Complete Case Digest on NCLT Rulings under the IBC [Part 1]

The Insolvency and Bankruptcy Code, 2016 (IBC) was enacted to streamline corporate insolvency resolution, liquidation, and debt restructuring, while ensuring a time-bound process that adequately balances the interests of creditors and debtors.

The National Company Law Tribunal (NCLT) serves as the primary adjudicating authority for corporate insolvency cases, while the National Company Law Appellate Tribunal (NCLAT) hears appeals against NCLT orders, playing a crucial role in refining insolvency jurisprudence.

This case digest is Part 1 of landmark NCLT rulings on IBC reported at Taxscan.in, highlighting interpretations of creditor rights, resolution plans, liquidation procedures, and emerging legal principles. Numerous rulings by the NCLT have served as judicial precedents, offering insights into the methodology adopted by courts to resolve disputes on insolvency timelines, promoter disqualifications, and financial creditor rights.

Threshold Limit For Initiating Insolvency Process against Personal Guarantors is same as of Corporate Debtor u/s 4 of IBC: NCLT M/s. Mudraksh Investfin Pvt. Ltd. vs Gursev Singh CITATION:   2024 TAXSCAN (NCLT) 114

The New Delhi bench of the National Company Law Tribunal ( NCLT) had held that the threshold limit for initiating insolvency process against the personal guarantors under section 95 of the insolvency Bankruptcy Code ( IBC ), 2016  would be the same as is with respect to the corporate debtor under section 4 of the IBC i.e. 1 crore.

The bench of Shri Subrata Kumar Dash (Technical Member) and Shri Ashok Kumar Bhardwaj (Judicial Member) observed that when Section 105 of the Code provides for repayment plan, the proceedings under Section 95 may, in a way, be treated as proceedings for recovering debt. While dismissing the application, the Tribunal concluded that  where the amount defaulted to be paid by the Corporate Debtor and Personal Guarantor is less than Rs. 1 Crore, proceedings before the Adjudicating Authority for the purpose of Section 7, 9, 10, 94 & 95 of Code cannot be maintained.

Relief BOI, NCLT Directs to Admit CIRP When Statutory Criteria u/s 7 of IBC Is Satisfied Bank of India vs GF Toll Road Private Limited CITATION:   2024 TAXSCAN (NCLT) 105

The National Company Law Tribunal ( NCLT ), Mumbai bench directed to admit Cooperate Insolvency Resolution Proceedings ( CIRP ) when statutory criteria under section 7 of Insolvency Bankruptcy Code ( IBC ), 2016 is satisfied. The Tribunal reiterated that the existence of an arbitral award in favour of the Corporate Debtor did not bar the admission of the CIRP petition.

The Tribunal noted that there was no dispute regarding the existence of a financial debt and default. The Corporate Debtor also admitted to its liability. In the case of M. Suresh Kumar Reddy vs. Canara Bank & Ors., it was held that even if it is assumed that the NCLT has the authority to reject a Section 7 application if there are good reasons to do so, the facts of the case did not present any such “good reason” to justify the denial of admission under Section 7.

The bench comprising Justice V. G. Bisht (Retd.) (Judicial Member) and Prabhat Kumar (Technical Member) admitted CIRP against the Corporate Debtor. Mr. Rahul Jindal was appointed as Interim Resolution Professional of the Corporate Debtor.

Insolvency Petition U/s  95 of IBC  Not Maintainable Against Partnership Firms: NCLT Union Bank of India vs M/s. K M R Enterprises CITATION:   2024 TAXSCAN (NCLT) 109

The Hyderabad bench of the National Company Law Tribunal (NCLT) ruled that partnership firms do not fall under section 95 of the Insolvency and Bankruptcy Code (IBC). The tribunal dismissed a petition filed by Union Bank of India (Financial Creditor) under section 95 of the IBC against KMR Enterprises (Respondent).

The petition was filed by the financial creditor under section 95 of the IBC against a partnership firm. The respondent was a personal guarantor in a loan facility provided to Smaat India Pvt. Ltd, the corporate debtor. This personal guarantee was executed by the respondent on December 27, 2016 in which the loan amount advanced to the corporate debtor was secured.The financial creditor claimed that the respondent was responsible for the loan amount to the tune of Rs. 71.84 crores as the personal guarantor.

The Tribunal carefully analysed legal provisions especially section 79 and section 5(22) of the IBC. Section 79 provides that Adjudicating Authority for individuals and partnership firms is Debt Recovery Tribunal (DRT) and not NCLT. Whereas section 5(22) defines a personal guarantor as an individual who is a surety in a contract of guarantee to a corporate debtor. It was noted that the term personal guarantor did not cover partnership firms therefore they do not fall under the scope of section 95 of the IBC.

Application u/s 7 IBC Cannot Be Initiated Against a Struck-off Company: NCLT Mr. Satyabrata Mitra & Ors. vs Earth Towne Infrastructure Pvt Ltd CITATION:   2024 TAXSCAN (NCLT) 111

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 Two-Member Bench of the Tribunal comprising Manni Sankariah Shanmuga Sundaram (Judicial Member) and Dr Binod Kumar Sinha (Technical Member)  obserevd that “According to the provisions of Section 248(8) of the Companies Act, 2013, the Tribunal may order winding up of a Company, the name of which has been struck off, but no power can be exercised by the Tribunal for Insolvency Resolution under the Insolvency and Bankruptcy Code, 2016, unless the name of the Company is restored to the Register of Company in terms of procedure laid down under Section 252 of the Companies Act, 2013.”

Hearing not mandated by Adjudicating Authority during Appointment of RP u/s 97(5) of IBC: NCLT MR. SIRI KISHAN AGGARWALCITATION:   2024 TAXSCAN (NCLT) 113

The Delhi bench of the National Company Law Tribunal has held that a hearing is not mandated by the adjudicating authority during the appointment of a Resolution Professional ( RP ) under section 97(5) of the Insolvency and Bankruptcy Code, 2016. The Tribunal appointed an RP in an application filed under Section 94(1) of the Insolvency and Bankruptcy Code, 2016.

It was observed that, the Supreme Court in Dilip B Jiwrajka Vs. Union of India & Ors., held that no judicial adjudication is involved in the stages outlined in Sections 95-99 of the IBC. Furthermore, the SC held that no hearing is mandated by the Adjudicating Authority during the appointment of a Resolution Professional under Section 97(5) of the IBC.

The two-member bench of Mahendra Khandelwal (Judicial Member) and Dr Sanjeev Ranjan (Technical Member) appointed Mr Buchasia as the Resolution Professional and instructed him to submit the Assignment Declaration within seven days from the date of the decision to the Registry for official record-keeping. Further, the Resolution Professional was directed to diligently fulfil his obligations by submitting his report as required under Section 99 of the IBC.

Assignee of Financial Creditor also Financial Creditor u/s 5 (7) of IBC: NCLT Assets Care & Reconstruction Enterprise Limited vs Ankit Metal & Power Limited CITATION:   2024 TAXSCAN (NCLT) 116

The Kolkata Bench of the National Company Law Tribunal ( NCLT ) held that the assignee of the financial creditor is also financial creditor under Section 5 (7) of the Insolvency and Bankruptcy Code, 2016 (IBC).

A Two-Member Bench comprising Balraj Joshi, Technical Member and Rohit Kapoor, Judicial Member observed that “As such, in light of a conjoint reading of section 5 and & 7 of the SARFAESI Act, it is clear that the transfer of the debt of the Corporate Debtor to the Petitioner herein by way of execution of the assignment deeds annexed to the petition as Annexures G, H, I, J of the petition is in consonance with the provisions of the SARFAESI Act, 2002. The financial assets i.e the debt of the Corporate Debtor has been legally acquired by the Petitioner herein.” “There remains no ambiguity that the ARC being the assignee of a Financial Creditor is also a Financial Creditor within the scope of Section 5 (7) of IBC, 2016 and is thus competent to file the present case under Section 7 of IBC, 2016. The plea of Corporate Debtor is, therefore, rejected in view of the position stated above” the Tribunal noted.

No Interest Can be Claimed In Insolvency Petition Without Prior Intimation to Corporate Debtor: NCLT JANUS GBAC LIMITED vs BELOORBAYIR BIOTECH LIMITED CITATION:   2024 TAXSCAN (NCLT) 118

The Bengaluru bench of the National Company Law Tribunal (NCLT),while dismissing a petition under section 9 of the Insolvency and Bankruptcy Code (IBC), 2016 held that no interest can be claimed in insolvency petition without prior intimation to corporate debtor.

The Tribunal  noted that the payment became due on March 3, 2020 for which the limitation period expired on March 14, 2023. It was viewed that the operational creditor was entitled to 379 days as it is the period left in the period of limitation after February 28, 2022. The bench comprising Shri K. Biswal (Judicial Member) and Shri Manoj Kumar Dubey (Technical Member) ruled that the operational creditor was not entitled to claim interest as it was not agreed upon to be paid in the agreement. The Tribunal held that the petition was filed when limitation period had expired therefore the petition was barred by limitation also. Accordingly, the present petition was dismissed.

Corporate Debtor Being an Agent Not Responsible For Non-Supply of Materials by Third Party: NCLT Mr. Rajender Kedia vs Nirav Metals Private Limited CITATION:   2024 TAXSCAN (NCLT) 119

In a significant ruling, the Mumbai bench of the National Company Law Tribunal ( NCLT ) has held that  Corporate Debtor being an agent not responsible for non-supply of materials by third parties. The bench dismissed a Corporate Insolvency Resolution Process ( CIRP ) petition filed by JM Steels , Operational Creditor under section 9 of the Insolvency and Bankruptcy Code ( IBC ) against Nirav Metals Pvt. Ltd., Corporate Debtor.

The NCLT stated that there was a pre-existing dispute in relation to the debts as concluded by the Hissar Police Authorities after investigating the complaint filed by the operational creditor against the corporate debtor. The Police indicated in its report that this criminal case had to be resolved first before any outstanding debts can be claimed. The Tribunal comprising Justice V.G. Bisht (Judicial Member) and Prabhat Kumar (Technical Member) held that “In view of these facts, we are of considered view that there exists primafacie dispute and this Tribunal can not adjudicate upon such dispute in the present proceedings. Hence, the debt in question can not be said to be undisputed debt. Accordingly, the present petition is not maintainable and liable to be dismissed”.

NCLT dismisses SBI’s Petition as Discrepancy in Addresses for Serving Demand Notice State Bank of India vs Renuka Rani Maganti Case Number:   2024 TAXSCAN (NCLT) 101

The National Company Law Tribunal ( NCLT ) Amaravati special bench dismissed a petition filed by the State Bank of India under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 as discrepancies were found in the addresses used for the demand notice served to the personal guarantor.

The NCLT observed discrepancies in the addresses used for the demand notice and found that SBI failed to send the notice to the correct address as per the guarantee agreement. SBI’s claim that the demand notice was sent and delivered was unsupported by consistent documentation, leading to doubts about the notice’s authenticity. The NCLT agreed with Dr Renuka’s contention that the demand notice was improperly addressed and not genuinely served. A two member bench of Dr Venkata Ramakrishna Badarinath Nandula (Judicial Member) determined that SBI failed to establish compliance with the necessary requirements under Section 95 of the IBC and rejected the application for initiating the insolvency resolution process.

Insolvency Proceedings against Byjus on default of Rs. 158 Crores: NCLT admits Plea by BCCI THE BOARD OF CONTROL FOR CRICKET IN INDIA vs THINK & LEARN PRIVATE LIMITED CITATION:   2024 TAXSCAN (NCLT) 110

The Bengaluru bench of the National Company Law Tribunal ( NCLT ) admitted the Insolvency plea by the Board of Control for Cricket in India ( BCCI ) against Think & Learn Private Limited, the Corporate Debtor under Section 9 of Insolvency and Bankruptcy Code, 2016 ( IBC ) for default of Rs. 158.90 crores.

The bench comprising Justice K. Biswal (Judicial Member) and Mr. Manoj Kumar Dubey (Technical Member)allowed the application and determined that the ‘rights fee’ owed by Think & Learn Pvt. Ltd. to BCCI is ‘Operational Debt’ under Section 5(21) of IBC. The bench refused the request of Think & Learn Pvt. Ltd.’s To refer the dispute to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. The Tribunal ruled that the Adjudicating Authority has to either reject or admit the Application and cannot postulate a third option. In this matter, the application under section 9 of the IBC has been admitted by the Order passed today, therefore, the application for referring the matter for Arbitration is not maintainable.

Insolvency Professional Entities are qualified to Appoint as Resolution Professionals: NCLT Holds in Favour of Piramal Capital Piramal Capital & Housing Finance limited Vs Notion Real Estate Private Limited CITATION:   2024 TAXSCAN (NCLT) 122

The National Company Law Tribunal( NCLT ) held that Insolvency Professional Entities ( IPEs ) are qualified to be appointed as Resolution Professionals ( RPs ) under the Insolvency and Bankruptcy Code, 2016. Further viewed that the Insolvency and Bankruptcy Board of India ( IBBI ) has the authority to regulate and recognize IPEs as resolution professionals.

The two-member bench of Shri Sanjiv Dutt (Technical Member) and Shri K.R. Saji Kumar (Judicial Member), observed that the IBBI recognizes IPEs under the IBBI (Insolvency Professionals) Regulations, 2016 and is empowered under Section 240(2)(zzi) of the IBC to make regulations regarding the categories of professionals or persons, their qualifications, and experience.

Notice issued by SBI to CD Recalling Loan Facility Not Amounts to Demand on Corporate Guarantor: NCLT State Bank of India vs Navjeevan Tyres Private Limited CITATION:   2024 TAXSCAN (NCLT) 123

The Mumbai bench of the National Company Law Tribunal ( NCLT ) held that notice issued by the State Bank of India ( SBI ) , the Financial creditor to Corporate Debtor recalling loan facility not amounts to Demand on Corporate Guarantor.

The NCLT held that SBI’s legal notice under Section 13(2) of the SARFAESI Act, 2002 was addressed only to the Principal Borrower and did not indicate an intention to invoke the corporate guarantee. The Tribunal while concluding observed that there is no proof that SBI made a demand on the Corporate Debtor/Guarantor by invoking the guarantee or that the Corporate Debtor defaulted on its liability under the Guarantee Agreements. While dismissing the application, the NCLT held that since the pre-requisite condition for initiating CIRP under Section 7 of the IBC has not been satisfied, the CIRP application is not maintainable.

Adjudicating Authority under IBC not appropriate forum to decide Revocation of Attachment Made by ED during CIRP: NCLT MR. PALANIAPPAN vs THE JOINT DIRECTOR CITATION:   2024 TAXSCAN (NCLT) 120

The Chennai Bench of the National Company Law Tribunal ( NCLT ) held that adjudicating authority under the Insolvency and Bankruptcy Code, 2016 ( IBC ) is not appropriate forum to decide revocation of attachment made by Enforcement Directorate ( ED ) during Corporate Insolvency Resolution Process (CIRP).

A Two-Member Bench comprising Ravichandran Ramasamy, Technical Member and Jyoti Kumar Tripathi, Judicial Member observed that “It is quite evident that the attachment made is as per the ingredients of the provisions of the PMLA Act, 2002 and that the same is to be dealt with under the relevant provisions of the said act only. Moreover, it is time and again retreated by the Hon’ble NCLAT that the Code only pertains to the questions concerning Corporate Insolvency Resolution Process & Liquidation Proceedings of the Corporate Debtor.”

“Keeping that in mind, the concept of ‘Attachment’ made as per Section 5 (1) of the Prevention of Money Laundering Act, 2002 cannot be a subject matter of proceedings under Section 60(5) of the code, in a way making it clear that this Adjudicating Authority is not the right ‘FORA’ to deal with revocation of attachment made under the PMLA, Act, 2002. Thereby, making it obvious that a remedy under PMLA act cannot be claimed before this Adjudicating Authority under the IBC, 2016 Code” the Bench noted.

Detention Charges are Operational Debts under IBC: NCLT ABC India Ltd. vs Prabhakar Engineers Pvt. Ltd. CITATION:   2024 TAXSCAN (NCLT) 125

The Mumbai Bench of the National Company Law Tribunal ( NCLT ) observed that the detention charges is operational debt under the Insolvency and Bankruptcy Code, 2016 (IBC).

A Two-Member Bench comprising Madhu Sinha, Technical Member and Reeta Kohli, Judicial Member observed that “There is a clear establishment of “Debt” and corresponding “Default” along with satisfaction of pecuniary, subject matter and territorial jurisdiction which makes it a fit case for admission of the Corporate Debtor to CIRP under Section 9 of the IBC.” “Since there is no proposal for the name of Interim Resolution Professional by the Operational Creditor, Mr. Shekhar Kumar Agarwal is appointed as the Interim Resolution Professional from this Tribunal’s Panel. The Operational Creditor shall deposit an amount of Rs. One Lakh towards the initial CIRP costs by way of a Demand Draft drawn in favour of the Interim Resolution Professional appointed herein, immediately upon communication of this Order” the Tribunal noted.

Liabilities of Corporate Debtor must be Settled u/s 53 of IBC: NCLT Mr. Ravikant Modi vs Mr. Anshul Gupta CITATION:   2024 TAXSCAN (NCLT) 126

In  a recent case, the Mumbai bench of the  National Company Law Tribunal ( NCLT ) has held that only assets are transferred in a sale of the corporate debtor in liquidation as a going concern and liabilities have to be discharged as per section 53 of the Insolvency Bankruptcy Code ( IBC ), 2016..

The bench of Ms. Reeta Kohli ( Judicial Member ) and Ms. Madhu Sinha ( Technical Member ) directed the Liquidator to provide all support and Assistance to the Applicant for the smooth functioning of the Corporate Debtor to complete the acquisition strangely. The Liquidator and Applicant shall be at liberty to take all the steps required to make accounting entries for the smooth transmission and clearing the balance sheet. Further directed the Liquidator to ensure completion of pending filings with the Registrar of Companies, Income Tax Authorities and any other Government / Statutory Authorities.

Moratorium u/s 14 of IBC imposed legal ‘Embargo’ not only on Financial Creditors but on any other person for Sale of Assets in CIRP: NCLT

Punjab National Bank vs NCS Sugars Ltd

CITATION:   2024 TAXSCAN (NCLT) 107

The Hyderabad bench of the National Company Law Tribunal ( NCLT ) has held that a Moratorium under section 14 of the Insolvency Bankruptcy Code ( IBC ),2016 imposed a legal ‘Embargo’ not only on financial creditors but on any other person for the sale of assets in Corporate Insolvency Resolution Process( CIRP ).

The 1st respondent, despite being repeatedly informed and even persuaded by the applicant not to proceed further with the impugned sale process, as the moratorium ordered by this Tribunal is in force, went ahead, completed the sale and even distributed a sizeable part of the sale proceeds not only to the farmers but also to various ‘others’ even though none of them are even entitled to be paid in the manner in which the 1st respondent has done, and thus, not only made the statutory process under IB Code a ‘mockery; but also jeopardized the entire ‘due distribution of the assets of the corporate debtor’ among the stakeholder as envisaged under I&B Code. The CESTAT held that the impugned sale of the property of the corporate debtor, which is undergoing CIRP, under the public auction held under the provisions of the AP Revenue Recovery Act, is unsustainable, unenforceable besides null and void, hence the same is liable to be annulled.

CIRP cannot be Initiated u/s 7 of IBC on Transfer Agreement for Purchase of Debentures from Financial Creditors: NCLT Edelweiss Asset Reconstruction Company Limited vs Ajmera Realty and Infra India Limited CITATION:   2024 TAXSCAN (NCLT) 127

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.”

CoC under IBC can Liquidate Corporate Debtor any Time after its Constitution or Before Resolution Plan is Confirmed: NCLT M/S TRI-WALL PAK PRIVATE LIMITED vs M/S 5 CORE ACOUSTICS PRIVATE LIMITED CITATION:   2024 TAXSCAN (NCLT) 108

The Delhi bench of the National Company Law Tribunal has held that the Committee of Creditors ( CoC ) under the Insolvency and Bankruptcy Code, 2016 ( IBC ) can decide to liquidate the Corporate  Debtor, any time after its constitution and before confirmation of the resolution plan.

The two member bench of Mahendra Khandelwal (Judicial Member) and Dr Sanjeev Ranjan (Technical Member) found no grounds for interference with the decision of the CoC for liquidation. Moreover, the resolution for liquidation, passed unanimously with one hundred per cent voting shares, signified a clear consensus among the creditors. The NCLT granted the application for the liquidation of M/s 5 Core Acoustics Private Limited and Radhey Shyam Yadav, the Resolution Professional, was relieved from his assignment.

Legitimate Claim of Creditors cannot be Defeated Using Moratorium as Shield: NCLT Rules on Punjab National Bank Case Punjab National Bank vs Mohita Indrayan CITATION:   2024 TAXSCAN (NCLT) 128

In  a ruling of Punjab National Bank Chandigarh Bench of the National Company Law Tribunal ( NCLT ) while admitting  an insolvency petition under section 95 of the Insolvency and Bankruptcy Code ( IBC ) against Ms. Mohita Indrayan, a personal guarantor, for the debts of M/s Indian Clothing League Private Limited (corporate debtor),  observed that Legitimate Claim of Creditors cannot be Defeated Using Moratorium as Shield.

A two member bench comprising Shri Harnam Singh Thakur (Judicial Member) and Shri Ashish Kumar Verma (Technical Member) held that despite a petition under section 94 of the IBC filed by the personal guarantor, no further steps were taken to proceed with the case therefore benefit of interim moratorium under section 96 of the IBC could not be given.

The NCLT concluded that the petition filed under section 95 of the IBC by Punjab National Bank along with Indian Bank cannot be refused to be admitted on the ground that a petition under section 94 of the IBC had already been filed by Ms. Mohita Indrayan rendering subsequent petition inadmissible due to interim moratorium under section 96 of the IBC. The purpose of the IBC will be defeated if such proceedings are allowed to continue. The tribunal finally held as under.

CIRP Can be Initiated against Corporate Debtor even on Principal-Agent Relationship between CD and Client: NCLT S.A. Consultants & Forwarders Pvt. Ltd. vs Prime Cargo Movers & Logistics Pvt. Ltd. CITATION:   2024 TAXSCAN (NCLT) 129

The Mumbai Bench of the National Company Law Tribunal ( NCLT ) held that the Corporate Insolvency Resolution Process ( CIRP ) can be initiated against corporate debtor ( CD ) even on principal-agent relationship between the CD and the client.

A Two-Member Bench comprising Anil Raj Chellan, Technical Member and Kuldip Kumar Kareer, Judicial Member observed that “The Operational Creditor has been able to establish the existence of operational debt and its default having been committed by the Corporate Debtor and further that the Petition is filed within the period of limitation. Therefore, the Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 deserved to be admitted.” “In this case, the agent of the principal i.e. owner of the vessel signed the contract on behalf of the principal and it was held that in the event of loss of any goods, the agent cannot be sued in view of Section 230 of the Contract Act. Besides that, in the cited case, agent was acting for his principal while providing services to other parties including the plaintiff whereas in the instant case, the Corporate Debtor is the recipient of the services provided by the Operational Creditor. Besides, the Corporate Debtor was never appointed nor acted as an agent of the Operational Creditor” the Tribunal noted.

Assignee of Financial Creditor also Financial Creditor u/s 5 (7) of IBC: NCLT Assets Care & Reconstruction Enterprise Limited vs Ankit Metal & Power Limited CITATION:   2024 TAXSCAN (NCLT) 116

The Kolkata Bench of the National Company Law Tribunal ( NCLT ) held that the assignee of the financial creditor is also financial creditor under Section 5 (7) of the Insolvency and Bankruptcy Code, 2016 (IBC).

A Two-Member Bench comprising Balraj Joshi, Technical Member and Rohit Kapoor, Judicial Member observed that “As such, in light of a conjoint reading of section 5 and & 7 of the SARFAESI Act, it is clear that the transfer of the debt of the Corporate Debtor to the Petitioner herein by way of execution of the assignment deeds annexed to the petition as Annexures G, H, I, J of the petition is in consonance with the provisions of the SARFAESI Act, 2002. The financial assets i.e the debt of the Corporate Debtor has been legally acquired by the Petitioner herein.” “There remains no ambiguity that the ARC being the assignee of a Financial Creditor is also a Financial Creditor within the scope of Section 5 (7) of IBC, 2016 and is thus competent to file the present case under Section 7 of IBC, 2016. The plea of Corporate Debtor is, therefore, rejected in view of the position stated above” the Tribunal noted.

No Provision in IBC states on issuance of multiple demand notices prior to filing of petition u/s 9 of IBC: NCLT M/s. METRO TYRES LIMITED vs M/s. HERO ELECTRIC VEHICLES PVT. LTD CITATION:   2024 TAXSCAN (NCLT) 104

The New Delhi bench of the National Company Law Tribunal ( NCLT ) has held that the Insolvency Bankruptcy Code ( IBC ), 2016 does not provide issuance of multiple demand notices before filing of petition under section 9 of IBC.

The Corporate Debtor has objected to the non-reconciliation of accounts, it further said. No documentation or records have been submitted by the Respondent/Corporate Debtor to support the payment of Rs. 5,00,000 to the Operational Creditor. As a result, it would not be covered by an existing dispute. A two-members, Justice Shri Bachu Venkat Balaram Das ( Judicial Member ) and Shri Atul Chaturvedi ( Technical Member ) of the tribunal concluded that the Corporate Debtor has not been able to raise a plausible contention regarding the pre-existence of “dispute” between the parties. Hence, the present petition filed under Section 9 of the IBC, 2016 ought to be admitted.

CoC Can Take Decision To Consolidate CIRP:  NCLT Mr. Gajjala Yoganand vs Mr. Birendra Kumar Agarwal CITATION:   2024 TAXSCAN (NCLAT) 107

The Hyderabad bench of the National Company Law Tribunal ( NCLT ) held that the Comittee of Creditors ( CoCs ) can take decision to consolidate the Corporate Insolvency Resolution Process ( CIRP ).

The bench of Sri Rajeev Bhardwaj ( Judicial Member ) and Sri Sanjay Puri ( Technical Member ) viewed that the resolution plans have already been approved by the COCs of both the corporate debtors and which are pending for approval before the Adjudicating Authority therefore the facts and circumstances of the present case are starkly different from the above case. The Tribunal dismissed the application.

The bench viewed that “for both Corporate Debtors, MCL and MRHPL, the CIRPs are at an advanced stage. Both have separately attracted a substantial number of EoIs and received multiple viable resolution plans. The CoCs of both CDs have approved the respective Resolution Plans with the requisite majority, and applications for their approval are currently pending before this Authority. This application, seeking consolidation of the CIRPs of both CDs at such a late stage by a suspended director with no stake in the outcome, is only an attempt to disrupt the successful resolution process of the Corporate Debtors. This application is without merit and is therefore dismissed, with a cost of Rs 5.0 lakhs, to be deposited in `Bharatkosh’.”

NCLT not Empowered to Set Aside Arbitral Award passed during Moratorium Period u/s 14 of IBC: NCLTbMahavir Industrial Corporation vs Hindustan Controls and Equipment Private LimitedbCITATION:   2024 TAXSCAN (NCLT) 117

The Kolkata Bench of the National Company Law Tribunal ( NCLT ) held that the NCLT is not empowered to set aside arbitral award passed during moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016 ( IBC ).

A Two-Member Bench comprising D. Arvind Member (Technical) and Bidisha Banerjee, Member (Judicial) observed that “NCLT cannot derive its power from the sprit and object of the IBC. The NCLT has a wide residuary jurisdiction, under Section 60 (5) of the IBC to adjudicate question of law a fact arising out of Insolvency Proceedings nonetheless it is defined by the text of IBC. The NCLT cannot do what the IBC consciously did not provide the power to do.” “In as much as, the Arbitration Award has been challenged in this application, whereas this Tribunal lacks jurisdiction to set aside an Arbitral Award, although it was passed in course of moratorium under Section 14 of IBC, we dispose of the IA with liberty to the Resolution Professional to initiate appropriate proceedings to challenge the said Award” the Tribunal noted.

Non-Acceptance of Goods by Corporate Debtor does not equate to Operational Debt u/s 5(21) of IBC: NCLT SHANTI MOTORS vs UNION OF INDIA & ORS. CITATION:   2024 TAXSCAN (SC) 171

The National Company Law Tribunal ( NCLT ) has held that the non-acceptance of the goods by the Corporate Debtor cannot be equated with default in respect of an operational debt. Section 5 (21) of the Insolvency Bankruptcy Code ( IBC ),2016 defines the operational debt as a “claim in respect of the provisions of goods and services including employment or debt in respect of payment of dues arising under any law for the time being in force payable to the Central Government, any State Government and any Local Authority.”.

A two-member bench comprising Mr Anil Raj Chellan, Member ( Judicial ) and Mr Kuldip Kumar Kareer, Member ( Technical ) viewed that non-acceptance of the goods by the Corporate Debtor cannot be equated with the default in respect of operational debt. Section 5 (21) of IB Code, 2016 defines the operational debt as a “claim in respect of the provisions of goods and services including employment or debt in respect of payment of dues arising under any law for the time being in force payable to the Central Government, any State Government and any Local Authority.” The goods were never supplied to the Corporate Debtor nor any invoices were raised.

The Tribunal dismissed the Petition under Section 9 of the Insolvency and Bankruptcy Code. Adv. Nausher Kohli appeared for the Operational Creditor and Adv. Amir Arsiwala a/w Adv. Abdullah Qureshi & Adv. Arjun Sathees appeared for the Corporate Debtor.

Amount given as Share Application Money not Financial Debt under IBC: NCLT Mittson Fille Enterprise vs Sammaan Ventures Limited CITATION:   2024 TAXSCAN (NCLT) 130

The Kolkata Bench of the National Company Law Appellate Tribunal (NCLT) held that the amount given as share application money is not financial debt under the Insolvency and Bankruptcy Code, 2016 (IBC).

The petition has been filed by Mittson Fille Enterprise, the Financial Creditor represented by its Partner, Mrs. Neha Choudhary under section 7 of the Insolvency and Bankruptcy Code, 2016 (“Code”) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Financial Creditor seeks initiation of Corporate Insolvency Resolution Process (“CIRP”) in respect of Sammaan Ventures Limited/Corporate Debtor.

A Two-Member Bench comprising Balraj Joshi, Member (Technical) and Rohit Kapoor, Member (Judicial observed that “We are of the view the amount of default is not a Financial Debt and therefore petition under Section 7 is not maintainable. The dismissal of this petition shall not be construed in any manner as expression of opinion on the claim of the petitioner and the Petitioner is at liberty to pursue any other remedy that may be available under any other law”.

Settlement Breach Agreement between Operational Creditor and CD does not fall Under “Operational Debt” as per Section 5(21) of the IBC: NCLT M/s. Amrik Cranes and Infrastructure vs Simplex Infrastructures Limited CITATION:   2024 TAXSCAN (NCLT) 131

The Kolkata bench of the National Company Law Tribunal ( NCLT )has held that the breach of the settlement agreement between the operational creditor and the corporate debtor does not fall within the ambit of “Operational Debt” as per Section 5 (21) of the Insolvency Bankruptcy Code ( IBC ), 2016.

Two member bench of D. Arvind (Technical Member) and Bidisha Banerjee (Judicial Member) observed that the claimed default was based on the non-payment of instalments under the settlement agreement. It was observed that Section 5(21) of the IBC defines “operational debt” as a claim in respect of the provision of goods or services, including employment, or a debt in respect of payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority. While dismissing the petition, the NCLT held that the breach of a settlement agreement does not constitute “Operational Debt” under Section 5(21) of the Code.

Amount given by Financial Creditor as Investment for Joint Venture to Corporate Debtor is not Financial Debt under IBC: NCLT Chiragsala Sales Pvt. Ltd. vs Vaishno Devi Traders Pvt. Ltd. CITATION:   2024 TAXSCAN (NCLT) 132

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.”

‘Provisional Order of Attachment’ under PMLA will not Nullify Protection u/s 32A IBC: NCLT Canara Bank vs Deccan Chronicle Holdings Limited CITATION:   2024 TAXSCAN (NCLT) 133

The National Company Law Tribunal, Hyderabad Bench observed that ‘Provisional Order of Attachment’ under the Prevention of Money Laundering Act, 2002 (PMLA) will not nullify protection under Section 32A of the Insolvency and Bankruptcy Code, 2016 (IBC).

A Two-Member Bench comprising Charan Singh, Technical Member and DR. Venkata Ramakrishna Badarinath Nandula, Judicial Member observed that “On careful examination of the ‘impact’ of the impugned provisional order of attachment on the implementation of the approved resolution plan by the Successful Resolution Applicant (SRA) and taking into consideration the ‘clean slate’ theory propounded by Hon’ble Supreme Court, besides the very object behind introducing section 32A by way of an amendment in I&B Code, in our considered view, the power of this Tribunal to interfere with the “impugned measure” is well within the teeth of section 60 (5)(c) of IB Code.” “We hereby hold that, all the assets and properties of the corporate debtor which formed part of the approved resolution plan for the resolution of the insolvency of the corporate debtor, are immune from the provisional order of attachment made vide order No.1 of 2020, ECIR No.CIR/HYZO/02/2015 dated 15.10.2020, under section 5(1) of Prevention of Money Laundering Act, 2002” the Bench concluded.

Amount in Corpus Fund used for Maintenance of Apartments by Homebuyers not ‘Financial Debt’ under IBC: NCLT Vasathi Anandi Owners Welfare Association vs Vasathi Housing Limited CITATION:   2024 TAXSCAN (NCLT) 134

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).

A Two-Member Bench comprising Sanjay Puri, Technical Member and Rajeev Bhardwaj, Judicial Member observed that “Therefore, in our considered view, the amount in question is akin to a prepayment made to a service provider, with maintenance services being the relevant service in this case. A comprehensive examination of Section 5(8)(f) of the IBC, 2016, in conjunction with the aforementioned judgments, unequivocally establishes that the said amount does not meet the criteria for classification as Financial Debt.” “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.

IRP/RP/Liquidator cannot Provide for IT except under S. 53 of IBC in Absence of Separate Account for PF: NCLT Mrs. Teena Saraswat Pandey vs Regional Provident Fund CommissionerCITATION: 2024 TAXSCAN (NCLT) 135

The National Company Law Tribunal (NCLT), Mumbai Bench has held that if the corporate debtor (CD) failed to keep a separate account for the Provident Fund (PF), the  Insolvency Resolution Professional (IRP)/RP /Liquidator cannot Provide for Income Tax except under section 53 of Insolvency Bankruptcy Code (IBC).

It was evident that the amount deducted for `Provident Fund’, purely belongs to an `Employees’ and is not to be treated as an `Asset’ of the ‘Corporate Debtor’ and cannot be touched by an `Interim Resolution Professional’/`Resolution Professional’/ `Liquidator’ as the case may be. However, it is important to note that such a `Provident Fund’, has to be an `Establishment Fund’, kept separately by the company and only then this proviso will be applicable. If even wrongly and in violation of the laws of the land, the company fails to establish such  `Provident  Fund’, in that event `Interim Resolution Professional/Resolution Professional/Liquidator’ is not expected to provide for same, except under Section 53 of the I & B Code, 2016. The two-member bench comprising of Shri. Kuldip Kumar Kareer (Judicial Member) and Smt. Anuradha Sanjay Bhatia (Technical Member) viewed that since the Corporate Debtor had not opened a separate Bank Account for the `Provident Fund’, the aforesaid account has to be treated as per Section 53 of the I & B Code, 2016.

Retired Partner can’t Initiate Proceedings against Other Partners under IBC for Retirement Dues: NCLT Anil Vora HUF vs Kavya Build-Con Private Limited CITATION:   2024 TAXSCAN (NCLT) 136

The National Company Law Tribunal (NCLT), Mumbai Bench has held that the retired partner has no right under IBC to file a claim against the partner or the firm for the retirement dues.

The Bench consisting of Technical Member Rajesh Sharma and Judicial Member Kishore Vemulapalli held that,“the Operational Creditor and the Corporate Debtor were the Partners and also accepts the contentions of the Operational Creditor with respect to the joint and several liability with the other partners or with the Firm. However, the Bench considered that, even the liability of the Corporate Debtor is proved in all aspects, the IBC does not protect the interest or claim of the Partner against another Partner or the Firm. The claim and the cause of action arose on the transaction between the Partners. Therefore, the Petition itself is not maintainable in the eye of the law”. While rejecting the application of Operational Creditor the bench also said that, “the Operational Creditor may be liable to the claims against the Corporate Debtor not under the IBC but under any other law which provides the remedy to the Operational Creditor. The Retired Partner has no right under the IBC to file a claim against the Partner or the Firm”.

Fraudulent intent not necessary for preferential transaction u/s 43 of IBC: NCLT Mr. Ankur Kumar vs Mr. Jitendra Kikavat & others CITATION:   2024 TAXSCAN (NCLT) 137

The Mumbai Bench of the National Company Law Tribunal ( NCLT ) held that fraudulent intent is not necessary to prove preferential transaction under Section 43 of the Insolvency and Bankruptcy Code, 2016 ( IBC ).

A Two-Member Bench comprising Prabhat Kumar Member ( Technical ) and Justice V.G. Bisht Member ( Judicial ) observed that “The Section 43(3) of the Code, inter-alia, provides that the transactions undertaken in ordinary course of business shall remain out of the scope of section 43 of the Code. Further, the transaction should be in ordinary course of business of both the parties i.e. the Corporate Debtor as well as recipient of the preference. In the present case, it can not be said that it is in ordinary course of business of the recipient of the preference to realise their debts, particularly when the Corporate Debtor, a related party, is under financial stress.”

“Connected Person” under Explanation-I of Section 29A(J) of IBC relates to Resolution Applicant, not Corporate Debtor: NCLT Trilochan Biswal vs Commissioner of CT & GST CITATION:   2024 TAXSCAN (NCLT) 138

The Hyderabad Bench of the National Company Law Tribunal ( NCLT ) held that the term “Connected Person” under Explanation-I of Section 29A(J) of the Insolvency and Bankruptcy Code, 2016 ( IBC ) relates to the resolution applicant, not the corporate debtor.

A Two-Member Bench comprising Charan Singh, Member ( Technical ) and Dr.Venkata Ramakrishna Badarinath Nandula, Member ( Judicial ) observed that “The Resolution applicant herein, being an ex-director of the corporate debtor, we are of the view that contention of the respondent that the applicant is disqualified to submit resolution plan as CD is debarred by SEBI and that the applicant is a connected party to the CD is not maintainable. Further, we should always bear in mind that legislature while passing the Bill, has given some special relaxation under Section 29(A) to MSME promoters so that they are allowed to participate in the resolution process of corporate debtor.”

Exclusive Supply Agreement Does Not Establish Creditor-Debtor Relationship Under IBC: NCLT M/S TRANSLINE TECHNOLOGIES LIMITED vs EXPERIO TECH PRIVATE LIMITED CITATION:   2025 TAXSCAN (NCLT) 107

In accordance with Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), the National Company Law Tribunal (NCLT), located in Delhi, has ruled that a petitioner cannot start the Corporate Insolvency Resolution Process (CIRP) if the parties’ business arrangement entails profit-sharing and joint participation rather than a simple operational debt. According to the Tribunal, under the IBC, such an arrangement does not create a debtor-creditor relationship.

A bench of Mahendra Khandelwal, Member (Judicial), and Dr. Sanjeev Ranjan, Member (Technical), held  that the nature of relation entered into between the Applicant and the Corporate Debtor is that of the ‘joint suppliers’ and the Applicant herein does not qualify to be considered as the ‘Operational Creditor’ within the meaning of Section 5(20) of the Code. The Tribunal held that when two parties engage in a business arrangement involving joint control and shared liabilities, they do not qualify as operational creditor and debtor. The tribunal observed that the basic ingredient of the Section 9 of the Code that the Applicant must qualify to be termed as the ‘Operational Creditor’ in terms of the Section 5(20) of the Code is not met with. Therefore, instant application filed by the Applicant is liable to be dismissed.

All Liabilities of Corporate Debtor stand Extinguished after Approval of Resolution Plan: NCLT Yes Bank Limited vs Katerra India Private Limited CITATION:   2024 TAXSCAN (NCLT) 102

The National Company Law Tribunal (NCLT) of  Bengaluru bench has held that all claims including subject matter of ongoing arbitration proceedings will stand extinguished after the approval of the Resolution Plan under Insolvency Bankruptcy Code (IBC), 2016.

The two member bench of K. Biswal (Judicial Member) and Shri Manoj Kumar Dubey (Technical Member) observed that the claim and counterclaim of the parties is already a subject matter of the Arbitration proceedings. It was evident from various decisions of Apex Court and NCLAT that determination of the tenability/validity of a contractual agreement falls in the realm of a civil dispute and therefore outside the scope and jurisdiction of this Adjudicating Authority.

The tribunal held that approval of the resolution plan cannot be subjected to the ongoing arbitral proceedings between the parties. Once the plan is approved, all liabilities of the corporate debtor stand extinguished for which no proceedings can be initiated. The bench dismissed he plea of the applicant as it cannot be accepted.

IBC Provision not Mandates Treatment of Related Party at Par with unrelated Party: NCLAT upholds NCLT Order West Coast Paper Mills Ltd. vs Bijay Murmuria CITATION:   2024 TAXSCAN (NCLT) 115

The National Company Law Appellate Tribunal, Principal Bench while upholding the National Company Law Tribunal ( NCLT ) has held that the Insolvency Bankruptcy Code ( IBC ), 2016 does not provide Mandate treatment of the related party at par with an unrelated party.

It was observed by the tribunal that the resolution plan reflecting the status of the Appellant as a related party unsecured financial creditor has been approved by the CoC and Adjudicating Authority. So, the appellant has not been treated as equivalent to an equity shareholder. Further, the NIL amount has been given to the appellants on account of them being related parties. The two members comprising Justice Rakesh Kumar Jain (Judicial Member), Naresh Salecha and Indevar Pandey ( Technical Members ) held that the Committee of Creditors and Adjudicating Authority were well within their rights not to treat a related party unsecured creditor on par with secured financial creditors.

NCLT rejects CIRP Petition against Birla Global Corporate Private Limited Birla Cotsyn (India) Limited vs Birla Global Corporate Private Limited CITATION:   2024 TAXSCAN (NCLT) 14

The National Company Law Tribunal (NCLT) has recently rejected the Corporate Insolvency Plea filed by Birla Cotsyn (India) Limited through its liquidator Anil Goel seeking to initiate a Corporate Insolvency Resolution Process (CIRP) against Birla Global Corporate Private Limited.

The two-member tribunal Bench of Kuldip Kumar Kareer, Member (Judicial) and Anuradha Sanjay Bhatia, Member (Technical) observed that the Petitioner is itself a company undergoing Liquidation and the present Petition has been filed by the Liquidator of the Petitioner. The Petitioner Company went into liquidation vide order dated 24.09.2019. It was thereby opined that the proviso under Section 33(5) of the is mandatory in nature. Therefore, the Bench is of the considered view that the present Company Petition had been filed without obtaining the prior approval of the Adjudicating Authority, which was liable to be dismissed and dismissed the plea in a result.

NCLT admits Insolvency Plea of Go Airlines India, appoints IRP Go Airlines (India) Limited CITATION:   2024 TAXSCAN (NCLT) 141

A Special Bench of the National Company Law Tribunal (NCLT) at New Delhi has admitted the insolvency plea of Go Airlines India. The NCLT has appointed an Interim Resolution Professional (IRP) to manage the affairs of the company and find a resolution to its financial difficulties.

The Tribunal Bench of Justice Ramalingam Sudhakar and L N Gupta (Technical Member) also directed the IRP to ensure that retrenchment of employees is not resorted to as a matter of course. In any event, any such decision/event should be brought to the attention of this Adjudicating Authority. It is further ordered that the Suspended Board of Directors and ExManagement of the Corporate Applicant/Corporate Debtor shall extend all necessary support and cooperation to the IRP and his team in keeping the Corporate Applicant/Corporate Debtor as “a going concern” and running its operations/services smoothly.

NCLT Appoints Liquidator of Jet Airways (India) Limited STATE BANK OF INDIA vs JET AIRWAYS INDIA LIMITED CITATION:   2024 TAXSCAN (NCLT) 142

In a recent case, the National Company Law Tribunal ( NCLT ) appointed Mr. Satish Kumar Gupta, having Registration No. IBBI/IPA001/IP-P00023/2016-17/10056 as Liquidator of Jet Airways India Limited. The State Bank Of India, applicant filed application for fixing liquidator under section 60(5) & 7 of the Insolvency and Bankruptcy Code, 2016. The matter was for taking on record the Consent of the Liquidator to be appointed in the case of the Corporate Debtor, viz. Jet Airways India Limited, in view of the order passed by the Supreme Court.

A two member bench of Prabhat Kumar, Member ( Technical ) And Justice Virendrasingh Bisht, Member ( Judicial ) allowed the Interlocutory Application that Jet Airways (India) Pvt. Ltd., be liquidated, since, the Respondents are admittedly in gross violation of the approved Resolution Plan, and in any case, are admittedly unable to abide by the said Resolution Plan.

Application for Insolvency Proceedings against Corporate Debtor for Financial Debt and Default: NCLT admits Application MANISH ANEJA & ORS. vs M/s REVITAL REALITY PRIVATE LIMITED CITATION:   2024 TAXSCAN (NCLT) 106

In a recent case, the National Company Law Tribunal ( NCLT ) admitted the has application for insolvency proceedings against a corporate debtor for financial debt and default. The Tribunal initiated insolvency proceedings Corporate debtor noting that it failed to deliver possession of the residential units within the stipulated time frame.

It found that the Financial Creditors made payments to the Corporate Debtor as per the agreements which substantiated the existence of a debt. Further found that the Corporate Debtor’s failure to obtain the Occupancy Certificate within the stipulated time indicated a deficiency in services and confirmed the default. The two member bench of Mahendra Khandelwal (Judicial Member) and Dr Sanjeev Ranjan (Technical Member) observed that even considering any grace period mentioned in the agreement, the default occurred before the excluded period and did not solely fall within it. Therefore, the NCLT admitted the petition filed by the Financial Creditors and initiated CIRP against the Corporate Debtor.

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