribbons (P) Ltd. v. Union of India. The Supreme Court interpreted Section 7(5) of the Code and held that the NCLT has to only satisfy itself that a default has occurred for admitting an application under Section 7 of the Code.
The Mumbai Bench of National Company Law Tribunal (NCLT) held that the Insolvency and Bankruptcy Code does not apply to Co-Operative Society as it is not a ‘Corporate Person’. “In view of the above, this Bench is of the opinion that, the Petition filed by the Financial Creditor is not maintainable and therefore, C.P. (IB) No. 263/MB/2019 filed by The Solapur Dist. Central Co – Operative Bank Limited, the Financial Creditor/Applicant, under section 7 of Insolvency & Bankruptcy Code, 2016 (I&B Code) against Sangola Taluka Sahakari Sakhar Karkhana Limited, Corporate Debtor, for initiating Corporate Insolvency Resolution Process is hereby Dismissed with no Cost,” the NCLT said.
The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has held that an Income tax appeal is not maintainable during Insolvency and Bankruptcy Code (IBC), 2016. The Tribunal granted leave to seek the restoration of the appeals if necessitated by the orders in the Corporate Insolvency Resolution Proceedings and the appeals of the assessee got dismissed. The assessee was represented by Shri R. Mohan Kumar and the revenue was represented by Shri Rajendra Kumar.
In the case of Deccan Chronicle Holdings Limited, the Hyderabad bench of the Income Tax Appellate Tribunal(ITAT) has held that statutory dues and claims stand frozen after approval of the resolution plan by Insolvency and Bankruptcy Code (IBC), 2016. Shri Rama Kanta panda, AM & Shri K Narasimha Chary, JMobserved that the appeals cannot be proceeded with during the continuance of the proceedings under the Insolvency and Bankruptcy Code. The Tribunal granted leave to seek the restoration of the appeals if necessitated by the orders in the Corporate Insolvency Resolution Proceedings and the appeals of the assessee and the revenue got dismissed.
The National Company Law Appellate Tribunal (NCLAT) affirmed that the limitation period will not be extended in The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI) and Debt Recovery Tribunal (DRT) Proceedings on the part payment under the Insolvency and Bankruptcy Code (IBC), 2016. Therefore, the appellate tribunal held that the Financial Creditor did not accept OTS, therefore, the same cannot be treated as an acknowledgement in view of Section 18 of the Limitation Act, 1963. From the records, it is seen that the Appellant also made OTS Proposal on 28.04.2016 prior to the OTS Proposal i.e., 01.06.2016.
The government has extended the suspension of insolvency proceedings for any COVID-19 related default by a period of three months, effective from September 25. The Insolvency & Bankruptcy Code (IBC) was suspended for a period of six months with effect from March 25, 2020, by the government earlier, to protect those experiencing financial distress on account of the pandemic. Any defaults, occurring on or after March 25, 2020, until the suspension remains in force, have been permanently excluded for the purpose of initiating insolvency proceedings, something that came under the criticism of the legal and banking fraternity.
The Central Government notified exceptions for Corporate Debtor under Section 14(1) of Insolvency and Bankruptcy Code, 2016 (IBC). The notification stated that the Central Government in exercise of the powers conferred by clause (a) of sub-section (3) of section 14 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government notified that the provisions of sub-section (1) of section 14 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), shall not apply where the corporate debtor has entered into any of the following transactions, arrangements or agreements, namely.
The New Delhi Bench of the National Company Law Tribunal (NCLT) ruled that an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be initiated against a struck-off company. “The power of the Tribunal to restore the name of a struck off company under Section 252 of the Companies Act, 2013 is not a suo motu power, but is to be exercised either on the basis of an appeal filed by any aggrieved person under Section 252 (1) or to be exercised on an application filed by the Companies, its members or creditors or workmen aggrieved by the order of striking off under Section 252(3) of the Companies Act, 2013. Secondly, such power of restoration is to be exercised under the powers confined to this Tribunal under the Companies Act, 2013 whereas the instant proceedings are initiated under the provisions of the I&B Code, 2016 before us being the Adjudicating Authority under the Code, 2016” the Bench concluded.
In a major decision the Bombay High Court observed that mere filing of an application under Section 7(1) of the Insolvency and Bankruptcy Code, 2016 (IBC) is not enough to invoke the bar of Section 238 of the Insolvency and Bankruptcy Code and consequently it would not bar the to file an application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator. The proviso to Section 7(4) of the IBC further enjoins the Adjudicating Authority to record reasons for not ascertaining the factors, as contemplated by Section 7(4) of IBC, within the time frame stipulated therein. Further Section 7(5) of the IBC enjoins upon the Adjudicating Authority to record its satisfaction that the default has occurred and there is no disciplinary proceedings pending against the proposed resolution professional and upon such satisfaction permits admission of such application” the Bench concluded.
The Ministry of Law and Justice on Friday notified Insolvency and Bankruptcy Code IBC (Amendment) Ordinance, 2020. Further, the In Section 66, after sub-section (2) subsection “Notwithstanding anything contained in this section, no application shall be filed by a resolution professional under sub-section (2) in respect of such default against which initiation of the corporate insolvency resolution process is suspended for Section 10 A” shall be inserted.
The Disciplinary Committee (DC) of the Insolvency and Bankruptcy Board of India (IBBI) held that failure of the Insolvency Professional (IP) to represent the Corporate Debtor (CD) for conveying interest amounts to a violation of Section 25(2)(b) of the Insolvency and Bankruptcy Code (IBC). The Disciplinary Committee (DC) comprising Ravi Mital, (Chairperson) disposed of the SCN with the advice to diligently perform his functions provided under the Code.
The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) has held that the institution of suit against the corporate debtor during the moratorium period is prohibited under section 14 of the Insolvency and Bankruptcy Code. Therefore, there is no reason to keep this appeal pending. The Coram of Sri Prashant Maharishi, Accountant Member.
In a setback to Platino Classic Motors India Private Ltd, the Kerala High Court ruled that no bar under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) for Finalisation of Assessment and Adjudication Proceedings. “It is the petitioner who was issued notice. The representative of the petitioner remained present during the hearing. His reply was also filed in the show cause notice and thereafter the orders in has been passed. Thus, I find no substance in the writ petition and the same is hereby dismissed. The Official Liquidator should consider the five claims of the petitioner in accordance with the law” the Court noted.
The Chennai National Company Law Appellate Tribunal (NCLAT) consisted of Justice M. Venugopal and Shreesha Merla (Technical) stated that the `Date of Filing’ of the ‘Application’, under Section 95 of IBC is, what is to be taken into account and not the date when the Application is numbered. There is no appreciable evidence on record to state that the said `Application’ was `defective’. The bench also ruled that all of the “Personal Guarantor’s” creditors are taken care of in the Chapter-III proceedings when a “Insolvency Resolution Process” is initiated against the “Personal Guarantor.”
The Delhi Bench of the National Company Law Tribunal (NCLT) has held that the power to file application u/s 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) can be delegated by AGM to GM. Ms Vaishnavi Viswanathan, Advocate appeared for the appellant and Mr Akshat Khare, Advocate appeared for the respondent. The Impugned Order dated 31.08.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench) was affirmed by the NCLT and dismissed the appeal.
The Insolvency Bankruptcy Board of India’s (IBBI) Disciplinary Committee (DC) revoked the registration of Mr. Ananda Rao Korada as an Insolvency Professional (IP) for multiple reasons, including the submission of a compliance certificate despite the fact that Regus Impex, the SRA, was a related party and ineligible under Section 29A of the Insolvency Bankruptcy Code (IBC). The DC found that Despite the SRA being a ‘related party’ and ineligible under section 29A of the Code, Mr. Korada submitted a compliance certificate signed by himself, in their favour finding them eligible for submission of the resolution plan. Thus, the board cancelled the registration of the IP.
In a recent decision the Supreme Court of India ruled that the National Company Law Appellate Tribunal (NCLAT) cannot direct the National Company Law Tribunal (NCLT) to admit petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) without evaluating the rival contentions on merits. “We accordingly allow the appeal and set aside the impugned judgment and order of the NCLAT dated 6 December 2023. The application under Section 7 has already been restored to the file of the NCLT. The NCLT shall, after hearing the parties, determine as to whether the application under Section 7 is liable to be admitted. All the rights and contentions of the parties in that regard are kept open” the Bench noted. To Read the full text of the Order CLICK HERE
The Chennai bench of the National Company Law Appellate Tribunal( NCLAT ) held that the Suspension of Corporate Insolvency Resolution Process (CIRP) under section 10A of The Insolvency And Bankruptcy Code, 2016 (IBC) applies to due default on 31/3/2020. A two-member bench comprising Justice M. Venugopal, Member (Judicial) and Shreesha Merla, Member (Technical) observed that the ‘Explanation’ removes any doubt by clarifying that the provisions of the Section shall not apply in respect of any default committed before 25.03.2020. In light of Apex Court’s observation in ‘Ramesh Kymal versus M/s. Siemens Gamesa Renewable Power Pvt. Ltd.’ allowed the appeal and set aside the Impugned Order.
A three-judge Bench of the Supreme Court comprising Justices L. Nageswara Rao, B.R. Gavai and A.S. Bopanna, on Monday, held that a liability in respect of a claim arising out of a Recovery Certificate under the Recovery of Debts and Bankruptcy Act, 1993 would be a “financial debt” within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC) and a holder of such Recovery Certificate would be a “financial creditor” under Section 5(7) of the IBC. Considering the object and purpose of the statute, the Court was of the view that Section 5(8) would include a debt which has crystallised in the form of a decree. “Therefore, the liability in respect of a claim arising out of a Recovery Certificate would be a “financial debt” within the ambit of its definition under clause (8) of Section 5 of the IBC, and the holder of such certificate would be a financial creditor under Section 5(7) of the IBC. The Court noted that a judgment is said to be per incuriam when any provision of a statute, rule or regulation is not brought to the notice of the court or it is inconsistent with previous judgments passed by co-ordinate or larger bench.”
The National Company Law Appellate Tribunal (‘NCLAT’), has held that financial assistance given by one party to another in a Joint Venture Agreement (‘JVA’) by way of an Inter Corporate deposit cannot be Financial Debt under the Insolvency Bankruptcy Code (IBC), 2016. The two-member New Delhi Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) observed that the Appellant is not a Financial Creditor in terms of Section 5(7) of IBC and the application under Section 7 at the instance of the Appellant was not maintainable and hence the same has been rightly rejected by the Adjudicating Authority. The authority dismissed the appeal.
The Mumbai Bench of the National Company Law Appellate Tribunal ( NCLT ) observed that the Corporate Insolvency Resolution Process ( CIRP ) cannot be initiated under Section 7 of the Insolvency and Bankruptcy Code, 2016 ( IBC ) on transfer agreement for purchase of debentures from financial creditors. A Two-Member Bench comprising Prabhat Kumar, Technical Member and Justice VG Bisht observed that “The Supreme Court has settled the position of law that the element of disbursal against the consideration of time value of money has to be traced in the genesis of debt. In the present matter, the transaction was for purchase of debentures for consideration and it is evident that the element of disbursal against the consideration for time value of money is absent. It appears that Petitioner has instituted the captioned Petition for recovery of money and seeks specific performance of the terms of the agreement.”
The Principal Bench of the National Company Law Appellate Tribunal(NCLAT) upheld the proceedings against Corporate Debtor under Section 7 of the Insolvency and Bankruptcy Code (IBC) as the debt and default were proven with corroborative evidence. A two-member bench comprising Justice Ashok Bhushan, Chairperson and Barun Mitra, Member (Technical) upheld the initiating proceeding against the Corporate Debtor under Section 7 of the Insolvency and Bankruptcy Code as there being debt and default undisputed and proved by the fact. The Authority dismissed the appeal.
The Guwahati Bench of the National Company Law Tribunal ruled that the amount given by financial creditor as investment for joint venture to corporate debtor is not financial debt under the Insolvency and Bankruptcy Code, 2016 (IBC). A Two-Member Bench of the Tribunal comprising Satya Ranjan Prasad, Member (Technical) and H.V. Subba Rao, Member (Judicial) observed that “Therefore, it is very clear from the plain reading of the above definition of financial debt as well as the business arrangement between the parties under the above MoU that the above amount of Rs. 3 Crore given by the Financial Creditor to the Corporate Debtor by way of an investment and not towards any loan as rightly argued by the Counsel appearing for the Corporate Debtor and the above amount shall not be considered as a financial debt.”
The Supreme Court has held that the National Company Law Tribunals (NCLT) cannot reject applications under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) unless the debt has not become due & payable. “Even assuming that NCLT has the power to reject the application under Section 7 if there were good reasons to do so, in the facts of the case, the conduct of the appellant is such that no such good reason existed on the basis of which NCLT could have denied admission of the application under Section 7”, the two-judge bench comprising Justice Abhay S. Oka and Justice Rajesh Bindal held.
The Supreme Court held that Section 10A of the Insolvency and Bankruptcy Code (IBC) bars initiation of the Corporate Insolvency Resolution Process (CIRP) with respect to a default that occurred on or after March 25, 2020, even if the application for CIRP was filed before June 5, 2020, when Section 10A was inserted in the IBC. “Acceptance of the submission of the appellant would defeat the very purpose and object underlying the insertion of Section 10A. For, it would leave a whole class of corporate debtors where the default has occurred on or after 25 March 2020 outside the pale of protection because the application was filed before 5 June 2020,” the Apex Court said.
The National Company Law Appellate Tribunal, New Delhi has held that the application under section 7 of the Insolvency and Bankruptcy Code (IBC) is acceptable as exist of financial debt and default. The Adjudicating Authority has returned the finding that there exist financial debt and default, and no error has been committed by the Adjudicating Authority in admitting the Section 7 application. The Board comprising Justice Ashok Bhushan, Chairperson and Barun Mitra,Member (Technical) upheld the impugned order admitting the Section 7 application.
The Hyderabad Bench of the National Company Law Tribunal (NCLT) ruled that the amount in corpus fund used for maintenance of apartments by homebuyers not ‘financial debt’ under the Insolvency and Bankruptcy Code, 2016 (IBC). “In the present case, it is acknowledged that possession has already been handed over to the allottees, and the issue pertains to the Corpus Fund, which was intended for ensuring the proper maintenance of the project. It cannot be held that the primary motivation for collecting such a corpus fund was profit-oriented” the Bench noted.
The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT), held that there is No prohibition of appearance of Advocate in representing different company, in separate proceedings under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016. A Bench consisting of Justice Prashant Bhushan, Chairperson, Dr Alok Srivastava, Technical Member and Barun Mitra, Technical Member observed that “No prohibition can be read in the statutory provision governing appearance of an Advocate in representing a different company in separate proceedings filed under Section 7. The present is not a case that Appellant has appeared for Resolution Professional and Resolution Applicant i.e. Respondent No.4 in the CIRP of the Corporate Debtor.”
The Ministry of Corporate Affairs has invited the Public Comments on proposed changes to Corporate Insolvency Resolution and Liquidation Framework under Insolvency and Bankruptcy Code. The Code should provide a fixed time period for approval or rejection of a resolution plan by the AA. Consequently, the Code is proposed to be amended to provide the AA with 30 days for approving or rejecting a resolution plan under Section 31. Where the resolution plan is not approved or rejected within this time period, the AA shall record reasons in writing for the same.
The Income Tax Appellate Tribunal (ITAT), Hyderabad bench has held that the income tax appeal is not maintainable during the pendency of Insolvency and Bankruptcy Code (IBC) proceedings. While dismissing the appeal of revenue, Shri Rama Kanta Panda, accountant member & Shri K Narasimhachary, judicial member held that depending upon the result of such proceedings before the adjudicating authority in respect of the corporate debtor, appropriate steps if any, may be taken by the appellant/respondent.
The Calcutta High Court held that the procedure for submission of financial information under Section 215 of the Insolvency and Bankruptcy Code (IBC), 2016 is not mandatory. By the virtue of being a financial creditor who has such a pre-existing application filed under Section 7 of the IBC, 2016 pending before the NCLT at its Kolkata Bench, the impugned order has the effect of adversely altering their substantive rights as granted to a creditor under the provisions of the IBC, 2016. Lastly, the court held that any delegate under the IBC, 2016, and the CA, 2013, that is, the Central Government, the IBBI, and the NCLT cannot make regulations that have a retrospective effect.
The New Delhi Bench of the National Company Law Appellate Tribunal ( NCLAT ) observed that the homebuyers having order or Decree from the Real Estate Regulatory Authority ( RERA ) are allottees and are required to comply with 2nd Proviso to Section 7(1) of the Insolvency and Bankruptcy Code, 2016 ( IBC ). A Three Member Bench comprising Justice Ashok Bhushan, Chairperson, Barun Mitra, Member ( Technical ) and Arun Baroka, Member ( Technical ) observed that “The Appellant cannot be said to go out of the definition of ‘allottees’ merely because they have an order in their favour by RERA and the Appellants’ submission that they should be treated in a different category, i.e., category of ‘Decree Holder’ and are not required to comply with Section 7, sub-section (1), 2nd Proviso cannot be accepted. The Appellants even after order of the RERA, directing for refund by the Corporate Debtor, continued to be allottees and they have filed Section 7 Application as Financial Creditor of the Corporate Debtor.”
The Supreme Court held that the entire resolution process has to be completed within the period stipulated under Section 12 of the Insolvency and Bankruptcy Code and any deviation would defeat the object and purpose of providing time limit. Pursuant to an application made under Section 7 of the Insolvency and Bankruptcy Code, 2016, the corporate insolvency resolution process was initiated against Amtek Auto Limited, Corporate Debtor on 24.07.2017. A resolution professional was appointed. The Apex Court directed all the concerned parties to the approved resolution plan and/or connected with implementation of the approved resolution plan including IMC to complete the implementation of the approved resolution plan, within a period of four weeks from today, without fail. It is further directed and it goes without saying that on implementation of the approved resolution plan and even as per the approved resolution plan, an amount of Rs. 500 crores now deposited by DVI-successful resolution applicant be transferred to the respective lenders/financial creditors as per the approved resolution plan and/or as mutually agreed. Any lapse on the part of any of the parties in implementing the approved resolution plan with the time stipulated hereinabove shall be viewed very seriously.
The Delhi bench of the National Company Law Tribunal ( ‘NCLT’ ) held that the Debt Assignment Deed cannot be challenged in a Corporate Insolvency Resolution Process ( ‘CIRP’ ) under Section 7 of the Insolvency and Bankruptcy Code, 2016 ( ‘IBC’ ). “The Interim Resolution Professional shall be under duty to protect and preserve the value of the property of the ‘Corporate Debtor’ as a part of his obligation imposed by Section 20 of the Code and perform all his functions strictly in accordance with law.”, the Tribunal held.
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