Case BriefsSupreme Court

Supreme Court: The bench of L. Nageswara Rao and BR Gavai*, JJ has held that the proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) cannot continue once the CIRP has been initiated and the moratorium has been ordered as per the Section 14(1)(c) of the Insolvency and Bankruptcy Code, 2016 (IBC).

The Indian Oversees Bank had extended certain credit facilities to the Corporate Debtor. When the Corporate Debtor failed to repay the dues and the loan account became irregular, it came to be classified as “Non¬Performing Asset” (NPA).

The Bank issued a Demand Notice under Section 13(2) of the SARFAESI Act, calling upon the Corporate Debtor and its guarantors to repay the outstanding amount due. Upon failure to do so, the Bank, under Section 13(4) of the SARFAESI Act, took symbolic possession of two secured assets of the Corporate Debtor and Corporate Guarantor, mortgaged exclusively with it. E-auctions were also held to recover the public money availed by the Corporate Debtor.

Later, NCLT, passed an order under Section 10 of the IBC, after which the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor commenced. A moratorium under Section 14 of the IBC was notified and an Interim Resolution Professional (the IRP) was also appointed.

It is important to note, that 75% of the sale consideration from E-Auctions was received before initiation of the CIRP. The remaining 25% was recovered subsequently. Hence, it was argued that merely because a part of the sale consideration was received subsequently, it could not affect the sale. It was also argued before the Court that the CIRP was initiated only to stall the SARFAESI proceedings.

It was submitted before the Court that Section 14(1)(c) of the IBC interdicts any action to foreclose, recover or enforce any security interest including any action under SARFAESI. However, it does not undo actions which have already stood completed.

The Court, however, noticed that, in the case at hand, the balance amount was accepted by the Bank on 8th March 2019. The sale stood completed only on 8th  March 2019. Admittedly, this date falls much after 3rd January 2019, i.e., on which date CIRP commenced and moratorium was ordered.  Hence, the Court refused to accept the argument of the Bank that the sale was complete upon receipt of the part payment.

The Court explained that under Section 14(1)(c) of the IBC, which has overriding effect over any other law, any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the SARFAESI Act is prohibited.

Considering that IBC is a special Code, its provisions have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

It is thus clear that after the CIRP is initiated, there is moratorium for any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the SARFAESI Act. It is clear that once the CIRP is commenced, there is complete prohibition for any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property. The words “including any action under the SARFAESI Act” are significant.  The legislative intent is clear that after the CIRP is initiated, all actions including any action under the SARFAESI Act to foreclose, recover or enforce any security interest are prohibited.

[Indian Overseas Bank v. RCM Infrastructure ltd., 2022 SCC OnLine SC 634, decided on 18.05.2022]

*Judgment by: Justice BR Gavai

For Bank: Senior Advocate Tushar Mehta

For aution purchasers: Senior Advocate C.S. Vidyanathan

For Respondents: Senior Advocate K.V. Viswanathan and Advocate Aditya   Verma

National Company Law Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, Kolkata Bench I: The Bench of Rajasekhar V.K., judicial member and Balraj Joshi, technical member has held that no fresh legal proceeding can be initiated, including personal debts, and all pending legal action will be stayed during the interim moratorium period, as per Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC). The interim moratorium period commences from the date of filing of the application and continues until the application is rejected or admitted by the Adjudicating Authority.

EMC was admitted into Corporate Insolvency Resolution Process (CIRP) on 12-11-2018 and an Interim Resolution Professional (RP), Rakesh Kumar Agarwal, was appointed. On 06-02-2019 one Kannan Tiruvengadam was appointed as Resolution Professional, and the resolution was approved through order dated 21-10-2019.

In the present case, State Bank of India (‘SBI’) and Industrial Financial Corporation of India (‘IFCI’) filed two separate applications under Section 95 and Section 95(1) of the IBC for initiation of insolvency against Manoj Toshniwal (Personal Guarantor of EMC, EMC being the Corporate Debtor) on 09-07-2021 and 29-09-2021 respectively. In the application filed by SBI, a coordinate bench of the NCLT appointed a Resolution Professional (‘RP’) who was directed to file a report under Section 99 of IBC, by order of 14-01-2022 (‘SBI Order’). On 21-02-2022, the order was modified and a new RP was appointed. The NCLT also heard the application filed by the IFCI and appointed a different RP and directed him to submit the report vide order dated 17-02-2022 (‘IFCI Order’).

Meanwhile, Manoj Toshniwal also filed an application under Section 60(5) of IBC for setting aside the IFCI Order contending that by the virtue of the SBI Order, an interim moratorium period already commenced against the creditors ruling out initiation of any legal action against the personal guarantor with respect of any debt. Hence, the proceedings initiated by the IFCI must be stayed.

Analysis and decision

NCLT made the following observations-

  1. Interim moratorium commences from the date of filing of application under Section 95 of IBC and ceases to have effect on admission and rejection of the application from the same date. During this period, all legal actions pending in respect of any debt should be stayed and creditors cannot initiate any fresh legal action in respect of any debt.

  2. The Bench also observed that the term “and” in Section 96 IBC should be read as a conjunctive clause. Meaning, interim moratorium commences against all debts- including his personal debt, and creditors are barred from initiating any legal proceedings.

  3. It was concluded that the interim moratorium against the personal guarantor commenced from 09-07-2021 as the application by SBI was filed on the same and the application by IFCI was filed after that date, i.e. on 29-09-2021.

Hence, the application made by Manoj Toshniwal, personal guarantor of corporate debtor was allowed by this Bench. As a result, the application by IFCI was stayed and the RP appointed on 17-02-2022 by the virtue of IFCI Order was discharged of his duties.

[IFCI Limited v. Manoj Toshniwal, 2022 SCC OnLine NCLT 172, decided on 07-06-2022]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Appellate Tribunal, New Delhi: The Coram of  Ashok Bhushan, J (Chairperson), Shreesha Merla (Technical member), and Naresh Salecha (Technical member) has held that regardless of the delay made in filing the claims by homebuyers, a resolution professional should include the corporate debtor’s liabilities as mentioned in the Memorandum of Information(MoI).

Facts of the case and issue raised

An appeal was filed against the Order passed by the Adjudicating Authority (NCLT, New Delhi).

The observation of the Adjudicating Authority was that the claims of the homebuyers have been filed after a gap of eight months from the last date of the submission of the claim and therefore the claims cannot be admitted. Further, it was stated that the Committee of Creditors (CoC) had already approved the resolution plan.

The following issues were raised-

  • Whether the Resolution Professional was obliged to include the details of Homebuyers as reflected in the records of the Corporate Debtor in the Information Memorandum, even
    though they have not filed their claim before the Resolution Professional within time?
  • Whether Resolution Applicant ought to have also dealt with Resolution Plan regarding Homebuyers, whose names and claims are reflected in the record of the Corporate Debtor, although they have not filed any claim?

Submissions of the counsel

Appellant’s Counsel submitted that even though they could not file their claims within the time prescribed, details of their allotment and payments made by them already existed in the records of the Corporate Debtor. It was further submitted that it was the duty of the Resolution Professional to inform the Appellants to file their claims and in case the financial creditors were not able to do so the Resolution Professional could have included their claims in the Information Memorandum prepared under Regulation 36 of Corporate Insolvency Resolution Process (CIRP) Regulations as liabilities to Corporate Debtor.

Respondent’s Counsel submitted that Appellants did not file their claims within the time and filing of their claims was also beyond 90 days as provided by Section 12 of the Insolvency and Bankruptcy Code, 2016 (IBC) therefore no error was committed by Resolution Professional by not including the names of the Appellants in the ‘list of creditors’.

Analysis and decision

Firstly, the Coram stated that when the allotment letters are issued to the Homebuyers against the payment made, the real estate company is under the obligation to provide possession of the houses along with other attached liabilities.

Further, the Coram opinioned that the liability towards Homebuyers who had not filed their claim exists and are required to be included in the Information Memorandum. Non- consideration of such claims in the information memorandum can lead to inequitable and unfair resolutions.

Therefore, the Coram directed the resolution professional to submit the details of homebuyers, which are mentioned in the records of the corporate debtor including their claims, to the resolution applicant, based on which the resolution applicant shall prepare an addendum to the resolution plan, which may be placed before the CoC for consideration.

[Puneet Kaur v. K.V. Developers (P) Ltd., 2022 SCC OnLine NCLAT 245, dated- 01-06-2022]

Advocates before the tribunal

For Appellant(s): Mr. Mahesh Kumar and Ms. Simran Soni, Advocates.
For Respondent: Mr. Abhinav Vasisht, Sr. Advocate with Mr. Rakesh Kumar Bajaj and Mr.Harish Taneja, Advocates, Mr. Nitin Kumar and Mr. Gagan Gulati, Advocate.
Mr. Sumesh Dhawan and Ms. Vatsala Kak, Advocates.

Op EdsOP. ED.

At the beginning of 2016, the law of insolvency and bankruptcy in India could be found in a bric-a-brac of statutes.[1] They related to differing legal entities and drove parties to varying forums for their enforcement. In its seminal report, the Government appointed Bankruptcy Law Reforms Committee criticised this “highly fragmented framework”. It called for a “deeper redesign” of the entire insolvency resolution process, rather than working on strengthening any single piece of it.[2] The Insolvency and Bankruptcy Code, 2016[3] the result of the Committee’s recommendations, was, by any standards, a unique and remarkable piece of legislation.

The Code’s showpiece mechanism was the corporate insolvency resolution process (immediately reduced by lawyers to its acronym “CIRP”). The CIRP was originally intended as a direct attack on the country’s massive corporate non-performing assets (NPAs). The way it worked was simple – bids would be called for a bankrupt company, and the person making the “best” bid (invariably the largest monetarily) would, after getting the nod from the company’s creditors and the NCLT, take over its affairs, and the old management would be ousted.

One would think, given the centrality of bidders and their deep pockets to the success of the new law, that they would be lavished and fawned upon at every turn, have their every need attended to with alacrity and swiftness, and veritably sped to the point where they would open their purse strings and pay up. One would be triply wrong. Not only do resolution applicants (IBC legalese for bidders) have no legal rights till their plan for the company is approved, they also cannot leave the process once they enter it, and may in some instances even be forced into a “fight to the death” with other bidders. What follows is an appraisal of the indelicate and short-sighted handling of resolution applicants since the Code was enacted.

The enactment of Section 29-A

One of the main prejudices that the Bankruptcy Law Reforms Committee wanted to dispel was that all default involves malfeasance. The Committee thought that this thinking was the hallmark of a “weak insolvency regime”, and the new law ought to recognise that some business plans will always go wrong, and this was no reason to disincentivise risk-taking. “If default is equated to malfeasance, then this can hamper risk-taking by firms”, said the Committee, in a section titled “Drawing the line between malfeasance and business failure”.[4]

The Code was structured to give the company’s earlier management inducement to share its knowledge of the company, with the promise that if it could convince the company’s creditors, it might resolve the company’s loan default and jump back in the saddle and run its business anew.

Section 29-A[5] changed all that. In his speech to the Lok Sabha, the Finance Minister railed against the fact that “the man who created the insolvency pays a fraction of the amount and comes back into management”.[6] This, he said, was “morally unacceptable”, and so we needed Section 29-A, which disqualifies inter alia any person who has an account which is classified as an NPA from submitting a resolution plan to the committee of creditors. With the legislation of Section 29-A, the line between malfeasance and business failure was obliterated. A host of potential resolution applicants were turned away at the doorstep.

An added shortcoming of Section 29-A is that ever since it was introduced, it has been the source of torrential litigation between rival resolution applicants. In their eagerness to eliminate competitive bids, bidders spiritedly term each other as being in violation of Section 29-A. “Like wolves in long winters,” wrote Dr Samuel Johnson in an 18th-century essay, “they are forced to prey upon one another.[7]

The long winter of the IBC began with Section 29-A.

The elimination of legal rights

In Essar Steel case,[8] the Supreme Court upheld the principle that a resolution applicant has no vested right that its plan be considered. Elaborating on the consequence of such a principle, the court observed that a resolution applicant had no right to challenge the rejection of its plan by a resolution professional, or even by the Committee of Creditors when the plan does not receive 66% of the Committee’s votes.[9] This was a reasonable interpretation, and obviously intended to slice away some of the cancerous litigation that has afflicted the Code.

But in Bank of Baroda v. MBL Infrastructures Ltd.,[10] even this salutary principle was taken to an extreme. The issue was the applicability of Section 29-A to a bidder that had submitted its bid before the provision had been introduced. The Court held that this did not matter, “the concern of the Court is only from the point of view of two entities viz. corporate creditors and corporate debtors”. The bidder, the Court observed, “has no role except to facilitate the process”. “No role except to facilitate the process” is, like George Orwell’s “All animals are equal, but some are more equal than others,” a paradox that reveals more than it intends to. Surely, the entity tasked with facilitating the process has the largest role in it?

The sealing of escape routes

When a resolution applicant submits its bid, it should ordinarily expect a quick, two-step appraisal – first by the Committee of Creditors and then by the NCLT. Instead, the CIRP often gets derailed by side issues for unreasonable lengths of time, and the bidders find themselves having to pay last year’s price for a company that has depreciated rapidly since.

In Ebix Singapore (P) Ltd. v. Educomp Solutions Ltd.[11] the Supreme Court simultaneously considered three cases, in each of which the resolution applicants sought to withdraw their bids after waiting for the NCLT’s consent for over a year after the Committee of Creditors granted its approval. (Incidentally, the IBC prescribes a limit of 330 days for the completion of the entire CIRP.)[12] One of the resolution plans even came with a self-imposed validity period of six months.[13] But the Supreme Court refused to release the resolution applicants, however, long they may have languished in the waiting room, maintaining that the IBC did not provide for such a procedure.[14]

The result of such a coercive process is that the resolution applicants will naturally discount the costs of delay and uncertainty when making their bids. Who would bid the full price for a company that may wither and decay for conceivably over a year before its management gets transferred? Worse still, an unascertainable number of potential resolution applicants may decide that the IBC process is not worth the bother, and never bid at all.

In conclusion

The corporate insolvency resolution process is like a Roman galley – it depends upon several arms rowing in the same direction as one. Resolution applicants sit perched at the head of the ship; on them rests the success of the journey. They cannot be made into castaways.

It is in everybody’s interest that the bidders are given every incentive to put in their bids, that their rights are respected, and that they are not made to pay for an unreasonably delayed process. As things stand, they can be forgiven for giving the IBC a pass.

Advocate, Bombay High Court. Author can be reached at

[1] For the resolution of insolvencies in companies, the law provided two alternatives: “winding up” under the Companies Act, 1956 and reconstruction under the Sick Industrial Companies (Special Provisions)  Act, 1985 (SICA).

[2] The Report of the Bankruptcy Law Reforms Committee,  Para 3.3.1.

[3] Insolvency and Bankruptcy Code, 2016.

[4]  The Report of the Bankruptcy Law Reforms Committee, Para 3.2.3.

[5] Insolvency and Bankruptcy Code, 2016, S. 29-A.

[6] <> accessed on 10-5-2022.

[7] Samuel Johnson, “A Project for the Employment of Authors” in The Works of Samuel Johnson, LLD, 200, 206 (1788), Vol. XIV.

[8] Arcelormittal India (P) Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1.

[9] (2019) 2 SCC 1, pp. 86 and 87.

[10] 2022 SCC Online SC 48.

[11] (2022) 2 SCC 401.

[12] Insolvency and Bankruptcy Code, 2016, S. 12. The Supreme Court later held that this time limit was merely directory, but that the process must ordinarily be completed in this time. See Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531, 628.

[13] (2020) 8 SCC 531.

[14] (2020) 8 SCC 531.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal, New Delhi (NCLAT): The Coram of Justice M. Venugopal (Judicial Member) and Dr Ashok Kumar Mishra (Technical Member) held that if granting exclusion of time helps the Corporate Debtor to revive, the basic objective of Insolvency and Bankruptcy Code will eb achieved.

An appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the impugned order passed by the Adjudicating Authority.

Adjudicating Authority had not granted exclusion of certain period of ‘Corporate Insolvency Resolution Process’ inspite of the Resolution passed by the 100% voting share of the Committee of Creditors of the Corporate Debtor.

Counsel for the appellant submitted that the exclusion of 90 days from the CIRP of the CD would save the company from ‘Liquidation’. It was also pointed that there was a ‘Prospective Resolution Applicant’ who has submitted his ‘Resolution Plan’ & there was a likelihood for the revival of the CD.

Due to the prevalent pandemic, there was not much progress in de-attachment of property from ED at Tribunals/Courts. The CoC had also considered reissue of ‘Expression of Interest’ (EOI) and hence there was a need for exclusion of such period.

Appellant was perusing legal proceedings to get attachment of sole property of the CD lifted before various judicial forum to get the property released as early as possible and also cited the decision of Supreme Court in the case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta,  (2020) 8 SCC 531, wherein it has held that the ‘Adjudicating Authority or the Appellate Authority has discretion to extend the time of CIRP period even beyond 330 days in certain exceptional cases’.

Analysis and Decision

Tribunal observed that the pandemic had no doubt updated the normalcy in various activities of ‘Corporate Insolvency Resolution Process’.

The Resolution Professional received a Resolution Plan for Prospective Resolution Applicant which was under the scrutiny of Resolution Professional/Committee of Creditors.

Further, Coram expressed that,

“If granting of 90 days helps the Corporate Debtor to revive, then the basic objective of the I&B Code, 2016 will be met. Liquidation is the last resort.”

Therefore, Tribunal opined that no prejudice will be caused in allowing the instant appeal to prevent an aberration of justice and to promote the substantial cause of justice.

Hence, the appeal was allowed. [Vinod Tarachand Agrawal, In Re., 2022 SCC OnLine NCLAT 82, decided on 16-2-2022]

Advocates before the Tribunal:
For Appellant: Mr. Monaal Davawala, Advocate.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal, New Delhi (NCLAT): The Coram of Justice Ashok Bhushan (Chairperson) and Dr Alok Srivastava (Technical Member) held that if the Intervention Application was filed under the IBC, then, any penalty to be imposed should have been under the provisions of IBC and not Companies Act.

Appellant filed the present appeal under Section 61 of the Insolvency and Bankruptcy Code 2016, assailing the order passed by the Adjudicating Authority.

Factual Matrix

An application under Section 9 of the IBC was admitted vide the order of the Adjudicating Authority and CIRP was initiated against the Corporate Debtor along with the appointment of Interim Resolution Professional.

During the pendency of the Corporate Insolvency Resolution Process, the IRP moved two applications under Section 19(2) and Section 60(5) of the IBC alleging that the appellant had withdrawn a sum of Rs 32 lakhs during the moratorium period during the CIRP though the appellants claimed that they had given a post-dated cheque to Kewal Kishan as repayment of the loan and the said cheque was not given by them during the ongoing CIRP.

Adjudicating Authority had imposed a penalty of Rs 5 lakhs on each of the two ex-directors to be deposited in the account of the Government of India, Ministry of Corporate Affairs.

Since the ex-directors of the corporate debtor did not provide the records and other financial information to the Resolution Professional under Section 19(2), the Adjudicating Authority invoked Section 128(6) of the Companies Act and levied a penalty of Rs 5 lakhs each on the appellants 1 and 2, therefore the present appeal was filed seeking to set aside the impugned order.

Analysis and Decision

Tribunal on noting that the appellants not only did not provide the records and financial documents relating to the corporate debtor to the erstwhile resolution professional and the liquidator despite multiple requests, they also did not comply with the Adjudicating Authority’s orders.

Hence such acts of carelessness in complying with the requirements of law, amounting to defiance and disrespect of the legal process, could not eb condoned and needed to be dealt with strictly in accordance with the provisions of Chapter VII: “OFFENCES AND PENALTIES” of the IBC.

“…we are of the view that since the IA No. 1253/2020 was filed under the provisions of IBC, it would have served the requirement of law if any order regarding the penalty was imposed under the provisions of IBC. Moreover, it would have served the cause of natural justice if the Appellants were given an opportunity to be heard before imposition of any penalty. Chapter VII of the IBC which lays down “Offences and Penalties” under which officers of the Corporate Debtor can be penalized and/or punished with imprisonment is relevant in this regard.”

Therefore, Tribunal directed that the case be remanded to the Adjudicating Authority for taking a decision under the provisions of IBC after giving an opportunity to the appellants to present their case.

In view of the above discussion, the impugned order was set aside. [Ashish Chaturvedi v. Sanjay Kapoor, Company Appeal (AT) (Insolvency) No. 1103 of 2020, decided on 14-2-2022]

Advocates before the Tribunal:

For Appellants:

Mr. Manoj Kumar Garg, Advocate.

For Respondents:

Mr. K.D. Sharma and Mr. Anuj Kumar Pandey, Advocates for R-3.

Case BriefsSupreme Court

Supreme Court: While dealing with a case involving two controversial terms; “operational debt” and “operational creditor” of IBC, the 3-judge Bench of Dr Dhananjaya Y Chandrachud* Surya Kant and Vikram Nath, JJ., explained that the appellant would be an operational creditor under the IBC, since an ‘operational debt’ will include a debt arising from a contract in relation to the supply of goods or services from the corporate debtor. The Bench expressed,

“…no doubt that a debt which arises out of advance payment made to a corporate debtor for supply of goods or services would be considered as an operational debt.”

Factual Conspectus

The genesis of the case related to following undisputed facts:

  • the Consolidated Construction Consortium Ltd.-appellant and the Proprietary Concern; i.e. Hitro Energy Solutions entered into a contract for supply of light fittings, since the appellant had been engaged for a project by Chennai Metro Rail Corpn. (CMRL);
  • CMRL, on the appellant’s behalf, paid a sum of Rs 50 lakhs to the Proprietary Concern as an advance on its order with the appellant;
  • CMRL cancelled its project with the appellant;
  • The Proprietary Concern encashed the cheque for Rs 50 lakhs anyways; and
  • The appellant paid the sum of Rs 50 lakhs to CMRL.

Impugned Order

It was when the proprietary concerned refused to pay the aforesaid sum despite several notices and demands, the appellant approached NCLT under Section 9 of the IBC for initiation of the Corporate Insolvency Resolution Process (CIRP) against the respondent, Hitro Energy Solutions (P) Ltd. The NCLT allowed the application holding that the respondent’s Memorandum of Association (MoA) proved that it took over the proprietary concern; and that the Proprietary Concern did owe the appellant an outstanding operational debt. Further, the NCLT declared a moratorium under Section 14 of the IBC and appointed an Interim Resolution Professional.

In appeal, the NCLAT set aside the NCLT’s decision, dismissed the application filed under Section 9 of the IBC and released the respondent from ongoing CIRP on the following grounds:

  • The appellant was a ‘purchaser’, and thus did not come under the definition of ‘operational creditor’ under the IBC since it did not supply any goods or services to the Proprietary Concern/respondent;
  • There was nothing on record to suggest that the respondent had taken over the Proprietary Concern; and
  • The appellant could not move an application under Sections 7 or 9 of the IBC since all purchase orders were issued on 24 June 2013 and advance cheques were issued subsequently. Hence, there was unjustified delay.

However, by an interim order, the Supreme Court had stayed the operation of NCLAT’s judgment.

Whether the appellant was an operational creditor

The NCLAT, sought to narrowly define operational debt and operational creditors under the IBC to only include those who supply goods or services to a corporate debtor and exclude those who receive goods or services from the corporate debtor. Rejecting the stand taken by NCLAT, the Bench observed the following:

Firstly, Section 5(21) defines ‘operational debt’ as a “claim in respect of the provision of goods or services”. The operative requirement is that the claim must bear some nexus with a provision of goods or services, without specifying who is to be the supplier or receiver.

Secondly, Section 8(1) of the IBC read with Rule 5(1) and Form 3 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 and Regulation 7(2)(b)(i) and (ii) of the CIRP Regulations 2016 make it abundantly clear that an operational creditor can issue a notice in relation to an operational debt either through a demand notice or an invoice. As such, the Bench opined,

“…the presence of an invoice (for having supplied goods or services) is not a sine qua non, since a demand notice can also be issued on the basis of other documents which prove the existence of the debt.”

Finally, in Pioneer Urban Land and Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416, in comparing allottees in real estate projects to operational creditors, the Supreme Court had noted that the latter do not receive any time value for their money as consideration but only provide it in exchange for goods or services.

Therefore, the Bench opined that the phrase “in respect of” in Section 5(21) has to be interpreted in a broad and purposive manner in order to include all those who provide or receive operational services from the corporate debtor, which ultimately lead to an operational debt. In the instant case, the appellant clearly sought an operational service from the Proprietary Concern when it contracted with them for the supply of light fittings. Further, when the contract was terminated but the Proprietary Concern nonetheless encashed the cheque for advance payment, it gave rise to an operational debt in favor of the appellant, which remained unpaid.

Whether the respondent took over the debt from Proprietary Concern

The MoA of the respondent unequivocally stated that one of its main objects was to take over the Proprietary Concern. However, the respondent had produced a resolution dated 01-09-2014 passed by its Board of Directors, purportedly resolving to not take over the Proprietary Concern. In this regard, the Bench observed,

“Admittedly, there was no reference to the resolution in the counter-statement dated 18 January 2018 and additional counter-statement dated 9 March 2018 filed by the respondent before the NCLT. However, in their appeal filed before the NCLAT, the respondent states that the resolution was, in fact, brought to the notice of the NCLT.”

Additionally, the NCLT made no mention of that resolution or the auditor’s certificate in its judgment. Therefore, the Bench opined that the conduct of the respondent in bringing up the resolution for the first time before the NCLAT would lead to an adverse inference against them for having suppressed the document earlier, if at all it was in existence.

Even otherwise, Section 13 of CA 2013 provides that where the object clause is amended in MoA, it requires the Registrar to register the Special Resolution filed by the company. However, the respondent had provided no proof that the purported resolution was a Special Resolution, it was filed before the Registrar and that the Registrar ultimately did register that. Thus, the purported amendment to the MOA would not have any legal effect. Consequently, the Bench held that the MOA of the respondent still stands and the presumption would continue to be in favour of the appellant.

Whether the application under Section 9 of IBC was barred by limitation

Rejecting the respondent’s submission that limitation commenced from 07-11-2013, when the cheque was issued by CMRL to the Proprietary Concern and that considering three years limitation period under Article 137 of the Limitation Act 1963, the period would expire on 07-11-2016, while the application under Section 9 was only filed on 01-11-2017, the Bench observed, in its application under Section 9, the appellant had mentioned 07-11-2013 as the date on which the debt became due.

However, in B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates, (2019) 11 SCC 633, it was held that limitation does not commence when the debt becomes due but only when a default occurs. As noted, default is defined under Section 3(12) of the IBC as the non-payment of the debt by the corporate debtor when it has become due. Hence, it was only on 27-02-2017 that the final letter was addressed by the appellant to the Proprietary Concern demanding the payment on or before 04-03-2017 and Proprietary Concern replied on 02-03-2017, finally refusing to make re-payment to the appellant. Consequently, the application under Section 9 would not be barred by limitation.


Hence, the appeal was allowed and the impugned judgment and order were set aside.  Since the CIRP in respect of the respondent was ongoing due to the Court’s order dated 18-11-2020, no further directions were issued.

[M/s Consolidated Construction Consortium Ltd. v. M/s Hitro Energy Solutions (P) Ltd., 2022 SCC OnLine SC 142, decided on 04-02-2022]

*Judgment by: Justice Dhananjaya Y Chandrachud

Appearance by:

For the Appellant: M P Parthiban, Advocate

For the Respondent: K Parameshwar, Advocate

Kamini Sharma, Editorial Assistant has put this report together


Case BriefsSupreme Court

Supreme Court: In a case relating to Corporate Insolvency, the Division Bench comprising of Indira Banerjee* and J.K. Maheshwari, JJ., quashed the order of NCLAT rejecting the application under S. 60(5) of IBC. The Bench held that the NCLAT and NCLT had failed to consider the law laid down by the Court with regard to extension of limitation period due to Covid-19 pandemic.

The appeal was filed under Section 62 of the Insolvency and Bankruptcy Code 2016 (IBC) against a judgment and order of NCLAT, whereby it had dismissed the application assailing order of NCLT under Section 61 of the IBC, mainly on the ground that the Resolution Process had already been approved by the Committee of Creditors.

The Appellant, an entity indulged in business of Supply and Erection of Piping Systems had entered into a contract with the Rohit Ferro Tech Ltd.-Corporate Debtor, who contacted the Appellant and placed a Purchase Order for design, supply, erection and testing of LP piping system and the commissioning of an LDO (Light Diesel Oil) storage handling system for its IX 67.5 MW Power Plant (Unit-II) for a consideration of Rs.5,37,75,761 excluding taxes and duties. Subsequently, the Corporate Debtor amended the said purchase order to include additional work of the value of Rs.88,64,239 excluding taxes and duties.

Arbitral Award

Some dispute arose between the parties due to failure and negligence of the Corporate Debtor to pay a sum of Rs.76,85,472 in connection with the said purchase order, pursuant to which the appellant invoked the Arbitration Clause and an Arbitrator was appointed by the High Court of Calcutta. The Arbitrator decided the case in favour of the appellant declaring that the claimant-appellant shall be awarded a sum of Rs.55,01,661 along with interest at the rate of two percent higher than the current rate of interest prevalent on the date of the award on and from 08-08-2014 till the date of payment. Further, the costs at Rs. 5,00,000 was also awarded to the claimant-appellant.

Initiation of CIRP

However, the said award was challenged before the Trial Court by the appellant under Section 34 of the Act, 1996. Meanwhile, the respondent 2, namely State Bank of India being a Financial Creditor of the Corporate Debtor, filed an application before the NCLT under Section 7 of the IBC, for initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, and one Supriyo Chaudhuri was appointed as Resolution Professional.

Covid-19 and Countrywide Lockdown

The grievance of the appellant was that due to the COVID-19 pandemic and subsequent imposition of countrywide lockdown, it was not aware of the initiation of CIRP against the Corporate Debtor till 27-11-2020 whereafter it came to know the Corporate Debtor had not been taking steps in the Arbitration Proceedings in view of Insolvency process initiated against it.

IBC and Period of Limitation

The appellant’s claim of Rs.1,13,38,651, filed under Regulation 7 of the Insolvency and Bankruptcy Board of India (Insolvency Process for Corporate Persons) Regulations 2016 against the Corporate Debtor was rejected by the Resolution Professional on the ground that it had been filed beyond time. It was this order of the Resolution Professional which was being assailed before NCLT and NCLAT and which was being impugned in the instant appeal.

The Bench observed that the NCLT had failed to consider the order of the Supreme Court in Cognizance For Extension of Limitation: In Re, (2021) 5 SCC 452, wherein, taking cognizance of the situation arising out of the challenge faced by the country on account of Covid-19 Virus and resultant difficulties that may be faced by litigants across the country the Supreme Court had ordered that for the purpose of counting period of limitation in all proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not the period from 15-03-2020 till 14-03-2021 shall stand excluded. The Court had further declared that in cases where the limitation would have expired during the period between 15-03-2020 till 14-03-2021, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 15-03-2021.

Therefore, noticing that the NCLAT had also failed to consider the order of the Court extending period of limitation, the Bench held that since the appellant was required to file its claim within 3 months from 11-02-2020, and the appellant actually filed claim well before 14-01-2021, the claim ought not to have been rejected in the light of the above mentioned order.


In the backdrop of above, the Bench held that the NCLAT erred in dismissing the appeal without even considering the effect and impact of the orders of the Court in Cognizance For Extension of Limitation: In Re. Accordingly, the appeal was allowed and the impugned judgment and orders of NCLAT and NCLT were set aside. The application of the appellant under Section 60(5) of the IBC was allowed.

[GPR Power Solutions (P) Ltd. v. Supriyo Chaudhuri, 2021 SCC OnLine SC 1328, decided on 29-11-2021]

*Judgment by: Justice Indira Banerjee

Appearance by:

For Appellant(s): Sumit Kumar, AOR, Rajesh Pathak, Kumari Supriya, Abhishek Chakraborty, Hemant Kumar and Harshita Sinha, Advocates

For Respondent(s): Indranil Ghosh, Orijit Chatterjee, Swati Dalmial, Palzer Moktan, Ojasa Arya,  Akash Yadav, Advocates

Satya Mitra, AOR, Swarnendu Chatterjee, AOR and Naman Kamdar, Advocate

Report by: Kamini Sharma, Editorial Assistant


Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal, New Delhi (NCLAT): The Coram of Justice Ashok Bhushan (Chairperson) and Jarat Kumar Jain (Judicial Member) and Dr Alok Srivastava (Technical Member) allowed withdrawal of application for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor.

Two appeals were filed against the same judgment passed by the National Company Law Tribunal, Allahabad Bench.

Whether the approval of the Committee of Creditors for withdrawal of the application was required or not on the present matter?

Supreme Court in Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17, held that at any stage, before a Committee of Creditors is constituted, a party can approach National Company Law Tribunal (NCLT) directly and that the Tribunal may, in the exercise of its inherent powers under Rule 11 of NCLT Rules, allow or disallow an application for withdrawal or settlement.

In the present matter, the Application under Section 12A was filed on 25.08.2021 on which date settlement between the Appellants and the Corporate Debtor had already been entered. On the day when the Application was filed, there was no requirement of approval of ninety percent of the voting share of the Committee of Creditors.

Tribunal expressed that, when the application is filed prior to the constitution of Committee of Creditors, the requirement of ninety percent vote of Committee of Creditors is not applicable and the Adjudicating Authority has to consider the Application without requiring approval by ninety percent vote of the Committee of Creditors.

Another aspect was that, as per the Memorandum of Understanding, two Demand Drafts of Rs 19 Lacs and Rs 6 Lacs were handed over to the Appellant and the cheque of Rs 38,74,000/- was also given. The cheque of Rs 38,74,000 was returned and subsequently, the said payment was made by RTGS before the order was passed by the Adjudicating Authority.

The entire payment as per the Memorandum of Settlement having been paid, there is no debt of the Appellant- ‘M/s. Ashish Ispat Pvt. Ltd.’ due on the Corporate Debtor.

In the instant case, the entire dues of the appellant were paid by the Corporate Debtor under the Memorandum of Settlement. An application was filed before the constitution of the Committee of Creditors. There was no requirement of directing for obtaining approval of ninety per cent vote of Committee of Creditors for considering the application.

Coram held that the NCLT without considering the facts and sequence of the events had refused to entertain the application on the ground that it was not supported by 90% vote of the Committee of Creditors. Hence, Tribunal opined that present is a case where the Application for withdrawal ought to be allowed permitted withdrawal of CIRP.

The appeal was allowed. [Ashish Ispat (P) Ltd. v. Primsuss Pipes & Tubes Ltd., Comp. App. (AT) (Ins.) No. 892 of 2021, decided on 7-1-2022]

Advocates before the Tribunal:

For the Appellant: Mr. Adhitya Srinivasan, Ms. Shalya Agarwal, Mr. Rahul Patel, Mr. Varun Chugh, Ms. Shagun Shahi, Advocates.

Ms. Mrinali Prasad, Advocate for R1.

For the Respondents: Mr. Aditya Gauri, Advocate for R2.
Mr. Abhishek Kumar Advocate for Kotak Mahindra
Mr. Saket Singh, Mr. Ankur Goel, Advocates (Intervenor)

National Company Law Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, Mumbai Bench: The Coram of H.V. Subba Rao, Judicial Member and Chandra Bhan Singh, Technical Member directed that attachment of bank accounts of a Corporate Debtor by tax authorities while Corporate Insolvency Resolution Process was pending is a violation of Section 14 of the Insolvency and Bankruptcy Code.

The interlocutory application was filed by the liquidator against the respondent Deputy Commissioner of State Tax (respondent 1) and Axis Bank Limited (respondent 2) seeking direction from the tribunal to unfreeze/lift the attachment on the bank account of Corporate Debtor maintained by the respondent 2.

It was submitted that the applicant had communicated to respondent 2 about the initiation of the CIRP of the Corporate debtor and further requested respondent 2 to remove the attachment/lien marked on the said bank accounts.

Analysis, Law and Decision

Tribunal noted that the applicant had appraised the officials of respondents 1 and 2.

Bench expressed that,

“…the attachment is violative of Section 14 of IBC and thus needs to be lifted.”

Elaborating further, the Tribunal stated that since the respondent 1 submitted its claims before the liquidator and the same was accepted by the liquidator, it had to be dealt with in the manner as provided under Section 53 of the IBC and hence, respondent 1 cannot continue to enforce its lien over the bank accounts of the Corporate Debtor.

Bench referred to the decision of NCLT in OM Prakash Agarwal v. Tax Recovery Officer, wherein it was held that,

“the monies of the CD lying in the bank account shall be construed to be an asset of the CD even if tan attachment order is passed against the same. It noted that section 178 of the Income-tax Act, 1961 has been amended to allow the Code to have overriding effect and accordingly directed the Bank to defreeze the account”.

Concluding the matter, the Tribunal directed respondent 1 and respondent 2 to lift its lien/attachment over the said bank accounts maintained with respondent 2 bank.

The direction was issued to respondent 2 to unfreeze the bank account of the Corporate Debtor and allow the applicant to manage its operations. [Asis Global Ltd. In re., CP (IB) 4442 (MB)/2018, decided on 28-10-2021]

Advocates before the tribunal:

Mr Nausher Kohli, counsel appearing for the liquidator, was present through a virtual hearing.

National Company Law Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, New Delhi Bench, New Delhi –The Coram of P.S.N Prasad, Judicial Member and Narender Kumar Bhola,  Technical Member were inclined to allow the process of CIRP, considering the debt acknowledged by the corporate debtor.

In the pertinent matter the corporate debtor approached the operational creditor for supply of image scanner manufactured by the operational creditor. It was alleged that the operational creditor had to send various reminders through emails, text messages and phones for the payment of the goods purchased by the corporate debtor. Pursuant to which even a demand notice was duly served upon.The petitioner thus submitted that since corporate debtor has acknowledged the debt, therefore the petition under Section 9 of IBC, 2016 should be allowed and the CIR process to be initiated against the corporate debtor.

The Tribunal after perusing the written submissions and arguments advanced by the operational creditor was of the opinion that the corporate debtor through emails has acknowledged the debt. Resultantly, the Tribunal was inclined to admit the application to initiate the process of CIRP of the corporate debtor. And further declared moratorium, and appointed an Insolvency Resolution Professional to take charge of the respondent corporate debtor.

It further stated that the supply of essential goods or services of the corporate debtor shall not be terminated, suspended or interrupted during moratorium period.[CSII India Pvt. Ltd. v. Telexcell Information Systems Limited, IB-411/ND/2020, 05-10-2021]

Agatha Shukla, Editorial Assistant has reported this brief.

Counsel for the Parties:

Operational Creditor:

Kshitiz Karjee & Mrinal Agarwal (Advocates)

National Company Law Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, Mumbai Bench, Mumbai- The Coram of Ashok Kumar Borah, Judicial Member, and Shyam Babu Gautam, Technical Member while allowing the company petition, ordered for initiation of Corporate Insolvency Resolution Process (CIRP). The Bench stated that,

“The Operational Creditor has successfully demonstrated and proved the debt and default in this case and has also proved that there is absolutely no reason for the Corporate Debtor to hold on to the payment of the invoices”.

In the present matter initiation of Corporate Insolvency Resolution Process (CIRP) against Prince MFG Industries Private Limited (Corporate Debtor) was sought for, alleging that the corporate debtor committed default in making payment to the operational creditor. This petition was filed by invoking the provisions of Section 9 Insolvency and Bankruptcy Code, 2016 read with Rule 6 of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

The Tribunal after considering the statements, acts and the submissions was of the opinion that despite giving enough chances, the corporate debtor did not file its reply, showed that the amount was due and payable. Also the acts and the tactics used also elaborated the intention. The Tribunal considering the contradicting statements where a part payments was made and then later denying any pre-existing dispute, it was of the view that,

“This bench clearly visualizes the tactic played on the part of the Corporate Debtor to delay the proceedings”.

The Tribunal was thus of the opinion, “It is observed by this bench that the part payment made by the Corporate Debtor proves that it owes the claimed amount to the Operational Creditor and hence it is deemed to be an admission on the part of the Corporate Debtor”. And further stated, “Hence this Bench is left with no option except to admit the above Company Petition, since the above Company Petition in hand satisfies all necessary legal ingredients for admission under Section 9 of the Code”.

[Amit Sangal v. Prince MFG Industries Private Ltd., IA No. 1509/2021, decided on-05-10-2021]

Agatha Shukla, Editorial Assistant has reported this brief.

Counsel for the parties:

For the Operational Creditor:

Mr. Anuj Solanki, Practicing Company Secretary, Mr. Rajesh Agarwal, Advocate

For the Corporate Debtor :

Mr. Dinesh Dubey, Advocate

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT) -The Coram of Justice Jarat Kumar Jain and Alok Srivastava, Technical Member while deciding an appeal denied to put a stay on the CIRP proceedings. The Tribunal was of the opinion that the alleged ‘pre-existing-dispute’ was raised at such a late stage even though it was a spurious dispute, only with an intention to avoid action under IBC. The Tribunal further made it clear that the order will not have any effect on the final outcome of the

In the instant matter the Corporate Debtor (Appellant) alleged that the Appellant had repeatedly sought reconciliation of the invoices that were presented by the Operational Creditor (Respondent No. 1) and in the absence of non-production of work completion reports relating to the invoices under question, the requisite payments could not be made. His argument was that it was a ‘dispute’ as defined in Insolvency and Bankruptcy Code, 2016  and in accordance with the Supreme Court’s judgment in Mobilox Innovations vs. Kirusa Software Civil Appeal, (2018) 1 SCC 353 the application for insolvency under Section 9 of IBC cannot be admitted. While the counsel for the Appellant submitted that the it was only after the two letters of the Operational demanding pending payments and threat of legal action before the NCLT that the Corporate Debtor started sending communications for reconciliation and submission of supporting documents. And cited the same case, claiming that a spurious dispute cannot come in the way of admission of the operational creditor’s application u/s 9 of IBC.

The Tribunal considering the relevant arguments and the same case that both the parties referred to in favour of their arguments stated, “We are, therefore, at this stage persuaded by the argument of the Ld. Counsel of Respondent No. 1 that this alleged dispute has been raised at this late stage only after the Operational Creditor started asking for his pending payments to show that a pre-existing dispute was present even though it is a spurious dispute, to avoid action under IBC. Thus we find that a prima facie case doesn’t exist in favour of the Appellant”.

[Amit Wadhwani v. Global Advertisers, 2021 SCC OnLine NCLAT 325, decided on 28-09-2021]

Agatha Shukla, Editorial Assistant has put this report together 

Counsel for the Parties:

For Appellant:-

Mr. Ramji Srinivasan, Sr. Advocate, Mr. Dharam Jumani, Mr. Kunal Mehta, Mr. Rajshree Chaudhary, Mr. Suraj Iyer, Ms. Priyashree Sharma, Ms. Gauri Joshi, Mr. Kush Chaturvedi, Ms. Rushall Agarwal, Advocates

For Respondent:-

Mr. Krishnendu Datta, Sr. Advocate with Mr. Girish Kedia, Ms. Shivangi Kedia, Mr. Mohit Chaudhary, Ms. Garima Sharma, Mr. Amir Ariswala, Advocates for R1 Mr. Ami Jain, R2 for IRP

National Company Law Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal (NCLT): Coram of Judicial Member Ashok Kumar Borah and Technical Member Shyam Babu Gautam has admitted a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 by Bank of India (Financial Creditor) seeking to initiate Corporate Insolvency Resolution Process against VVVF (India) Limited (Corporate Debtor).

Factual Background

Applicant had sanctioned/revised/reviewed/continued various fund based and non-fund based working capital facilities to VVF (India) Limited for a sum of 283.65 Crore (Loan Amount).

In the petition, it was mentioned that the amount in default along with interest was INR 293, 42, 50, 526.79 (Financial Debt), which was due and payable by the Corporate Debtor in favour of the applicant.

Due to various defaults by Corporate Debtor, its account was classified as a Non-Performing Asset by the applicant.

As per the RBI guidelines, if a company failed to repay the loan liability sanctioned to the borrower under the corrective action plan, then the asset classification of the borrower will be considered from the cut-off date considered for the implementation of the corrective action plan (CAP).

In this account, under CAP, long term working capital loan was sanctioned in 2016 and due to payment default the Statutory Central Auditors of the Applicant classified the Corporate Debtor as an NPA from the implementation date of the CAP.

Further, corporate debtor issued a revival letter addressed to the applicant, confirming and admitting the existence of the various facilities and security documents availed by and executed by the Corporate Debtor and its Promoters.

Even the liability to the Financial Creditor was expressly admitted.

Financial Creditor and the Corporate Debtor had executed 14 agreements/contracts reflecting all amendments and waivers, which were forming part of the Financial Creditor’s pleadings.

Since the financial debt amount remained unpaid, the applicant filed the present petition.

Analysis, Law and Decision

The Tribunal opined that the petition was maintainable by law and the defenses raised by the Corporate Debtor were nothing but an attempt to delay the commencement of the Corporate Insolvency Resolution Process of the Corporate Debtor.

Bench while analyzing the facts of the case, referred to the Supreme Court decision in Swiss Ribbons (P) Ltd. v. Union of India, WP (C) 99 of 2018, wherein the Constitutional validity of IBC was upheld, the position was very clear that unlike Section 9, there was no scope of raising a ‘dispute’ as far as Section 7 petition was concerned. As soon as a ‘debt’ and ‘default’ is proved, the adjudicating authority is bound to admit the petition.

Contention with respect to not attaching the documents as raised by the Corporate Debtor was dealt by the Supreme Court in Dena Bank (now Bank of Baroda) v. C. Shivakumar Reddy, Civil Appeal No. 1650 of 2020, where the same issue was raised and covered.

In Tribunal’s opinion, no dispute with respect to Corporate Debtor owing money to the Financial Creditor existed.

Further, the Coram added that, the Financial Creditor’s application was complete in all respects as required by law. It clearly showed that the Corporate Debtor was in default of a debt due and payable and the default was in excess of the minimum amount stipulated under Section 4(1) of IBC.

Hence, debt and default stood established.

Therefore, Tribunal ordered as follows:

(a)        Petition filed by the Bank of India, Financial Creditor, under Section 7 of the IBC read with Rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against VVF (India) Limited the Corporate Debtor, is admitted.

(b)       There shall be a moratorium under Section 14 of the IBC, in regard to the following:

(i)  The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

(ii)  Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;

(iii)  Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002;

(iv)  The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor.

(c) Notwithstanding the above, during the period of moratorium:

(i)  The supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period;

(ii)  That the provisions of sub-section(1) of section 14 of the IBC  shall not apply to such transactions as may be notified by the Centre in consultation with any sectoral regulator;

(d) Moratorium shall have effect from the date of this order till the completion of the CIRP or until this Adjudicating Authority approves the resolution plan under Section 31 (1) of the IBC or passes an order for liquidation of Corporate Debtor under Section 33 of the IBC, as the case may be.

(e) Public announcement of the CIRP shall be made immediately as specified under section 13 of the IBC read with regulation 6 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

(f) Mr Avil Menezes appointed as Interim Resolution Professional of the Corporate Debtor to carry out the functions as per the IBC.

(g) During the CIRP Period, the management of the Corporate Debtor shall vest in the IRP or, as the case may be, the RP in terms of section 17 of the IBC. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP within a period of one week from the date of receipt of this Order, in default of which coercive steps will follow.

(h) Financial Creditor shall deposit a sum of Rs 2,00,000 with the IRP to meet the expenses arising out of issuing public notice and inviting claims. These expenses are subject to approval by the Committee of Creditors (CoC).

[Bank of India v. VVVF (India) Ltd., 2021 SCC OnLine NCLT 452, decided on 23-9-2021]


For the Financial Creditor: Nausher Kohli, Nirav Shah and Viraj Gami i/b DSK Legal

For the Corporate Debtor: Mustsafa Doctor, Counsel i/b M/S Dhruve Liladhar & Co.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Coram of Justice Jarat Kumar Jain, Judicial Member and Dr Ashok Kumar Mishra, Technical Member while dismissing as appeal released the Corporate Debtor Company from the rigours of CIRP, and allowed the Board to function through its Board of Directors from immediate effect. The Appellate Tribunal also remitted back the matter to the Adjudicating Authority to decide the fees and costs of CIRP payable to IRP, to be borne by the Corporate Debtor.

In the instant matter, K. Srinivas Krishna, the Suspended Director of Corporate Debtor, filed an appeal against the order passed by the Adjudicating Authority before the Appellate Tribunal. Further, a civil appeal was filed before the Supreme Court challenging the Appellate Tribunal’s impugned order. The appeal was dismissed on the ground that the claim of the Operational Creditor for Rs, 50,32,028 was not tenable and other claim was paid. Further, the interim stay passed by the Tribunal was vacated and IRP was directed to take further action against the CIRP. Further, the objections raised by the Operational Creditor were rejected by the adjudicating authority on the grounds of material error, where the form FA (application for withdrawal of CIRP) was not signed by the Operational Creditor (applicant) on whose application CIRP was initiated. Therefore, the application was dismissed for not being maintainable.  Being aggrieved by the order, the Suspended Director of the Company filed an appeal where the impugned order was challenged.

The Tribunal was of the opinion that, to prevent abuse of process, setting aside the impugned order and the order of initiating CIRP against the Corporate Debtor was more conducive. Therefore, the Corporate Debtor Company was released from the rigours of the CIRP and was allowed to function through its Board of Directors from immediate effect.

Further, the Tribunal remitted back the matter to the Adjudicating Authority to decide the fees and costs of CIRP payable to IRP which shall be borne by the Corporate Debtor.[K. Srinivas Krishna v. Shyam Arora, Company Appeal (AT) (Insolvency) No. 221 of 2021, decided on 02-09-2021]

Agatha Shukla, Editorial Assistant has reported this brief.

Counsel for the Parties:

For Appellant :

Mr. P Nagesh, Sr. Advocate with Mr. Srinivas Kotni, Mr. Shantam Gorwara, Advocates and Mr. Srinivas Krishna, in person.

For Respondents :

Mr. Shyam Arora, Respondent No. 1 in person, Mr. Sharad Tyagi, Mr. K. Gayatri, Advocates for Respondent No. 1. 2

Mr. Sanjay Kapur, Mr. V M Kannan, Ms. Shubhra Kapur, and Mr. Arjun Bhatia, Advocates for Respondent No. 2.

Dr. Laxhmi Narashimha, Advocate for RP.

National Company Law Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, NCLT Mumbai: Coram of Suchitra Kanuparthi, Judicial Member and Chandra Bhan Singh, Technical Member, observed that,

“…a Judicial authority ought not to pass Orders which would lead to further multiplicity of proceedings.”

The instant application was filed by the Operational Creditor who had earlier initiated the corporate insolvency resolution process against the Corporate Debtor−Rolta India Ltd. The applicant−Operation Creditor now sought withdrawal of his company petition admitted under Section 9 of the Insolvency and Bankruptcy Code, 2016.

The applicant worked as an employee of the Corporate Debtor from March 2013 to June 2019, when he was relieved from services without settlement of arrears of salary and other dues. Consequently, he filed a petition under Section 9 which was admitted by the National Company Law Tribunal, Mumbai (“NCLT”), in May 2021 and an Insolvency Resolution Professional was appointed for the Corporate Debtor.

Thereafter, further negotiations took place between the parties and they reached a settlement agreement. Consequently, the application requested the Insolvency Resolution Professional to file an application under Section 12-A (Withdrawal of application admitted under Section 7, 9 or 10). As the Insolvency Resolution Professional did not file the application immediately, the applicant preferred the Section 12-A application before the NCLT.

The withdrawal application was vehemently opposed by the Financial Creditors (a consortium of several Public Sector Banks) and some of the other ex-employees. Notably, over 75 other petitions under Sections 7 and 9 of  IBC were pending against the Corporate Debtor.

Analysis, Law and Decision

Instant application had been filed under Section 12-A of the IBC read with Rule 11 of the NCLT Rules, 2016 by an employee of the Corporate Debtor company in the capacity of Operational Creditor seeking withdrawal of the company petition in terms of Regulation 30-A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Applicant mentioned that he had approached the Insolvency Resolution Professional for filing the Application in Form FA under Regulation 30-A(1)(a) to seek withdrawal of the admitted company petition. However, he stated that the Insolvency Resolution Professional did not cooperate and, therefore, the applicant was compelled to file the present application on their own motion under Rule 11 of the NCLT Rules seeking withdrawal of the admitted company petition.

The Insolvency Resolution Professional mentioned that she had received claims/intimation of claims of about Rs 5523.81 crores from financial creditors, operational creditors and workmen employees of Rolta India Limited.

Further, the Bench noted that even under Workmen and Employees’ claim there were 567 employees whose claims had been collated by the Insolvency Resolution Professional. However, the settlement entered into by the Corporate Debtor was only with 32 employees. It was also noted that even the settlement which was proposed by the promoter on behalf of the Corporate Debtor company kept aside majority of the workmen employees’ claim which had been brought out by the Insolvency Resolution Professional. Moreover, the proposed settlement with the employees under the Joint Settlement Agreement will be done only after they withdraw the petition. The Bench observed:

“…Corporate Debtor is willing to pay the major part of the dues to the employees only subsequent to withdrawal of petition through the settlement jointly and/or severally with the employees. The Bench feels that this provides an escape route to both the promoter as well as to the Corporate Debtor Company to conveniently wriggle out of the partial mini settlement at any point of time.”

Major Issue 

The Tribunal noted the major issue:

Whether it would be proper for the Bench to allow withdrawal of corporate insolvency resolution process (“CIRP”) under Section 12-A or to exercise, its discretion to reject the present application under Section 12-A?

The Bench was fully aware that after passing the “Admission Order” dated 13-05-2021 and after the commencement of CIRP, the proceeding are in rem and therefore, any decision regarding the continuation or otherwise of CIRP has to be decided in the interest of all stakeholders and not just a handful of employees. It was reiterated:

“…under Section 53 of IBC the debts of the workmen rank equally with the financial debt owed to the secure/ unsecured creditors.”

In view of the above, it was stated that it cannot be ignored that Tribunal has to take into account the interest of all stakeholders. Before taking the discussion further, the Bench relied upon some of the prominent judgments in respect of the scope and ambit of Section 12-A of IBC. Supreme Court in the decision of Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17, clearly directed that interest of all stakeholders have to be considered while accepting or disallowing an application for withdrawal.

Supreme Court recently in the matter of Indus Biotech (P) Ltd. v. Kotak India Venture (Offshore) Fund, 2021 SCC OnLine SC 268 has clearly observed that when a petition under Section 7 of IBC is admitted/triggered it becomes a proceeding in rem and even the creditor who has triggered the process would also lose control of the proceedings as corporate insolvency resolution process is required to be considered through the mechanism provided under IBC.

Further, the Tribunal noted that in the present matter, there were several Financial Creditors and total financial claim collated by the Insolvency Resolution Professional in the matter of Rolta India Ltd. was upward of Rs 5000 crore. Thus, this itself would be an enough ground to disallow the present application for withdrawal under Section 12-A. The Tribunal said:

“…even in the event of the original creditor [and] the Corporate Debtor settling their disputes prior to the constitution of the CoC, the Tribunal has sufficient jurisdiction to reject an application under Section 12-A of the IBC if the facts and circumstances of the case warrants such rejection.”

Tribunal in view of the above, expressed that, even if withdrawal was permitted, it is a fact that all the dues of all the employees of the Corporate Debtor company were not being settled. About more than 100 employees had lodged their claims against the Corporate Debtor. However, only some employees’ claims were being settled by the ex-management/promoter of the company. Therefore, the purported settlement lacked bona fide.

Moreover, the interest of the employees would be taken care of during the CIRP of the Corporate Debtor and they being operational creditors will be entitled to their rights as provided for under the IBC. Concluding, the Bench said that it had no doubt in its mind that considering that CIRP proceedings are in rem, the substantial claims of Financial Creditors cannot be disregarded or ignored in view of the purported settlement of certain employees of the Corporate Debtor.

In view of the above, the Bench dismissed the application filed under Section 12-A of the IBC and the CIRP against the Corporate Debtor company would continue. [Dinesh Gupta v. Rolta India Ltd., MA No. 1196 of 2021, decided on 6-08-2021]

Advocates before the Tribunal:

For the Promoter: Mr. Prateek Seksaria, Advocate.

For the IRP: Ms. Ranjana Roy Gawai, Mr. Pervinder, Mr. Vineet Kumar, Advocates a/w Ms. Vandana Garg, IRP.

For the Financial Creditor: Mr. Rohit Gupta, Mr. Nausher Kohli, Advocates.

For the Operational Creditor: Mr. Nausher Kohli and Mr. Rohit Gupta, Advocates

National Company Law Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, Mumbai: Coram of H.V. Subba Rao, Judicial Member and Chandra Bhan Singh, Technical Member dismissed an interlocutory application filed against a personal guarantor under Section 95 (“application by creditor to initiate insolvency resolution process”) of the Insolvency and Bankruptcy Code, 2016, finding that the Corporate Debtor concerned was not under Corporate Insolvency Resolution Process.

The instant Interlocutory Application was filed by the Financial Creditor under Section 95 of the Insolvency and Bankruptcy Code against the personal guarantor.

Further, on an enquiry from the Bench, it came out that the Corporate Debtor for which the personal guarantee had been given was not under Corporate Insolvency Resolution Process.

Hence, the present Interlocutory Application cannot be prosecuted and therefore the IA was disposed of. [Altico Capital India Ltd. v. Rajesh Patel, IA 1062 of 2021, decided on 9-07-2021]

Advocates before the Tribunal:

For the Personal Guarantor: Nausher Kohli

Samit Shukla, Associate Partner and Yash Dhruva, Associate i/b DSK Legal

For the Creditor: Faizan Mithaiwala

Op EdsOP. ED.

In the March of 2020, the Insolvency and Bankruptcy Code, 2016[1] (Code), notified two new thresholds which significantly impacted the real estate industry. Firstly, by a notification[2], the minimum threshold of default under Section 4(1)[3] of the Code was increased from Rs 1 lakh to Rs 1 crore, keeping in mind the financial repercussions of the global pandemic. Secondly, an amendment[4] was introduced, which mandated a numerical threshold requirement for allottees of a real estate project to trigger the corporate insolvency resolution process (CIRP).

Rationale behind the introduction of a numerical threshold for allottees

The Supreme Court in Pioneer Urban Land and Infrastructure Ltd. v. Union of India[5] had clarified that the sale agreement between the developer and homebuyer has a “commercial effect” of borrowing, as the money is paid in advance for temporary use, so that a flat/apartment could be given back to the homebuyer.

This essentially gave every individual allottee the status of a financial creditor, allowing them to trigger the CIRP against the promoter/developer of the real estate project in case of a default. This led to a large number of applications, frivolous or otherwise being filed in the National Company Law Tribunal (NCLT), thereby augmenting the misuse of the provisions of the Code, in turn leading to the disruption of the real estate sector.

Thus, an amendment was introduced in Section 7[6] of the Code, requiring the application for initiating CIRP to be filed jointly by at least a hundred allottees or one-tenth of the total number of allottees in the same real estate project, whichever is less.

Furthermore, the Supreme Court, in Manish Kumar v. Union of India[7] (Manish Kumar) while upholding the constitutionality of the amendment also threw light on the rationality and the need for the introduction of such a threshold. The Court observed that the consequence of empowering a lone allottee to initiate the CIRP at his discretion could thwart the entire real estate project, thereby endangering the interests of other allottees who were not in favour of the same and might have faith in the developer.

This post seeks to analyse the ground realities and the ambiguities that may arise in light of the amendment and the Manish Kumar[8] judgment.

Prerequisites for initiating CIRP

In light of the notification and the amendment, an allottee has to now fulfil the following two prerequisites to initiate the insolvency proceedings under Section 7 of the Code:

  1. The total amount of default by the corporate debtor shall be more than Rs 1 crore; and
  2. the application has to be filed jointly by hundred allottees or one-tenth of the total number of allottees in the same real estate project, whichever is less.

Calculation of total default

The threshold of Rs 1 crore means the total default of the corporate debtor to any financial creditor and not necessarily only to the applicant allottees. Thus, the allottees can move against the promoter even without any amount being due to them, provided that they meet the numerical threshold requirement under Section 7.

What constitutes a real estate project

As per the Code, the term “real estate project” (project) shall have the meaning assigned to it in clause (zn) of Section 2[9] of the Real Estate (Regulation and Development) Act, 2016 (RERA) which provides only a general overview of the scope of inclusion of the constituents of a project, leaving a grey area for interpretation.

Phases/towers/blocks in a project – separate individual projects

Section 3[10] of RERA deals with the mandatory requirements of registration and exemption from such registration to projects where the area of land proposed to be developed does not exceed five hundred square meters or the number of apartments proposed to be developed does not exceed eight, inclusive of all phases. However, the explanation to this section reads as follows:

For the purpose of this section, where the real estate project is to be developed in phases, every such phase shall be considered a stand-alone real estate project, and the promoter shall obtain registration under this Act for each phase separately.

The above explanation fails to confer a clear interpretation of how the phases should be included in the calculation of the numerical threshold of allottees.

The literal interpretation of the phrase “every phase shall be considered a stand-alone real estate project shall mean to apply only for the purpose of “this section, so as to analyse whether the registration of a project can be totally exempted from the purview of the Act.

Thus, it can be inferred from the literal interpretation and purpose of the section that each phase would not be considered as a stand-alone real estate project in calculation of the required numerical threshold of allottees. Hence, all the phases in a project shall be considered together for the purpose of calculating such threshold under Section 7 of the Code.

Further, to substantiate this interpretation, the observations deduced from some clauses under Section 4(2)[11] of the RERA which pertains to the details and documents required for filing an application for registration of a project can be referred. The relevant clauses are extracted below:

(d) the sanctioned plan, layout plan and specifications of the proposed project or the phase thereof, and the whole project as sanctioned by the competent authority;

Here, the clause refers to “the phase thereof, and the whole project which indicates that all the phases that are sanctioned by the competent authority to constitute a particular project may be considered as one project.

(f) the location details of the project, with clear demarcation of land dedicated for the project along with its boundaries including the latitude and longitude of the endpoints of the project;

Here, providing information relating to proper demarcation of land and boundaries to indicate the endpoints of a project would be helpful in ascertaining whether a certain building is a phase of a particular project or a different project in itself.

Example: Confusion may occur with regard to the demarcation between two projects by the same promoter, if the projects are adjacent to each other. How would one distinguish whether the said projects are two separate real estate projects or just phases of the same real estate project?

Thus, in the above scenario the location details provided by the promoter to the competent authority while registering the project as per Section 4(2)(f) would be considered.

Calculation of allottees for the numerical threshold

As per the Code, the term “allottee” shall have the meaning assigned to it under Section 2(d) of the RERA which states that an allottee is a person to whom a plot, apartment or building is allotted by sale, transfer or otherwise by the promoter of the project or any subsequent owner.

For calculating the total number of allottees, only the number of allotted units in a project shall be considered, irrespective of the number of units constructed.

In cases of joint allotments, wherein a single unit is allotted to more than one person, the joint allottees of that unit shall be considered to mean a single allottee.

Example: In a project constituting a total of twenty units, three individuals — A, B, and C book four units each. Here, the number of individual allottees is only three i.e. A, B, and C but the number of apartments allotted is twelve. Hence, for the purpose of calculation for threshold requirement, the total number of allottees shall be twelve.

Access to the information of allottees in a project

The Supreme Court, in Manish Kumar[12], reiterated the following provisions to address the concerns of homebuyers with regard to the asymmetry in availability of information.

Section 11(1)(b)[13] of the RERA, requires the promoter to upload quarterly updates of the number of apartments allotted on the RERA web page which can be referred to ascertain the total number of allottees till date. However, the Court failed to observe the fact that there is no obligation on the promoter to provide names and details of such allottees.

Section 11(4)(e) mandates the promoter to enable the formation of the association of allottees (association) within three months of the majority of units being allotted, in the absence of local laws, allowing the allottee to be privy to the details of fellow the allottees in the project. However, the Court overlooked the fact that there is no obligation on the promoter to form an association, in case the majority of units are not booked. Additionally, local laws of States like U.P. and Haryana require the formation of such association only after obtaining the completion certificate, thus slyly providing a loophole in favour of the promoters.

As a result, in the absence of such an association and where the promoter refuses to furnish the said information, the only redressal available to an allottee is to approach the real estate regulatory authority (authority). The authority using its discretionary powers under Section 37[14] may direct the promoter to furnish the required information.


The introduction of a numerical threshold for triggering the CIRP is a step in the right direction to curb the use of the Code as a debt recovery mechanism, thereby contradicting its primary objective of revival of an entity. This step ensures that the project does not collapse on the whims and fancies of a few disgruntled allottees.

However, the Court failed to address the major issue of unavailability of the necessary information faced by an allottee while meeting the newly imposed numerical threshold under the Code. This will pose a major hurdle in initiating the CIRP where the promoter is unable to meet his debt obligations and there is a dire need for an overhaul of the management.

The builders and the homebuyers are on the opposite sides of a weighing scale representing the real estate sector and the recently imposed thresholds have tilted the scales in favour of the builders. Thus, in order to create and maintain balance, it is necessary to implement regulations mandating the builders to publish the required information of allottees in the public domain.

Final year LLB student at ILS Law College, Pune.

†† Final year LLB student at ILS Law College, Pune.

[1] <>.

[2] <>.

[3] <>.

[4] <>.

[5] (2019) 8 SCC 416

[6] <>.

[7] 2021 SCC OnLine SC 30

[8] 2021 SCC OnLine SC 30

[9] <>.

[10] <>.

[11] <>.

[12] 2021 SCC OnLine SC 30

[13] <>.

[14] <>.

Op EdsOP. ED.

The Insolvency and Bankruptcy Code, 20161 (I&B Code) is a complete code, containing all the necessary provisions for providing a safe haven to corporate debtors under distress. However, the I&B Code being a relatively new enactment, still seems to be working out the kinks. One such ambiguity is that the I&B Code fails to provide a defined procedure for conduct of proceedings that tend to last beyond the duration of Corporate Insolvency Resolution Process (CIRP).

Avoidable transactions or vulnerable transactions, sub-classified into preferential transactions (Sections 43[2]-44[3]), undervalued transactions (Section 45[4]) transactions defrauding creditors (Section 49[5]) and extortionate credit transaction (Section 50[6]) are red-flagged transactions that may be avoided by the corporate debtor for shifting undue onerous burden that places the corporate debtor into distress or defrauds the creditors of the corporate debtor. The resolution professional (RP) in the course of CIRP, is required to identify such vulnerable transactions and files an application before the adjudicating authority for avoiding the said liability. While the said proceedings are an integral part of the I&B Code, they run parallel to the main proceedings which are more focused towards resolution of the corporate debtor and ensuring maximisation of value of assets of the corporate debtor. However, the question as to what happens if the corporate debtor is successfully resolved, thereby concluding CIRP, before the avoidance proceedings are adjudicated or even heard, has not been clearly laid down under the I&B Code. In many of the instances, it has been seen that such proceedings have continued even after the passing of the order under Section 31[7] of the I&B Code (thereby concluding the CIRP), for instance, Bhushan Steel, Essar Steel, etc.

The High Court of Delhi recently identified the present ambiguity in Venus Recruiters (P) Ltd.  v. Union of India[8] (Venus Recruiters). The High Court of Delhi, observed that the present matter raises three important questions:

  1. (i) Whether a RP can continue to act beyond the approval of the resolution plan?

(ii) Whether an avoidance application can be heard and adjudicated after the approval of the resolution plan?

(iii) Who would get the benefit of an adjudication of the avoidance application after the approval of the resolution plan?

While the High Court of Delhi decided the aforesaid questions in a comprehensive manner, the authors herein restrict the scope of the present article to the below mentioned findings/ observations and their implications:

(i) Resolution applicant cannot be permitted to file an avoidance application: A successful resolution applicant (RA) whose resolution plan is approved itself cannot file an avoidance application. The avoidance applications are neither for the benefit of the resolution applicants nor for the company after the resolution is complete. It is for the benefit of the corporate debtor and the creditors of the corporate debtor.

(ii) Avoidance application cannot be adjudicated beyond the period of CIRP: Where preferential transactions are permitted to be adjudicated after the resolution plan is approved, it would, in effect, lead the National Company Law Tribunal (NCLT) to step into the shoes of the new management to decide what is good or bad for the company. Once a resolution plan is approved and the new management takes over, it is completely up to the new management to decide whether to continue a transaction or agreement or not.

The ambiguity and the loose ends

The I&B Code had always envisaged that the avoidance proceedings were to proceed independent of the CIRP proceedings. This can be inferred from Section 26[9] which provides that the filing of an avoidance application by the RP shall not affect the CIRP proceedings. However, the Venus Recruiters[10] judgment has linked the two proceedings that may lead to contradictions within the I&B Code. Correspondingly, Regulation 44 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016[11] (Liquidation Regulations) also states that liquidator shall liquidate the corporate debtor within a period of one-year from the liquidation commencement date, notwithstanding pendency of any avoidance application under Chapter III of Part II of the I&B Code.

While the Venus Recruiters[12] judgment held that the resolved corporate debtor can take any decision in respect of an agreement which is deemed to be not beneficial, including termination of the onerous contracts, the I&B Code does not contain any provision for terminating existing contracts by way of a resolution plan. In fact, the NCLT, Mumbai Bench has specifically held that resolution applicants do not have any right to terminate legally binding contract unilaterally without following the due process for termination as per applicable law under the garb of a resolution plan13. Therefore, the same would have to be done without any assistance of the statutory scheme, for taking over or acquiring the corporate debtors, envisaged under the I&B Code.  The judgment seems to have not factored the views of the Insolvency and Bankruptcy Board of India (IBBI) on avoidable transactions. IBBI has specifically observed that there is a distinction between preferential transactions and undervalued transactions. In preferential transaction, the question of intent is not involved and by virtue of legal fiction, upon existence of the given ingredients, a transaction is deemed to be of giving preference at a relevant time, while undervalued transaction requires different enquiry under Sections 45 and 46[14] where the adjudicating authority is required to examine the intent, to examine if such transactions were to defraud the creditors.

The Venus Recruiters[15] judgment observes that avoidance proceedings are only for the benefit of the creditors of the corporate debtor. However, a perusal of the reliefs contemplated under Sections 44 and 48[16] of the I&B Code leads to an inescapable conclusion that the said provisions are all status quo ante in nature i.e. such directions were required to be issued that would place the corporate debtor in its original position before such onerous contracts were executed, therefore, it is clear that the avoidance proceedings are not just for the benefit of the creditors of the corporate debtor but for the resolved corporate debtor as well. Further, the Report of the Insolvency Law Committee published by the Ministry of Corporate Affairs in February 2020 (ILC Report) leaves the discretion to the adjudicating authority to decide the way the proceeds from the avoidance proceedings are to be distributed among the stakeholders.

At this juncture, it is also pertinent to state that the Supreme Court in Jaypee[17] laid out an elaborate mechanism for identification of avoidance transactions by the resolution professional and the determination of avoidance applications by the adjudicating authorities[18].  As is evident from the Jaypee[19] judgment, the Supreme Court have envisaged a high standard for ensuring that tainted transactions are identified and the proceeds are restored to the benefit of the lenders of the corporate debtor as well as the corporate debtor itself.

Pertinently, the I&B Code imposes no bar for the avoidance proceedings to continue beyond the conclusion of CIRP.  In fact, Regulation 39(2)[20] of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) provides that the resolution professional must, at the time of approval of the resolution plans, place the resolution plans along with the details of avoidance transactions and orders, if any, passed therein before the committee of creditors. The use of the words “if any” connotes a liberal interpretation to the timeline for such avoidance proceedings and appears to envisage continuance of such proceedings beyond the period of CIRP. Similarly, Form H of CIRP Regulations i.e. Compliance Certificate, also requires the RP to disclose pendency of avoidance applications at the time of submission of the resolution plan for approval before the adjudicating authority. While this argument has been rejected by the High Court of Delhi, it appears that the cumulative effect of Section 26 of the I&B Code, Regulation 44 of the Liquidation Regulations and the aforementioned provisions was not analysed in the judgment. The aforesaid argument also finds favour in the Indian Institute of Insolvency Professionals of India in its report titled Statement of Best Practices 1:”Role of IPs in Avoidance Proceedings”[21] and the ILC Report[22].

Implications and fallouts

The Venus Recruiters[23] judgment has sought to delineate from the present framework of the I&B Code and attempted to link the two proceedings together. The present modification will have a cascading effect resulting in one of the two following eventualities:

Event 1: The adjudicating authority will mandatorily be required to determine the avoidance proceedings prior to approval of the resolution plan under Section 31 of the I&B Code resulting in further delay in resolution of the corporate debtor under CIRP.


(a) It appears that the dual objective, namely, timely resolution of the corporate debtor and identification and annulment of onerous and fraudulent contracts, for which the two proceedings were delinked would not be successfully achieved. Essentially, it would lead to a situation where one is achieved at the cost of the other.

(b) Alternatively, the only way in which the aforesaid dual objective would be obtained is if the avoidance proceedings are dealt summarily. However, considering the procedure formulated by the Supreme Court in Jaypee[24], it can safely be stated that the avoidance applications cannot be disposed off summarily and the linkage of the two proceedings may inevitably lead to a cascading effect.

(c) The emphasis on timely resolution emanated from the needs of India’s plagued financial sector. Time-bound resolution, which is critical for the I&B Code to be a success, would be compromised.

(d) It has been noticed by the Supreme Court in Essar[25] that NCLTs have limited infrastructure and the outside time-limit of 330 days is not mandatory. The issue of lack of institution infrastructure, in particular National Company Law Appellate Tribunal (NCLATs) (which was only established Delhi at the time), was also raised in Swiss Ribbons[26]. The Court, while observing that litigants should be allowed to avail remedy under law and cannot be prejudiced due to lack of infrastructure, had received specific assurance from the learned Attorney General at the time that more NCLATs will be established as soon as it is practicable. Since the requirements to dispose off these applications before the conclusion of CIRP has been introduced vide the Venus Recruiters[27] judgment, the NCLT’s would be left with no other alternative but to find justifications to extend the CIRP in order to dispose of these applications.

Event 2: It will be the duty of the RP to ensure determination of avoidance applications before approval of the resolution plan, failing which the avoidance application will be deemed to be infructuous.

(a) This will provide a window of escape to the offenders engaging in fraudulent transactions and further burden the resolved corporate debtor in protracted rounds of litigation for terminating the onerous contracts.

(b) The disposal of avoidance proceedings without a hearing will be a form of blessing towards the illegal/wrongful transactions made by the errant promoters and provide such errant promoters to escape liability. Such a conclusion is completely antithetical to the I&B Code as it does not intend to grant any benefits for the errant promoters.

(c) The only remedy available with the successful resolution applicants would be to terminate the contracts/transactions after implementing the resolution plan. The termination of the said contracts will expose the resolution applicants to protracted rounds of litigation on a contract which, in all likelihood, would be inordinately favourable to the counterparties and also expose the resolved corporate debtor to damages. Ultimately, the resolution of the corporate debtor will become a near impossibility.

  Naman Singh Bagga (2010-2015) National Law University Odisha, now working as Senior Associate at L&L Partners Law Offices and may be reached at e-mail:

†† Maneesh Subramaniam (2014-2019), Amity Law School, Amity University, now working as an Associate at L&L Partners Law Offices and may be reached at e-mail:

†† Anurag Tripathi (2009-2014) National Law University Odisha, now working as in-house counsel at an Indian Conglomerate and may be reached at e-mail:

1 <>.

2 <>.

3 <>.

4 <>.

5 <>.

6 <>.

7 <>.

8 2020 SCC OnLine Del 1479

9 <>.

10 2020 SCC OnLine Del 1479

11 <>.

12 2020 SCC OnLine Del 1479

13 DBM Geotechnics and Constructions (P) Ltd. v. Dighi Port Ltd., 2019 SCC OnLine NCLT 8142

14 <>.

15 2020 SCC OnLine Del 1479

16 <>.

17 Jaypee Infratech Ltd., Interim Resolution Professional  v. Axis Bank Ltd., (2020) 8 SCC 401 

18 Id., paras 28.1 and 28.2.

19 (2020) 8 SCC 401 

20  <>

21 IIIPI in its report, titled Statement of Best Practices 1: “Role of IPs in Avoidance Proceedings”, had observed that the pendency of proceedings will not bar the resolution/liquidation or voluntary liquidation of the corporate debtor. It further observed that the two proceedings should be treated separately and even if the corporate debtor is resolved/ liquidated, the application of avoidance transactions will be carried on.

22 Similarly, ILC Report also states that where the adjudicating authority comes to the conclusion that the avoidance proceedings may not be concluded prior to dissolution of the corporate debtor, due to any countervailing factors, it should also provide the manner of continuation of the proceeding after such dissolution.

23 2020 SCC OnLine Del 1479

24 (2020) 8 SCC 401

25 Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531

26 Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 

27 2020 SCC OnLine Del 1479

Op EdsOP. ED.

I. Prelude

In the era of globalisation, the national economies have integrated into a global economic system and the cross-border trade has increased drastically which changed the entire fabric of businesses. Globalisation and growth in international trade have resulted in companies having business in multiple jurisdictions across the globe. When an investor invests in a multinational enterprise having assets and creditors in foreign nations and the event that enterprise becomes insolvent, such insolvency would have cross-border consequences, leading to conflicts between the national laws concerning insolvency and liquidation. When a company goes into insolvency, both foreign-based and domestic investor would seek to protect their rights and interests and this is when cross-border insolvency laws come into the picture.

The insolvency regime of a sovereign nation reflects the priorities of that State. India, on 28-5-2016, took a step forward in this direction and introduced the Insolvency and Bankruptcy Code, 2016[1] (hereinafter referred to as “IBC or “the Code”). The Code, primarily, provides the mechanism for the creditors of an entity to initiate corporate insolvency resolution process (hereinafter referred to as “CIRP”) in the event of default in the payment of debts by the corporate debtor. However, resorting only to national laws in relation to multinational players could be ineffective. In turn, a robust institutional arrangement is needed to efficiently deal with such disputes having cross-border consequences. Earlier, countries had intra-jurisdiction focused insolvency laws operating within their borders[2] and therefore, leading to conflicts in the restructuring of the foreign-based corporate debtor. Hence, with the ultimate aim to facilitate a uniform approach, the United Nations Commission on International Trade Law proposed the UNCITRAL Model Law on Cross-Border Insolvency, 1997 (hereinafter referred to as “the Model Law”).

Unlike other multilateral conventions, the Model Law merely offers legislative guidance for States. Its primary objective is to assist States to equip their insolvency laws with a modern, harmonised and fair framework to address cross-border insolvency disputes efficiently and swiftly.[3] The World Bank noted that insolvency proceedings may involve diverse interests and therefore, the legal system of a nationmust provide for unambiguous law concerning jurisdiction, recognition of foreign proceedings, cooperation with foreign courts, and choice of law.[4] Also, in the light of the growing significance of cross-border insolvencies, the International Monetary Fund (IMF) encourages States to adopt the Model Law as it provides an effective mechanism for recognition of foreign proceedings and cooperation among different courts and administrators.[5]

II. Existing mechanism for cross-border insolvency under IBC

The cross-border insolvency law guarantees an efficient restructuring mechanism to both creditor and corporate debtor by equitably safeguarding their interest and ensuring legal certainty of trade and investment. At present, following the recommendations of the Joint Committee on the Insolvency and Bankruptcy Code, 2015, the Code contains two provisions surrounding cross-border issues, yet to be implemented by the Central Government.[6]

Section 234: Agreements with foreign countries

In order to enforce the provisions of IBC, the Central Government is empowered to enter into bilateral agreements with other nations to administer the cross-border ramifications and may also direct the application of the Code when assets or property of a corporate debtor or its personal guarantor is situated at any place in the country with which reciprocal arrangement has been expressly signed.

Section 235: Letter of request

This provision calls for the application of the doctrine of reciprocity, when, in the course of the insolvency resolution process, any evidence or action relating to the assets of a corporate debtor or its personal guarantor is required, the resolution professional or the liquidator or the bankruptcy trustee make an application to the National Company Law Tribunal (hereinafter referred to as “NCLT”) and NCLT, if satisfied, may issue a letter of request to a court or an authority of the country with which an agreement has been made to deal with such request.

The prima facie objective behind incorporating the abovementioned provisions in the Code is to maximise the asset value of the corporate debtor, however until now, for that purpose, India has not signed any reciprocal agreement with any other nation and also, no effective measures have been taken to implement the inter-government agreements.[7]

 The rationale behind uncertainty regarding implementation stems from the very fact that treaties with different nations would have varying provisions involved and therefore require lengthy negotiations between nations in their individual capacities. However, the burden on the judiciary will certainly be lessened if the nations adopt a uniform framework concerning cross-border insolvencies.

III. The Model Law and the 2nd Insolvency Law Committee Report: How significant are they?

With the object of having a hassle-free solution for the international insolvency resolution process, the Secretariat of UNCITRAL, on 30-5-1997, issued the UNCITRAL Model Law on Cross-Border Insolvency (hereinafter referred to as “the Model Law”)[8]. It is indeed the most widely accepted legal framework to deal with cross-border insolvencies and has been adopted in 44 States with varying modifications suitable for their domestic legal systems.[9]

Considering the inadequacy of laws dealing with cross-border insolvencies in India, the Insolvency Law Committee (hereinafter referred to as “ILC”) in its second report on 16-10-2018, recommended incorporating the Model Law, with certain modifications, into the existing IBC. The adoption of the Model Law in India has been recommended in the past by the Eradi Committee and the N.L. Mitra Committee in the years 2000 and 2001 respectively. The Model Law, if adopted, would be helpful in numerous ways such as for improving the ranking in ease of doing business thereby significantly increasing the inflow of FDI, prioritising proceedings and domestic stakeholders (in the event when foreign proceedings are against domestic public policy), remedying Indian creditors in other jurisdictions, devising a mechanism for cooperation, etc.

The Model Law seeks to provide a uniform approach to cross-border insolvency proceedings by harmonising national insolvency laws dealing with it. It does not provide for substantive unification of insolvency laws, rather it respects the diversity found in the laws relating to insolvency of various jurisdictions and allows the States to draft their national laws in consonance with the Model Law after certain modifications as they deem necessary. The proposed amendment by the ILC is based on following main principles of the Model Law.

The “access” principle

As per the provisions of the Model Law, it will remove or subside many current barriers that are experienced by foreign liquidators with respect to jurisdiction, standing and right to be heard, and will allow any foreign representative to apply directly to access the court of a State which has adopted the Model Law so that they can also initiate domestic insolvency proceedings.[10]

The “recognition” principle

It allows recognition of foreign proceedings and the relief by the domestic court that flows from that recognition. With the intent to determine the level of control that the jurisdiction has over the insolvency resolution proceedings and type and extent of relief that NCLT may grant in foreign proceedings, the Committee Report of 2018 recognises two types of foreign proceedings:

(i) Foreign Main Proceedings (proceedings in the State where the corporate debtor has a centre of its main interests); and

(ii) Foreign Non-main Proceedings (proceedings in the State where the corporate debtor has an establishment).[11]

The “relief” principle

It specifies the relief that could be granted in both the foreign main and non-main proceedings. If NCLT determines that a proceeding is a foreign main proceeding then the ongoing domestic proceedings will be put on stay and the estate therein will be handled by the foreign representative so-appointed. Whereas, if a proceeding is termed as foreign non-main proceeding, then such relief is at the discretion of the domestic court.[12]

The “cooperation” and “coordination” principle

The Model Law lays down the basic framework for the maximum possible cooperation and communication between domestic and foreign courts, and insolvency professionals. It also provides a framework for concurrent insolvency proceedings i.e. for the commencement of domestic proceedings, when a foreign proceeding has already started or vice versa. It also provides for coordination among two or more concurrent insolvency proceedings taking place in different countries by facilitating cooperation among them.[13]

Moreover, the Model Law also contains a public policy exemption provision according to which a court may refuse to grant recognition to foreign proceedings or to take suitable action against it under the Model Law if admission or recognition of such proceedings is inconsistent with the public policy of its nation. A significant number of countries, including the USA, the UK and Singapore, have adopted the public policy exemption with varying degrees into their domestic legal systems.

Considering its universality and the flexibility that it provides by accommodating the domestic laws with necessary modifications, the second Insolvency Law Committee Report of 2018 has advocated for introduction of cross-border insolvency provisions based on the Model Law in the IBC. Adoption of the Model Law will serve as a strong signalling factor and may be seen as a progressive and forward-looking market reform while projecting a positive international image.

IV. The role of Indian judiciary in solving cross-border insolvency cases

There arise multiple complexities when it comes to the implementation of the law governing cross-border insolvencies in jurisdictions across the globe. Nations with common law have long been debating the impact of Court of Appeal decision in Gibbs & Sons v. La Societe Industrielle et Commerciale des Metaux[14], wherein it was held that full discharge of debtor’s liability towards certain creditors granted by a foreign court in a contract made and performed in England may not be readily acceptable in English Court.

The Gibbs rule though criticised off later but was followed grudgingly in the English courts. Several other courts have, time and again, highlighted the need to do away with the Gibbs rule. [15] It has been opined that, if a foreign creditor participates in the insolvency proceedings, he ought to be deemed to have submitted itself in personam to the jurisdiction of the insolvency court and cannot seek his claim independently. However, such restructuring puts the corporate debtor in an unfortunate situation bearing the costs of attaining the discharge of his liability in multiple jurisdictions.

These complexities in cross-border insolvencies do not end there but can be found in bankruptcy laws of other jurisdictions as well. Considering the Indian scenario, the last two years have witnessed the admission of certain high-valued companies to the insolvency resolution process, having assets and creditors outside the territorial scope of India, thereby raising concerns regarding the procedure to be adopted in such situations. India saw it first cross-border insolvency in 1908 in P. MacFadyen & Co., In re, wherein the proceeding was concerning the liquidation of an Anglo-Indian partnership, after the death of one of the partners. Consequently, the London and Madras Trustees entered into an agreement, confirmed by the respective courts, by which it was promised that surplus sum would be remitted to the other proceeding for global distribution. When the validity of this agreement was challenged, the English courts stated that the agreement was “clearly a proper and commonsense business arrangement” and that it was “manifestly for the benefit of all parties interested”.[16]

Hence, with no constructive law in place dealing categorically with the cross-border insolvency parlance, the judiciary had no option but to set out an encouraging precedent for all such future matters.

Unfolding the Jet Airways saga: First Indian cross-border insolvency case

Recently, in 2019, Jet Airways became the first Indian company to undergo cross-border insolvency as a consequence of the ruling of the National Company Law Appellate Tribunal (hereinafter referred to as “NCLAT”) directing a “Joint Corporate Insolvency Resolution Process” under IBC[17], thus setting a breakthrough for the evolving insolvency law of the country. The crucial case is concerning the defunct debt-ridden Mumbai-based Indian-international airline that was estimated to owe a total liability of more than Rs 36,000 crores to its domestic and foreign lenders including the operational creditors.

The prominent question that rekindled the debate in the instant case is regarding the jurisdiction of the Netherlands court to try the matter relating to the bankruptcy of the airline registered and incorporated in India and to pass the suitable orders for its restructuring.

In the early June 2019, State Bank of India (hereinafter referred to as “SBI”) led consortium of creditors approached NCLT seeking an official declaration of Jet as bankrupt and initiation of CIRP proceedings against it to preclude the transfer of assets under Section 14 of IBC.[18] Subsequently, on June 20, Jet was admitted to CIRP following which the adjudicating tribunal was apprised of the fact that two months earlier, in fact, a bankruptcy petition had been filed against the airline in the Noord-Holland District Court of Netherlands for asserted claims of unpaid dues worth nearly Rs 280 crores, by the two European creditors of the group seeking the seizure of one of the Jet Airways’ Boeing 777 aircraft that was parked in the Schiphol Airport in Amsterdam. Following which, a month later, the Dutch Court appointed a Netherlands-based bankruptcy Administrator to take charge of Jet assets located in the Netherlands.

Soon after the admission of the Jet Airways to CIRP in India, the administrator appointed by the Dutch Court approached NCLT, Mumbai Bench requesting it to recognise the insolvency proceedings in the Netherlands and to withhold the CIRP proceedings taking place in India, as the bankruptcy proceedings are already taking place against the airline in the competent court claiming its jurisdiction under Article 2(4) of the Dutch Bankruptcy Act and, therefore, the two parallel proceedings happening in different jurisdictions would vitiate the restructuring process and have an adverse impact on the creditors. However, the NCLT refused to withhold the Indian proceedings on the rationale that the twin provisions, they being, Sections 234 and 235 dealing with cross-border insolvency under the IBC had not yet been notified by the Government, and in the absence of such a law, the Tribunal outrightly barred the Administrator so appointed by the Dutch Court from participating in the proceedings going on under the IBC and, further, in para 29 of its order categorically declares the overseas proceedings null and void.

Aggrieved by the decision of the adjudicating authority, the Dutch Court appointed administrator appealed against the NCLT’s order.  The Appellate Tribunal, on the assurance that the administrator would not alienate any offshore assets of the airline, set aside the order of the NCLT and further, allowed the Dutch Administrator to cooperate with the Indian Insolvency Resolution Professional and to participate in the meetings of the Committee of Creditors (hereinafter referred to as “CoC”). The NCLAT went further and allowed seamless cooperation between the Indian parties and their Dutch counterpart to conclude a resolution plan in the best interest of the Jet Airways and all its stakeholders. Thus, the curious case of Jet Airways brought forth an interesting attempt by the judiciary to incorporate Model Law framework into the Indian insolvency law and practice until such time as the law is enacted.

In consonance with the directions of the Appellate Tribunal, Resolution Professional and the Dutch Court-appointed Administrator agreed upon the “cross-border insolvency protocol” construed on the principles of Model Law framework, recognising India as the “centre of main interest” and therefore the proceedings taking place in the Netherlands as the “non-main insolvency proceedings”. The NCLAT taking the onus while issuing suitable directions for coordination, significantly not afforded the Dutch Administrator the right to vote in CoC, however, allowed him to attend the meetings only to the extent of preventing any potential overlap of powers.

The complication that exists in the present case is that the distinct doctrinal perspectives on cross-border insolvency adopted by India and Netherlands, wherein, the former adheres to the “universalist approach” of cross-border insolvency, which stipulates the institution and administration of insolvency proceedings by one court in the jurisdiction where the corporate debtor is domiciled or has the registered office, taking into account all his assets irrespective of their location while the latter adhere to a sort of “territoriality approach” of cross-border insolvency, which limits the jurisdiction of the court only to the assets present within the territory of the State and abstains the administrator so-appointed to take charge of the assets not situated within its particular territory. However, the Dutch Supreme Court in Yukos Finance v. Liquidator, OAO Yukos Oil Company[19], had allowed the foreign administrator to effectively exercise its powers without harming the interests of the creditors located in the Netherlands, based on a condition precedent that his actions are in accordance with the laws of the jurisdiction in which the insolvency proceedings are being commenced.

NCLAT in its ruling succeeded in striking out a “balance between the relief granted to the foreign representatives and the interests of those affected by such relief”, in line with the objective of the Model Law framework. The Jet Airways case is, interestingly, one of many such cases which exemplified the need to incorporate the cross-border insolvency regime in the existing laws.

The Curious Case of Videocon Industries: First Indian “Group Insolvency” Case

In August 2019, the Mumbai Bench of NCLT recognised the principle of “substantial consolidation” and allowed to consolidate 13 of the 15 Videocon Group companies.[20] It was for the first time when consolidation of group companies for insolvency proceedings received green signal under IBC given the rationale that it would help in maximising the asset value of the debtor, thereby, setting a benchmark for group insolvency.

The doctrine of “substantial consolidation” is, primarily, an enabling doctrine, by way of which, adjudicating authority combines/merges the assets and liabilities of the individual corporate entities and proceed with a common insolvency resolution and restructuring process in order to achieve a fair value for the stressed assets of group companies while keeping in mind the interests of the creditors.

In December 2017, SBI filed insolvency application against the Videocon Industries at NCLT, Mumbai Bench, seeking to admit and initiate CIRP proceedings. Soon after the admission of Videocon Industries to CIRP, SBI led consortium moved an application seeking “substantial consolidation” of the 15 companies belonging to the corporate debtor, where the consortium was the common creditor. Meanwhile, separate CIRP proceedings were instituted against all the individual entities, however, it failed to obtain any attractive bid because of the lack of collateral assets and their inability to survive individually. In the absence of any express provision in the Code, the Tribunal analysed bankruptcy jurisprudence in the US and the UK and subsequently using its equity jurisdiction decided in favour of the consortium.

Interestingly, in February 2020, NCLT allowed[21] the second round of group insolvency of Videocon Industries with 4 foreign-based companies. The Tribunal ordered to club overseas oil and gas businesses in the ongoing insolvency proceedings on a plea filed by the managing director of the Videocon Group for extension of the moratorium, thereby questioning extraterritorial applicability of IBC and procedure involved in collation of foreign subsidiaries assets with the ones in India. This case, all over again, voiced the issues surrounding coordination theory in cross-border insolvency and expressed the need for legislation governing the same.

First instance of recognition of Indian insolvency proceedings under Chapter 15 of the US Bankruptcy Code

Chapter 15 of the United States Bankruptcy Code provides for the procedure through which bankruptcy courts recognise the foreign insolvency proceedings. The United States, in 2005, adopted the UNCITRAL Model Law framework for the efficient administration of cross-border insolvencies by devising a mechanism which necessarily rules out the possibility of initiating separate proceedings in different jurisdictions. Pursuant to the Model Law, in November 2019, in SBI v. SEL Mfg. Co. Ltd.[22], the Indian insolvency proceeding pending before NCLT, Chandigarh Bench secured, for the first time ever, recognition as “foreign main proceeding” within the meaning of Section 1502(4) of the US Bankruptcy Code[23], by the US bankruptcy court. This came after the application filed by the foreign representative attributed India as the “centre of main interests” of the foreign debtor, which was SEL manufacturing.

The Court, in this case, held that the recognition of the Indian insolvency proceeding is not contrary to the public policy of the United States. Further, it went on to state that it is equally pertinent to entitle the foreign representative and the debtor to all the reliefs in consonance with Section 1520 of the Code[24], to ensure maximisation of asset value without recklessly disregarding interests of the creditors.

V. Concluding remarks

Given the lack of a legal framework to deal with cross-border disputes under IBC, the observations of the courts in recent decisions indicate a positive judicial trend as regards the potential of India to devise a corporate-friendly approach. Such cases should, however, serve as a clarion call for the Government so that the process of incorporating cross-border insolvency provisions is expediated. Notably, the draft provisions, as proposed by the ILC, if adopted, would provide a framework that could go a long way in ensuring coordination and communication among States to successfully resolve the cross-border insolvency disputes. A law in line with the Model Law, if enforced, will sufficiently strengthen the Code and would encourage foreign direct investment (FDI), therefore, pave the way for ease of doing business in India, which is the need of the hour. Moreover, though Sections 234 and 235 of the IBC suggests a way to deal with international insolvencies, their implementation in more practical scenarios attracts complexities. The entire process involves signing bilateral agreements with different nations having different terms of arrangement and entailing lengthy negotiations to work that out. For example, what is a fallback plan in situations when there exists no bilateral arrangement with the foreign nation? Such implications necessitate the adoption of uniform and stable framework like Model Law to resolve cross-border insolvency cases and thus, easing the whole process. Hence, IBC being completely silent on cross-border insolvency is akin to a half-baked cake.

* BA LLB (Hons.) 3rd year law student, Damodaram Sanjivayya National Law University, Visakhapatnam.

**BA LLB (Hons.) 2nd year law student, Damodaram Sanjivayya National Law University, Visakhapatnam

[1] Insolvency and Bankruptcy Code, 2016.

[2] Ran Chakrabarti, Key Issues in Cross-Border Insolvency, 30 National Law School of India Review 119-135 (2018).

[3] Sudhaker Shukla et al., Cross Border Insolvency: A Case to Cross the Border beyond the UNCITRAL, IBBI.

[4]Principles for Effective Insolvency and Creditor/Debtor Regimes, World Bank (2015), <>.

[5]Orderly and Effective Insolvency Procedures, International Monetary Fund (1999).

[6] Himanshu Handa, Orchestrating the UNCITRAL Model Law on Cross-Border Insolvency in India, 1 International Journal of Law Management & Humanities (2018).

[7] Nishith Desai Associates, Introduction to Cross-Border Insolvency, Nishith Desai (April 2020).

[8]Dr Binoy J. Kattadiyil and CS Nitika Manchanda, Cross-Border Insolvency Framework in India, 9 International Journal of Multidisciplinary Educational Research (2020).

[9] Id. at 4.

[10] Andre J. Berends, The UNCITRAL Model Law on Cross-Border Insolvency: A Comprehensive Overview, 6 Tul. J. Int’l & Comp. L. 309 (1998).

[11] Supra Note at 4.

[12] Supra Note at 5.

[13] PRS Legislative Research, Report Summary Insolvency Law Committee on Cross-Border Insolvency, PRS India(1-11-2018),

[14] (1890) 25 QBD 399.

[15] Pacific Andes Resources Development Ltd., In re, 2016 SGHC 210.

[16] (1908) 1 KB 675.

[17] SBI v. Jet Airways (India) Ltd., CP 2205 (IB)/MB/2019

[18] Insolvency and Bankruptcy Code, 2016, Section 14.

[19] No. 07/11447.

[20]State Bank of India v. Videocon Industries Ltd., 2019 SCC OnLine NCLT 745

[21]State Bank of India v. Videocon Industries Ltd., MA 2385/2019 in C.P.(IB)-02/MB/2018, decided on 12-2-2020.

[22] 26 CP (IB) No. 114/Chd/Pb/2017.

[23] 27 US Bankruptcy Code, 1978, § 1502(4).

[24] Id., § 1520.