Complete Case Digest on NCLT Rulings under the IBC

NCLT Approves ACME Cleantech's Resolution Plan For Reliance Big Private Limited

The Resolution Plan will be implemented and overseen by the RP and the CoC in accordance with Section 30(2)(d) of the Code. The Tribunal permitted ACME Cleantech Solutions to replace MKU Holdings in the implementation of the resolution plan.

While allowing the appeal, the tribunal held that Section 29A of the Code was not violated and the Resolution Plan complied with the requirements of Section 30(2) of the Code and Regulations 37, 38, 38 (1A), and 39 (4) of the Regulations.

No Right to Bankrupt Individual in Seeking Discharge u/s 138(1) of IBC: NCLT

According to the National Company Law Tribunal (NCLT), only the Bankruptcy Trustee may petition the Adjudicating Authority for the discharge of a bankrupt person under Section 138(1) of the Insolvency and Bankruptcy Code, 2016 (IBC). According to the Tribunal, the bankruptcy trustee's failure to make such an application does not give the bankrupt the right to do so on their own.

In accordance with section 138(1), the Bankruptcy Trustee should apply for the Bankrupt's discharge before the Adjudicating Authority, according to the New Delhi bench made up of Bachu Venkat Balaram Das (Judicial Member) and Atul Chaturvedi (Technical Member); however, the Bankrupt filed for a discharge application. The Bankrupt has no locus or authority to file or maintain such an application, hence the Tribunal decided that failure to file the application would not permit the Bankrupt to file it himself.

The Tribunal stated that the "Effect of Discharge" is covered in Section 139, which describes the consequences of a bankruptcy discharge order granted under Section 138. The tribunal ruled that the applicant or bankrupt should not be released from the bankruptcy process since doing so would impair the ability of the bankruptcy trustee to carry out their duties.

Vedanta Demerger in Trouble as NCLT Strikes Down Talwandi Sabo Power’s Scheme over Financial Non-Disclosure

The Mumbai Bench of the National Company Law Tribunal ( NCLT ) rejected the Scheme of Arrangement involving Talwandi Sabo Power Limited ( TSPL ), a wholly owned subsidiary of Vedanta Limited, citing financial non-disclosure.

Vedanta Limited, a diversified natural resources company, proposed a corporate restructuring plan to demerge its businesses into independent entities.

The two-member bench comprising Reeta Kohli ( Judicial Member ) and Madhu Sinha (Technical Member) found merit in SEPCO’s objections, observing that TSPL had recognized SEPCO as a creditor in past financial statements but omitted it from the demerger scheme. The exclusion of this liability impacted the valuation process and creditor voting rights.

The tribunal ruled that Vedanta’s non-disclosure was a serious procedural lapse, rendering the scheme non-compliant with legal requirements. The tribunal did not rule on the merits of the demerger itself but concluded that the misrepresentation of financial obligations justified the rejection of the scheme.

So, the tribunal dismissed TSPL’s demerger scheme, holding that the concealment of material financial information prejudiced creditors and public interest.

NCLT have No Jurisdiction to Direct ED to Defreeze Corporate Debtor's Account Frozen under PMLA: NCLT

The National Company Law Tribunal (NCLT), New Delhi has held that the NCLT, the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 (IBC/the Code), lacks the authority to order the Directorate of Enforcement (ED) to unfreeze a corporate debtor's account after it has been frozen in accordance with the Adjudicating Authority's directives under the Prevention of Money Laundering Act, 2002 (PMLA).

The panel ruled that when the Corporate Debtor's account was frozen in accordance with the Adjudicating Authority's instructions under the PMLA, it lacked the authority to order the ED to defreeze it. It concluded that only the authorities authorized by the aforementioned statute have the authority to handle issues pertaining to the attachment and freezing of accounts under the PMLA.

Corporate Debtor's Account Payments Post-CIRP Start without IRP Approval is a Moratorium Violation: NCLT

The National Company Law Tribunal, Mumbai bench has held that after the Corporate Insolvency Resolution Process (CIRP) has begun, any payments made from the Corporate Debtor's account without the Interim Resolution Professional's (IRP) consent are prohibited by Section 14 of the Insolvency and Bankruptcy Code, 2016 (the Code).

The bench, which was composed of Justice V. G. Bisht (Judicial Member) and Prabhat Kumar (Technical Member), noted that the checks were ante-dated to make it a payment made before the start of CIRP and were only given to Respondent Nos. 3 and 4 after the CIRP had begun. According to the Tribunal, Respondent No. 5 was paid on September 10 and 11, 2018, using RTGS and NEFT rather than checks. Therefore, it may be argued that the payments had already been made before CIRP started. Because they were made in violation of the moratorium, these payments could therefore be revoked.

Moratorium under IBC should not be misused to prevent Public Welfare Projects: NCLT

The Mumbai bench of the National Company Law Tribunal (NCLT) has held that the proposed acquisition by Mumbai Metropolitan Region Development Authority (MMRDA) did not violate the Insolvency Bankruptcy Code (IBC) moratorium as it was the larger public interest and was not stripping the Corporate Debtor of its assets unlawfully.

The tribunal comprising Ms. Reeta Kohli, Member (Judicial) and Ms. Madhu Sinha, Member (Technical) examined Section 14 of the IBC and stated that moratorium prevents legal proceedings, assets transfers or recoveries against the Corporate Debtor. However, the tribunal acknowledged that the Government of Maharashtra has the authority to acquire land for public purposes through the due process of law. In the following case, the land in question was required for a public infrastructure and any acquisition would be accompanied by compensation.

While dismissing the appeal, the tribunal concluded that the proposed acquisition by MMRDA did not violate the IBC moratorium as it was in the larger public interest and was not stripping the Corporate Debtor of its assets unlawfully. Consequently, the application was dismissed as premature.

Outgoing Liquidator Entitled to Minimum Fee of Rs. 2 Lakh as Per IBBI Regulations: NCLT

The National Company Law Tribunal (NCLT), Kochi bench has held that if the liquidator is replaced, he is entitled to a minimum fee of Rs. 2 lakh as per Schedule II of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 for the tenure he has worked.

The bench comprising Vinay Goyal (Judicial Member) and Madhu Sinha (Technical Member) observed that the remuneration of the Liquidator was not fixed.As a result, he was entitled to his fees in accordance with Regulation 34 B (2) of the IBBI (Insolvency Resolution Process for Corporate Persons), which stipulates that the fee of the resolution professional or interim resolution professional appointed on or after October 1, 2022, cannot be less than the fee for the period specified in clause 2 of Schedule II. The IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016's Schedule II states that the liquidator is entitled to Rs. 2 lakhs every month.

The bench viewed that SCC rejected the fee proposed by the Professionals with a 93.37% vote without due application of mind and appointed Sreenivasan P.R. as the Liquidator. It fixed the remuneration of the outgoing Liquidator at Rs. 2 lakh per month for the period he has served, in line with the Schedule fee prescribed by the IBBI for the CIRP. The Tribunal also approved professional fees for the Chartered Accountant and for secretarial assistance.

In Absence of Fraud or Misrepresentation, Order Admitting CIRP cannot be Recalled: NCLT rules in favour of Canara Bank

The National Company Law Tribunal, Mumbai bench partially granted Canara Bank's interim plea concerning the CIRP of Carnival Techno Park Pt. Ltd (CTPPL). Although Canara Bank's request to recall CIRP admission was denied by the Tribunal, the forensic audit was permitted to look into the validity of the RCFL claim and its classification as secured financial debt.

The bench was composed of Prabhat Kumar, a member of the technical division, and Justice V.G. Bisht, a member of the judicial division, viewed that since NCLT had the power to issue such an order under Section 7 of the law, the decision to admit CTPPL into CIRP was not without jurisdiction.

The financial accounts provided by Canara Bank did not unequivocally demonstrate that RFCL owed no money to CTPPL at the time of CIRP admission, and there was insufficient proof of fraud or deceit to support reversing the decision. The bank's attempt to get the CIRP order recalled was denied. However, the tribunal permitted the forensic audit, adding that the RP was instructed to take the appropriate legal measures if it turned up evidence of fraudulent activity.

Imposition of Moratorium Prevents Pre-CIRP Tax Dues From Being Recovered During CIRP: NCLT

While disposing of an application filed by the Resolution Professional ( RP ) against the Commissioner, Greater Hyderabad Municipal Corporation ( GHMC ),the Hyderabad bench of the National Company Law Tribunal ( NCLT ) held that once the CIRP has commenced, proceedings for property tax arrears cannot be initiated against the Corporate Debtor. The tribunal also emphasized the overriding effect of the IBC, 2016, and upheld that the moratorium under section 14 bars all types of coercive action during the CIRP.

The Adjudicating Authority consisting of Dr. Venkata Ramakrishna Badrinath (Member - Judicial) and Shri Charan Singh (Member - Technical), held that Section 14 prohibits any action to foreclose, recover, or enforce any security interest created by the Corporate Debtor with respect to its property while the moratorium has been imposed. The panel underlined that all attempts to collect past-due amounts stop once a corporate debtor is admitted into CIRP. Creditors must submit a properly formatted claim to the resolution expert in order to recover such obligations.

Petition u/s 7 of IBC against Corporate Guarantor Not allowable without Proper Establishment of Valid Delivery of Guarantee Invocation Notice: NCLT

The Mumbai bench of the National Company Law Tribunal (NCLT) has ruled that unless the receipt of the demand-cum-guarantee invocation notice is correctly demonstrated, an insolvency action under Section 7 of the Insolvency and Bankruptcy Code, 2016 (the Code) against the corporate guarantor of the corporate debtor cannot be granted.

The bench comprising of Reeta Kohli (Judicial Member) and Madhu Sinha (Technical Member) observed that since the guarantee is being invoked on demand in this instance, the default date would only be January 1, 2024, provided that the notice of invocation is legitimate under the law.

While dismissing the appeal, the bench held that “Since the demand notice was never purportedly delivered to the Corporate Guarantor , the corporate guarantee never got invoked by the financial creditor in terms of the guarantee agreement which forms the basis of this petition, the default by corporate guarantor cannot be established.”

Any Default Falling Within Section 10-A of IBC Must be Excluded from Total Outstanding Debt: NCLT

In a recent case, the Hyderabad bench of the National Company Law Tribunal ( NCLT ) while dismissing the petition under section 9 of Insolvency Bankruptcy Code ( IBC ), 2016, held that the default amount that falls within the Section 10-A period is excluded from the calculation of total outstanding debt.

The NCLT bench, which is made up of Members Sri Rajeev Bhardwaj (Judicial) and Sri Sanjay Puri (Technical), emphasized that the clause was put in place to help corporate borrowers amid the COVID-19 pandemic's economic downturn. The entire amount of outstanding debt must therefore be calculated without including any defaults that occurred during this time. The majority of the invoices went into default during this time.

Corporate Debtor Not Barred From Raising Pre-Existing Dispute Even in absence of reply within period u/s 8 of IBC: NCLT

The National Company Law Tribunal (NCLT) Mumbai has held that failure to respond to a demand notice within 10 days under Section 8 of the Insolvency and Bankruptcy Code, 2016 (the Code) does not bar the Corporate Debtor from asserting the existence of a pre-existing dispute especially when such dispute was raised before the issuance of the demand notice.

The Tribunal while dismissing the petition, held that the applications filed by the corporate debtor before various fora and exchanged emails confirms the existence of a pre-existing dispute. Since these disputes arose before the filing of the present petition and the operational creditor's demand notice, the operational debt cannot be considered undisputed.

Threshold Limit For Initiating Insolvency Process Against Personal Guarantors Shall be same of Corporate Debtor: NCLT

The National Company Law Tribunal (NCLT) Chennai has held that the threshold limit for initiating the Personal Insolvency Resolution Process (PIRP) under Sections 94 or 95 of the Insolvency and Bankruptcy Code, 2016 (Code), shall be the same as that for a Corporate Debtor under Section 4 of the Code, i.e., ₹1 crore.

The bench of Shri. Sanjiv Jain (Judicial Member) Shri. Venkataraman Subramaniam (Technical Member) ruled that the threshold limit for initiating insolvency proceedings against personal guarantors under Sections 94 and 95 of the Code shall be the same as that for Corporate Debtors under Section 4 of the Code, i.e., ₹1 crore. Based on the above, it held that the defaulted amount does not meet the threshold limit therefore, the application under section 94 of the code cannot be maintained.

The Tribunal, while dismissing the petition, further held that the Applicant also failed to send notice to all financial creditors and the corporate debtor as required under Rule 6(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019.

Advance Payment Received by Corporate Debtor for Future Supply of Goods is Operational Debt Under IBC: NCLT

The National Company Law Tribunal ( NCLT ) Mumbai has held that the payment received in advance by the Corporate Debtor for the future supply of goods constitutes an operational debt.

According to the NCLT, the applicant fixed the deficiency on October 16, 2024, by serving an advance copy of the petition in accordance with Rule 6(2) of the IBC Rules, 2016. In contrast to the confessed debt above the threshold limit under section 4 of the law, the corporate debtor has only partially contested the claim. Moreover, section 8(2) of the code does not prohibit adjudication because of the existence of a dispute listed on the NeSL.

While allowing the appeal, the Tribunal concluded that an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code) can be admitted if it exceeds the threshold limit prescribed under Section 4 of the Code.

Liquidator must not Restrict Sale of Corporate Debtor's Assets through Private Sale to Single Buyer, Should Attract Multiple Buyers: NCLT

The National Company Law Tribunal (NCLT) Mumbai bench has held that the Liquidator must not restrict the private sale to a single buyer but should strategize to attract the maximum number of buyers to maximize realization from the asset sale.

While dismissing the tribunal held that to solicit bids above Amrex Marketing Private Ltd.'s offer, the liquidator will publish a new notice of sale in two extensively read publications. Amrex's bid will serve as the anchor bid when the Swiss Challenge Method is applied. Ten percent of the offer value must be submitted as EMD by interested bidders. Amrex Marketing Private Ltd. may choose to match a better bid if one is received.

Land Sold by Third Parties to Corporate Debtor Cannot be Held Liable u/s 66 of IBC: NCLT

The National Company Law Tribunal (NCLT), New Delhi bench has held that third parties who sold land to the Corporate Debtor cannot be said to fall within the ambit of expression “any persons who were knowingly parties to the carrying on the business of the Corporate Debtor” as used in Section 66 of the Insolvency and Bankruptcy Code, 2016 (“Code”).

The bench of Justice Ashok Kumar Bhardwaj (Judicial Member) and Anil Raj Chellan (Technical Member) held that third persons who sold their land to the Corporate Debtor cannot be said to fall within the ambit of expression “any persons who were knowingly parties to the carrying on the business of the Corporate Debtor” as used in Section 66 of the Code. It observed that an application under the Section may be maintainable against the persons responsible for managing the Corporate Debtor.

Relief to SBI, Absence of Creditor's Name in Balance Sheet Does Not Vitiate Acknowledgment of Debt: NCLT

In a ruling in favour of State Bank of India, the National Company Law Tribunal (NCLT), Kolkata, special bench observed that the absence of the financial creditor's name in the corporate debtor's balance sheet does not vitiate the acknowledgment of debt if the figures shown are consistent with the debt acknowledged in the balance sheet.

The bench, consisting of Smt. Bidisha Banerjee (Judicial Member) and Shri Sameer Kakar (Technical Member), noted that the corporate debtor unambiguously acknowledged debt and default by admitting that an OTS proposal was presented to the financial creditor.

Although SBI was not specifically mentioned in the balance sheets, the bench noted that the values displayed aligned with the debt that was admitted on the balance sheet. The bench decided that the recognition of debt in the balance sheet and OTS for CIRP purposes lawfully extends the limitation under Section 18 of the Limitation Act. The application for CIRP was accepted after the adjudicating body noted that all debt, default, limitation, and threshold requirements were satisfied.

Application u/s 9 of IBC Based on Arbitral Award Cannot be Admitted After 3 Yrs from Date of Award: NCLT

The National Company Law Tribunal (NCLT) Mumbai bench has ruled that, in accordance with Article 137 of the Limitation Act, 1963 (Limitation Act) read with Section 238A of the Code, an application submitted under Section 9 of the Insolvency and Bankruptcy Code, 2016 (Code) based on an arbitral award rendered in favor of the operational creditor cannot be admitted after three years from the date of the award.

The bench of Shri K. R. Saji Kumar (Judicial Member) and Shri Sanjiv Dutt (Technical Member) observed that the current application was submitted on March 23, 2022, after the three-year statute of limitations stipulated in Article 137 of the Limitation Act. As a result, the Operation Creditor's argument that Article 136 of the Schedule to the Limitation Act applies in this particular case cannot be recognized because Code proceedings are not related to the execution of decrees.

While rejecting the appeal, the bench found that the MSME Council Awards were passed in 2011 and had attained finality in 2013, whereas the present Application was filed on 23.03.2022. Hence, the Application is clearly hit by Section 238A of the Code read with Article 137 of the Limitation Act.

Insufficiently Stamped Agreements Not a Bar to Application for CIRP u/s 7 of IBC: NCLT

The National Company Law Tribunal (NCLT), Bengaluru Bench, ruled that insufficiently stamped agreement is not a bar to admission of petition filed under Section 7 of the IBC, 2016, read with Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.

The tribunal consisting of Shri. Sunil Kumar Aggarwal, Member (Judicial), and Shri. Radhakrishna Sreepada, Member (Technical) observed that the respondent's argument that the petition is precluded by the limitation is unsupportable because the parties mutually extended the payback date.

The tribunal discovered that the corporate debtor's financial sheet acknowledged the loan amount. Taking into account the problem of inadequately stamped and improperly attested debt. The tribunal cited the NCLT Mumbai Bench decision in the case of Axis Trustee Services Limited vs Reliance Infrastructure Consulting & Engineers Pvt. Ltd., the bench held that it is a well settled law that insufficiently stamped/ unstamped agreements do not present a bar to a Section 7 application.

GST Dept‘s Claims become Invalid on approval of Resolution Plan by NCLT: Allahabad HC

The Allahabad High Court has held that the claims of the Goods and Services Tax Department become invalid on approval of a resolution plan by the National Company Law Tribunal (NCLT).

The Court relied on its judgment in M/S NS Papers Limited And Another Vs. Union of India Through Secretary and Others where it had held that “The law cannot be read in a manner wherein the basic structure of the Code is breached by hindering the flow of the same by creation of roadblocks and dams – the underlying principle of the Code is to give a fresh start to the Resolution Applicant. Any new liability being fastened after the approval of the Resolution Plan would inherently and palpably be illegal and go beyond the Lakshman Rekha of the Code.”

The bench of Justices Shekhar B. Saraf and Dr. Yogendra Kumar Srivastava held that it is a well-established principle that all other creditors are prohibited from bringing their claims after the NCLT has approved the Resolution Plan because doing so would cause the resolution process to be disrupted.

Priority Claim by Secured Creditors After Relinquishing Security Interest not possible During Distribution of Sale Proceeds of Secured Assets: NCLT

The Cuttack bench of the National Company Law Tribunal (NCLT) dismissed an application filed by the liquidator seeking directions for distribution of the balance sale consideration and for extending the time for distribution of sale proceeds under Section 53 of the IBC Code.

The Tribunal, which was made up of Banwari Lal Meena (Member (Technical) and Justice Deep Chandra Joshi (Member (Judicial)), ruled that the secured creditors could not prioritize other similar creditors when the sale proceeds of the secured assets were being distributed after giving up their security interests.

The bench ruled that “once a Secured Creditor relinquishes its security interest to the liquidation estate, it cannot seek priority among other secured creditors on the basis of the charge and is only entitled to receive proceeds from the sale of assets in the manner specified under Section 53 of the Code.”

Operational Creditor cannot initiate Insolvency Proceedings When Complaints Regarding Defects Remain Unresolved: NCLT rules against Schneider Electric India Pvt. Ltd.

In a ruling against Schneider Electric India Pvt. Ltd., the National Company Law Tribunal (NCLT), New Delhi bench has held that an Operational Creditor cannot initiate insolvency proceedings against the Corporate Debtor for non-payment, when complaints regarding defects in products remain unresolved.

The Tribunal ruled that when there is a legitimate pre-existing dispute regarding the quality of goods and services, particularly when those issues were brought up before the demand notice was issued, the Operational Creditor cannot begin insolvency proceedings under Section 9 of the IBC.

Payment Made on Specific Invoice not adjustable Against Back-Dated Invoices: NCLT rejects petition filed u/s 9 of IBC

While rejecting a petition filed under section 9 of the Insolvency & Bankruptcy Code, 2016 (the code), the New Delhi bench of the National Company Law Tribunal (NCLT) held that when a payment is made by the Corporate Debtor against a specific invoice raised by the Operational Creditor, it can't be adjusted against back-dated invoices.

The bench of Shri Manni Sankariah Shanmuga Sundaram (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member),noted that the Corporate Debtor had paid for the particular invoices, which the Operational Creditor had correctly acknowledged, and that the Operational Creditor had raised payment due against some invoices.

It further stated that as the payments were made by the Corporate Debtor against invoices with precise dates, the Operational Creditor's claim that these payments were adjusted against back-dated invoices using the First-In-First-Out technique is rejected. Therefore, once payment for a particular invoice has been paid, it cannot be applied to any other outstanding invoices.

DRT Order Setting aside NPA Classification Does not Negate Existence of Financial Debt: NCLT

The New Delhi bench of the National Company Law Tribunal (NCLT) ruled that the existence of financial debt or the occurrence of default—the two main requirements for admitting a Section 7 petition under the Insolvency & Bankruptcy Code ("the code")—are not negated by a Debt Recovery Tribunal (DRT) order that invalidates an NPA classification.

The New Delhi bench of the National Company Law Tribunal (NCLT) ruled that the existence of financial debt or the occurrence of default—the two main requirements for admitting a Section 7 petition under the Insolvency & Bankruptcy Code ("the code")—are not negated by a Debt Recovery Tribunal (DRT) order that invalidates an NPA classification.

The tribunal accepted the Section 7 petition and determined that the two main requirements for accepting a Section 7 petition under the IBC are the presence of financial debt or the occurrence of default.

Income Tax Dept cannot be a Secured Creditor in Liquidation Proceedings: NCLT Disposes Canara Bank’s Application

The National Company Law Tribunal, Chennai bench, disposed of the application filed by the Canara Bank of India under Section 60(5) of the IBC and held that the income tax department's claim cannot be treated as a secured creditor and hence cannot be given preference by sidelining the process under section 53 of the IBC, 2016.

The bench comprising Shri Jyoti Kumar Tripathi (Member-Judicial) and Shri Ravichandran Ramasamy (Member-Technical) observed that the ratio established in the Rainbow Paper Mills case does not apply in this instance since the income tax obligations are sovereign debts and cannot be classified as secured debt because the attachment was performed in order to collect the debt.

The bench further pointed out that the Income Tax Department appears to be an operational creditor because the claim was submitted on Form B. The bench observed that, as per the ruling of State Bank of India vs. The Tax Recovery Officer, Income Tax Department, the income tax department cannot claim priority over the secured creditors based on an attachment. The bench finally held that the liquidator erred in treating the Income Tax Department as a secured creditor, and it also failed to consider the ruling of Paschimanchal Vidyut Vitran Nigam Ltd.

CIRP Cannot be Shield to Corporate Applicant to avoid Legally Recoverable Government Obligations: NCLT

The National Company Law Tribunal New Delhi Bench held that the Corporate Applicant cannot take the shield of Corporate Insolvency Resolution Process (CIRP) to avoid the legally recoverable government dues.

The Tribunal ruled that the money owed to DTTDC cannot be ignored because it includes government obligations such as property taxes, license fees, and concession charges. The applicant decided to file for CIRP even though the List of Assets and Liabilities indicates assets of Rs. 5.57 crores, which is enough to partially satisfy the dues.

The Tribunal came to the conclusion that, rather than a true resolution of insolvency, the purpose of filing the Section 10 application seems to be to avoid lawfully recoverable government dues. As a result, the application may be rejected on the grounds that it attempts to abuse CIRP in order to evade paying taxes.

Demand Notice u/s 8 of IBC Sent to Wrong Address Invalidates Insolvency Petition: NCLT

The National Company Law Tribunal (NCLT) held that if a demand notice under section 8 of the code is not sent to the correct address, it does not meet the mandatory requirements of law and invalidates the insolvency petition.

The bench of Shri. Rajeev Bhardwaj (Judicial Member) and Shri Sanjay Puri (Technical Member) held that Section 8(1) requires that a demand notice be properly delivered to the Corporate Debtor before filing a petition under Section 9 of the Code. In this case, although the Operational Creditor attempted service via registered post and email, the notice was sent to an incorrect address and the pin code mentioned was inaccurate. This discrepancy cast doubt on the validity of the service.

Advance Payments made by Receiver of Goods is also an Operational Creditor: NCLT

The National Company Law Tribunal (NCLT), Chandigarh bench held that the receiver of goods who has made advance payments for the goods purchased is also an Operational Creditor.

The division bench of Shri Harnam Singh Thakur (Judicial Member) and Shri Ashish Verma (Technical Member) that the Corporate Debtor from time to time has admitted to have received funds from the Operational Creditor in advance against the supply of products and amount in excess of Rs.1 crore are still lying with the Corporate Debtor even after all the reconciliation as available on the records are taken into account.

The Tribunal admitted the section 9 petition holding that the amount admitted to be paid by the Corporate Debtor to the Operational Creditor meets the threshold limit for initiating insolvency proceedings.

Establishment of Financial Debt does not precluded due to Absence of Formal Written Agreement: NCLT

The National Company Law Tribunal (NCLT) held that the presence of a financial debt is not negated by the lack of a written loan arrangement.

The Tribunal reaffirmed that the presence of a financial debt is not negated by the lack of a formal loan arrangement. To prove a claim under Section 5(8) of the IBC, supporting documentation such as tax filings (Form 26AS), TDS deductions, ledger entries, financial statements, and written acknowledgments are adequate.

The Tribunal concluded that the information in the file amply demonstrated the existence of financial debt and the Corporate Debtor's default on it. It came to the conclusion that every requirement outlined in Section 5(8) of the IBC had been met. As a result, the petition was approved, and CIRP was started against the corporate debtor for ₹2,70,33,417 in default.

Corporate Debtor Cannot Deny Transaction Which was once Approved : NCLT

The National Company Law Tribunal Bench affirmed a Section 9 petition brought under the Insolvency & Bankruptcy Code, 2016 ("the Code"), holding that the Corporate Debtor cannot later reject a wage structure adjustment once it has granted its consent.

According to the email exchanges, the Tribunal observed that until a demand notice was sent in accordance with Section 8 of the Code, the Corporate Debtor did not seem to have objected to the invoices. The Tribunal ruled that the Corporate Debtor could not later contest the validity of the identical wage terms for later months after accepting the December 2021 invoice with the updated salaries.

As a result, the Tribunal maintained the Section 9 petition and determined that the Operational Creditor was owed ₹2,28,65,774 in operational debt.

Resolution Plan Approved by 83.46% Creditors Cannot Be Challenged by Lone Homebuyer u/s 60(5) of IBC

The Delhi bench of the National Company Law Appellate Tribunal (NCLAT) held that the resolution plan approved by 83.46% of creditors cannot be challenged by a lone homebuyer under Section 60(5) of the Insolvency andBankruptcy Code (IBC), 2016.

The adjudicating authority noted that “ the applicant being part of a class of homebuyers, the majority of whom have already voted in favour of the resolution plan of respondent No. 2, has no independent locus standi to raise objections with regard to the manner of conduct of CIRP, and hence, the present IA is liable to be dismissed on this ground alone.”

The bench noted that in the present case, 83.46% of the creditors in the class have voted in favour of the plan, and thus the adjudicatory authority was right.

Application u/s 7 of IBC Admissible even in Absence of NeSL Certificate if Loan Disbursal & Default Proved with Relevant Documents : NCLT allows application of Canara Bank

In a ruling that admits the application of Canara Bank, the National Company Law Tribunal (NCLT) has held that even in the absence of a NeSL certificate, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 can be admitted if the disbursal of the loan amount and occurrence of default are established through other reliable and relevant documents.

The Tribunal came to the conclusion that the application was filed within the allotted time frame and that it was established by the review of the record and the documents the applicant had cited that there had been a financial debt for which the corporate debtor had defaulted. As a result, the application made in accordance with section 7 of the Code merits admission.

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