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National Company Appellate Tribunal (NCLAT): A Bench of S.J. Mukhopadhaya, Chairperson and Justice A.I.S Cheema, Member (Judicial) and Kanthi Narahari, Member (Technical) upheld the impugned decision whereby the appellant’s (Operational Creditor’s) application under Section 9 of the Insolvency and Bankruptcy Code, 2016, filed against the respondent (Corporate Debtor) was rejected.

Operational Creditor’s case was that despite repeated requests, the Corporate Debtor failed to make payments. Per contra, the Corporate Debtor submitted that it was willing to pay the entire amount subject to the condition that the Operational Creditor gets himself registered under the Goods and Services Tax, 2017. The Corporate Debtor also offered a demand draft to the Operational Creditor, which he refused to accept.

Aditya Diwan, Arpit Marwah and Karan Nagpal, Advocates appeared for the Operational Creditor. Per contra, the Corporate Debtor was represented by Y. Suryanarayana, Advocate.

On considering the facts and circumstances, the Appellate Tribunal was of the view that the Operational Creditor initiated the Corporate Insolvency Resolution Process (“CIRP”) with fraudulent and malicious intent for any purpose other than the resolution of insolvency or liquidation and therefore it was clearly covered under Section 65 IBC (fraudulent or malicious initiation of proceedings).

In such view of the matter, the Appellate Tribunal was inclined to interfere with the impugned order. The appeal was, thus, dismissed. [Praveen Kumar Mundra v. CIL Securities Ltd., Company Appeal (AT) (Insolvency) 89 of 2019, decided on 14-05-2019]

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National Company Law Appellate Tribunal (NCLAT): A Bench of Justice S.J. Mukhopadhaya, Chairperson and Justice A.I.S Cheema, Member (Judicial) and Kanthi Narahari, Member (Technical) allowed the appellant (shareholder of the Corporate Debtor) to pay the total dues of the Operational Creditor after the application filed against it under Section 9 of the Insolvency and Bankruptcy Code, 2016 was admitted by the the National Company Appellate Tribunal, Bengaluru.

The appellant submitted that though the Section 9 application was admitted against it, however, the Committee of Creditors was not yet constituted. He submitted that he was ready to pay the total dues of the Operational Creditor which brought the application before NCLT.

Three demand drafts brought by the appellant were produced before the Appellate Tribunal, which were directed to be handed over to the Operational Creditor in the discharge of Corporate Debtor’s liability towards it. In view of the fact that the total amount was paid to the Operational Creditor and the Committee of Creditors was not yet constituted, the Appellate Tribunal set aside the impugned order of NCLT admitting the Section 9 application against the Corporate Debtor. [A.P. Abdul Kareem v. Om Industrial Corpn., 2019 SCC OnLine NCLAT 154, Order dated 16-04-2019]

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National Company Law Tribunal, Mumbai: The Bench of Bhaskara Pantula Mohan, Member (Judicial) and V. Nallasenapathy, Member (Technical) allowed a petition filed by TJSB Sahakari Bank (“the Bankfor admission of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

The Bank was a member of the “SVC Bank Consortium” that sanctioned credit facilities to the Unimetal Castings Ltd. (“Corporate Debtor”) on 25-2-2013. The Bank sought initiation of Insolvency Resolution Process against the Corporate Debtor under Section 7 on the ground of default in repayment of the loan to the extent of more than Rs 6.38 crores.

Aditya Pimple, Advocate instructed by MAG Legal representing the Corporate Debtor raised various contentions to oppose the application of the Bank. One of the contentions related to applicability of Limitation Act, 1963 was that the claim of the Bank was barred under Article 137. For this, he relied on a recent judgment in B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, 2018 SCC OnLine SC 1921 wherein the Supreme Court clarified that the Limitation Act, 1963 is applicable to Insolvency and Bankruptcy Code, 2016. It was submitted that the date of alleged default was 30-06-2015 (the date on which Corporate Debtor’s account was declared a Non-Performing Asset). Furthermore, since the petition was filed on 23-8-2018, i.e., after more than 3 years of the date on which the cause of action arose (and also the right to apply accrued), therefore it was barred by limitation.

Per contra, Nausher Kohli, Advocate instructed by DSK Legal who appeared for the Bank, submitted that the Bank’s name and loan was shown in the balance sheet of the Corporate Debtor for the Financial Year ending 2017. This according to hi was an acknowledgement of liability. And therefore, it was contended that the debt was not barred by limitation even when the insolvency application was filed after 3 years from the date of default.

The tribunal noted that the Corporate Debtor did not dispute the fact the loan was shown as a liability in its balance sheet. It was observed, ” when the liability is shown in the balance sheet, that is a clear acknowledgement of debt by the Corporate debtor. There are umpteen numbers of judgments to say that the debt shown in the balance sheet is an acknowledgement of liability.” In such a view, the Tribunal held that the contention of the Corporate Debtor would not hold water. Having been satisfied that the Corporate debtor defaulted in making a payment towards its liability to the Bank, the Tribunal allowed the petition and admitted the bank’s application filed under Section 7 IBC. [TJSB Sahakari Bank Ltd. v. Unimetal Castings Ltd., CP (IB)-3622/I&BP/MB/2108 dated 25-01-2019]

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National Company Law Tribunal, Mumbai: The Bench of V.P. Singh, Member (Judicial) and Ravikumar Duraisami, Member (Technical) ordered for prosecution to be lodged against the Corporate Debtor / Corporate Applicant on the ground that it suppressed material information while filing a petition under Section 10 of the Insolvency and Bankruptcy Code, 2016  for initiating corporate insolvency resolution process.

The matter had reached upto the stage of the Resolution Professional filing the application for approval of the Resolution Plan by NCLT. During arguments, one of the Financial Creditors, IDBI Bank, brought to NCLT’s notice that the Bombay High Court had already ordered winding-up of the Corporate Debtor and this material fact was suppressed while filing the petition under Section 10.

Extensive arguments were made by both the sides and reliance was placed on various Supreme Court decisions. S. Purohit, Advocate appeared for the Corporate Debtor. On the other hand, Advocates Shavey Mukri along with Nishitha Manbiar  and Almira Lasrado of IndiaLaw represented IDBI Bank; Advocates Ashish and Priyanak Upadhyaya of Ethos Legal Alliance represented SBI Global Factors (P) Ltd.; Advocate Sugatya Chaudhary represented Axis Bank; Nikhil Rajani and Jyoti of V. Deshpande & Co. along with Naman Awasthi, Authorised Signatory represented Edelweiss ARC; Advocates Bhupesh V. Samant and Ganesh Kale represented Saraswat Coop. Bank; Sushmita Gandhi and Anamika of HSA Advocates represented ICICI Bank (all creditors). Another creditor, Ramkumar Birendrakumar (P) Ltd. was represented by Counsel Subir Kumar and Priyanka Sinha of A&P Partners.

The question before NCLT was whether disclosure of the Bombay High Court’s order was material for applying under Section 10 for initiation of corporate insolvency resolution process?

NCLT noted that the Corporate Debtor was fully aware that the company stood wound up by the order of the High Court. According to NCLT, this fact was without an iota of doubt, a material fact for presenting a petition under Section 10. Further, relying on Forech (India) (P) Ltd. v. Edelweiss ARC, 2019 SCC OnLine SC 87, NCLT observed that a Corporate Debtor is barred from filing a Section 10 petition after passing of liquidation orders in winding-up proceedings. The act of the Corporate Debtor in suppressing the information known to it to be material for filing Section 10 petition was held to be punishable under Section 77(a) IBC. Accordingly, the Registrar of Companies, Mumbai was directed to lodge prosecution against the Corporate Debtor under Section 77(a). Furthermore, cost of Rs 10 lakhs was imposed on Corporate Debtor and the petition was dismissed. [Amar Remedies Ltd., In re, 2019 SCC OnLine NCLT 1, Order dated 29-01-2019]

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National Company Law Appellate Tribunal (NCLAT): A Bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial) dismissed an appeal filed against the order of National Company Law Tribunal, Bengaluru dismissing appellant’s application under Section 9 of the Insolvency and Bankruptcy Code, 2016.

The appellant had filed a petition under Section 433(e), 434(1) and 439 of Companies Act, 1956 before the Karnataka High Court. The petition was transferred pursuant to rule 5of the Companies (Transfer of Pending Proceedings) Rules, 2016 to NCLT. The petition was treated as an application under Section 9 of the I&B Code by the appellant. Demand Notice under Section 8(1) was issued. After hearing the parties, NCLT dismissed the application on the ground of pre-existing dispute. Aggrieved thereby, the present appeal was filed.

Raghavendra M. Bajaj, Advocate for the appellant submitted that the Corporate Debtor had agreed to pay dues by 5 different times. But the Corporate Debtor claimed the existence of ‘dispute’. It raised objections regarding non-completion of project within time and completion of the same in haste with defects.

The Appellate Tribunal noted that the objections were raised by the Corporate Debtor much prior to the filing of petition under Companies Act. It was held that such disputes cannot be decided by NCLT but only by a civil court of competent jurisdiction on basis evidence. Therefore, as there existed a dispute raised prior to filing of petition under Sections 433(e) and 434(1) of Companies Act, it was held that the application under Section 9 of I&B Code was not maintainable. [Yash Technologies (P) Ltd. v. Base Corpn. Ltd., 2019 SCC OnLine NCLAT 1, dated 03-01-2019]

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National Company Law Appellate Tribunal (NCLAT): A Bench comprising of Justice A.I.S. Cheema, Member (Judicial) and Balvinder Singh, Member (Technical) dismissed an appeal filed against the order of National Company Law Tribunal (Mumbai) whereby it had admitted application filed by Operational Creditor under Section 8 read with Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process against Corporate Debtor.

Appellant was the Managing Director of Corporate Debtor. His submissions as to existence of dispute as contemplated under the code were not accepted. The main point considered by the Appellate Tribunal was regarding the non-observance of the provision of serving of notice by the Adjudicating Authority (NCLT) before admitting the application. It was argued by the appellant that absence of service of notice by the Adjudicating Authority itself violates principles of natural justice. Reliance was placed upon Starlog Enterprises Ltd. v. ICICI Bank Ltd., 2017 SCC OnLine NCLAT 13 and Mass Metals (P) Ltd v. Sunflag Iron and Steel Co. Ltd., 2017 SCC OnLine NCLAT 504. It was also an admitted fact that the appellant received the notice sent under Section 8 of I&B Code but Veritas Legal, Advocates & Solicitors of operational Creditor but it was contended that Veritas Legal was not the filing authority of the application in NCLT and nor was it authorised by any Board Resolution to act on behalf of Operational Creditor.

The Appellate Tribunal was of the view that Corporate Debtor and appellant had knowledge of the legal proceedings and also of the notice. It observed, “When advocate sends the notice, it is on instructions from the client and the same cannot be ignored by saying that the advocate should also forward authority and Resolution of the Company.” In regard to the requirement of notice to be sent by Adjudicating Authority, the Appellate Tribunal observed that the appellant had sufficient notice and still chose not to appear before NCLT. In such a case, the non-observance of the requirement was not fatal to the appellant’s case. Resultantly, it was held that the appeal was sans merit and was thus dismissed. [J.B. Tiwari v. Biostadt India Ltd., 2018 SCC OnLine NCLAT 563, decided on 30-11-2018]

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National Company Law Appellate Tribunal (NCLAT): A Two-Member Bench comprising of S.J. Mukhopadhaya(Chairperson) and Bansi Lal Bhatt (Member-Judicial), JJ. set aside an order passed by the National Company Law Tribunal (New Delhi) for being violative of principles of natural justice.

NCLAT had admitted the application filed by the respondent (operational creditor) under Section 9 of the Insolvency and Bankruptcy Code, 2016. The appellant submitted that the said application was admitted without any notice to the corporate debtor. It was contended that the order impugned was passed in contravention of rules of natural justice.

The Appellate Tribunal, after perusing the record, noted that admittedly the order impugned was passed by NCLT without notice to the corporate debtor which was indeed in violation of principles of natural justice. Furthermore, the parties had already settled the matter between themselves. in such view of the matter, the Appellate Tribunal was the view that in effect, the order impugned passed by NCLT and allotter orders passed pursuant thereof were illegal and therefore were set aside. The application preferred by the respondent under Section 9 was dismissed and NCLT was directed to close the proceedings. The appeal was, thus, allowed. [Rajesh Arora v. Sanjay Kumar Jaiswal, 2018 SCC OnLine NCLAT 837, dated 05-11-2018]

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National Company Law Appellate Tribunal (NCLAT): A two-member bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial)  dismissed an appeal filed against the order of the National Company Law Tribunal, Chennai whereby the application filed by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 was admitted.

Firstly, the appellant (shareholder of the Corporate Debtor) submitted that the respondent is not a Financial Creditor as defined in Section 5(7) read with Section 5(8). However, on facts, the Appellate Tribunal rejected the submission. It was found that the Rajkumar Impex Ghana Ltd. (subsidiary of the Corporate Debtor) had applied for a loan which was provided by Stanbic Bank Ghana Ltd. The Corporate Debtor executed guarantee in favour of the Bank for the said loan. As such, the Bank became a Financial Creditor. Secondly, the admission of application filed by the respondent under Section 7 for initiation of Corporate Insolvency Resolution Process was assailed. It was challenged on the ground that NCLT while admitting the application, did not record reasons in writing.

The Appellate Tribunal rejected the second submission filed by the appellant as well. It observed that application under Section 7 is not a recovery proceeding or proceeding for determining of a claim on merit that can be decided only by a court of competent jurisdiction. An application under Sections 7, 9 or 10 of the Code not being a money claim or suit and not being an adversarial litigation, NCLT is not required to write a detailed decision as to which are the evidence relied upon for its satisfaction. NCLT is only required to be satisfied that there is a debt and default had occurred. In the present case, NCLT had held that a prima facie case was made out by the applicant. As such, NCLT expressed its satisfaction about existence of debt and default. Thus, the appeal was dismissed holding it to be sans merit. [V.R. Hemantraj v. Stanbic Bank Ghana Ltd.,2018 SCC OnLine NCLAT 451, dated 29-08-2018]

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National Company Law Appellate Tribunal (NCLAT): A two-member bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial), dismissed an appeal filed against the judgment of National Company Law Tribunal, New Delhi whereby Respondents 1 and 2 were held to be Financial Creditors.

Factual matrix of the case is that the said respondents were the erstwhile Directors of the Corporate Debtor company. They extended loan to the Corporate Debtor from time to time at an interest of 18% per annum. The question that arose for consideration in this appeal was whether the respondents came within the meaning of Financial Creditors as defined in Section 5(7) and (8) of the Insolvency and Bankruptcy Code, 2016. It is pertinent to note that Section 5(7) defines a Financial Creditor as any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to.

The Appellate Tribunal perused various provisions of the Code and observed that the expression debt defined under Section 3(11) means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. Non-payment of such debt which has become due and payable and is not repaid by the Corporate Debtor falls within the mischief default defined under Section 3(12) of the Code. Further, in the present case, the manner and circumstances in which the amount of loan was borrowed by the Corporate Debtor from time to time with stipulated interest, left no room for doubt that the outstanding unsecured debt had all the trappings of a Financial Debt. Hence, the said respondents (erstwhile Directors) were safely held to be Financial Creditors. All the contentions raised by the appellant were repelled holding them sans merit. The appeal was, thus, dismissed. [Rajesh Gupta v. Dinesh Chand Jain,2018 SCC OnLine NCLAT 412, Order dated 09-08-2018]

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National Company Law Appellate Tribunal:  A two-member bench comprising of S.J. Mukhopadhaya and Bansi Lal Bhat, J., dismissed a company appeal filed against the order of the National Company Law Tribunal which dismissed the appellant’s application filed under Section 7 of the Insolvency and Bankruptcy Code 2016, for initiation of Corporate Insolvency Resolution Process.

The appellant (operational creditor) cited a long list of cases to substantiate its application. The question before the Tribunal was whether an application under Section 7 of the Insolvency and Bankruptcy Code 2016 was maintainable even when the winding up proceedings against the corporate debtor had already been initiated. It was an admitted fact that the Bombay High Court had already ordered the winding of the corporate debtor. Referring to various judgments, the Tribunal, held that an application for initiation of Corporate Insolvency Resolution Process was not maintainable. The Tribunal observed that winding up order is the second stage and corporate insolvency resolution process is the first. Therefore, the order for initiation of the first stage cannot be passed after order directing the compliance of the second stage had already been issued. As a result, the Tribunal dismissed the company appeal preferred by the appellant. [Indiabulls Housing Finance Ltd. v. Sree Ram Urban Infrastructure Ltd., 2018 SCC OnLine NCLAT 282, order dated 30-05-2018]

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National Company Law Appellate Tribunal: A two-member bench comprising of S.J. Mukhopadhaya, J. (Chairperson) and Bansi Lal Bhat, J. (Member, Judicial), allowed an appeal filed against the order passed by the National Company Law Tribunal (Adjudicating Authority) whereunder application under Section 9 of Insolvency and Bankruptcy Code 2016, preferred by the respondent was admitted and Insolvency Resolution Professional was appointed.

The appeal was filed by the Director of Lepton Projects (P) Ltd. which was the ‘Corporate Debtor’. The respondent Sanghvi Movers Ltd. was the ‘Operational Creditor’. An application was filed by the Operational Creditor under Section 9 of the I&B Code, after the admission of which ‘Moratorium’ was passed and ‘Insolvency Resolution Professional’ was appointed by NCLT in terms of the Code. However, the appellant challenged the said order of NCLT contending that no notice in terms of Section 8(1) of the Code was given to the appellant before such order was passed.

The Appellate Tribunal perused the record and considered the submissions made on behalf of the parties. It was brought to the notice of the Appellate Tribunal that when the respondents reached to the office of the appellant, no one was found occupying the premises. The Appellate Tribunal also found favour with the contention of the appellant that had a demand notice in terms of Section 8(1) or notice of petition been served on the appellant, they could have settled the claim with the respondent- Operational Creditor. Further, the appellant submitted that the amount had already been paid, which was not contended by the respondent. In such circumstances, the Appellate Tribunal though it fit to set aside the impugned order. Accordingly, the order was set aside as illegal, application preferred by the respondent under Section 9 was dismissed, and the appellant was released from all rigours of law in the matter concerned. [Lepton Projects (P) Ltd. v. Sanghvi Movers Ltd., Company Appeal (AT) (Insolvency) No. 273 of 2048, dated 31-5-2018]