corporate insolvency resolution process

NCLAT
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National Company Law Appellate Tribunal : In an appeal filed by the appellant against the order passed by the National Company Law Tribunal (NCLT) for cancellation of non-bailable warrants, a bench comprising of Ashok Bhushan*, M Satyanarayana Murthy, JJ., and Barun Mitra (Technical Member) held that the NCLT was right in refusing to approve the Resolution Plan due to non-serious, casual and non-diligent conduct of the Resolution Applicant.

Factual Matrix

A Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor by the NCLT. The Resolution Professional /Appellant submitted a resolution plan which was later approved in the 10th Committee of Creditors' (CoC) meeting held on 07-11-2018. The CoC authorized the appellant to file Application for approval of the Resolution Plan. The successful resolution applicant was permitted to be impleaded as one of the Respondents by the NCLT vide order dated 03-03-2021.

The resolution applicant failed to deposit the performance guarantee for the Resolution Plan and , he did not appear before the NCLT. The NCLT issued a non-bailable warrant against the resolution applicant vide order dated 03-09-2021 and dismissed the plan approval application vide order dated 24-11-2021. The NCLT directed the initiation of liquidation of the corporate debtor and also, directed the liquidator to take actions against the successful resolution applicant under S. 74(3) of the Insolvency and Bankruptcy Code, 2016. The present appeal is filed by the appellant against the order dated 24-11-2021 passed by the National Company Law Tribunal.

Contention of the Parties

The Appellant contended that initially he was not a party to the plan approval application but was made a party later and due to certain miscommunication, he was not able to appear before the NCLT. The Appellant contended that initially there was no requirement for submitting any performance guarantee therefore he did not submit any performance guarantee during submission of resolution plan. The Appellant also contended that he is still ready to abide by the resolution plan and to comply with all the terms and conditions of the resolution plan.

The respondents contended that the appellant had not shown any interest in abiding by the resolution plan and deliberately did not appear before the NCLT therefore the tribunal was correct in rejecting the application for approval of resolution plan.

Appellate Tribunal's Take

The Tribunal opined that it is correct that initially the appellant was not a party to the plan approval application and also, on the date when Resolution Plan was approved, it did not contain any provision for providing performance security.

The Tribunal observed that the NCLT was right in dismissing the plan approval application as the CIRP is a time bound process where timeline has been prescribed for each step and cannot be allowed to continue for an indefinite period. Moreover, the applicant has not shown any willingness to proceed with the Resolution Plan. The Tribunal stated that

“Due to non-serious, casual and non-diligent conduct of the Resolution Applicant, the Adjudicating Authority has rightly refused to approve the Resolution Plan. We do not find any error in the order of the Adjudicating Authority in rejecting CA-734 of 2018.”

The Tribunal cancelled the bailable and non-bailable warrants issued to the appellant as the NCLT dismissed the application for the cancellation of non-bailable warrant without adverting to any of the reasons given by the Appellant.

The Tribunal also held that the direction issued by the NCLT for filing a complaint under S. 74(3) against the appellant is unsustainable as there was no violation of S. 74(3) by the Appellant. The Tribunal stated that

“Since the Resolution Plan was never approved by the Adjudicating Authority, the Corporate Debtor or its officers or creditors or any other persons cannot be said to have knowingly and wilfully contravened any of the terms of the Resolution Plan.”

The Tribunal directed the Liquidator appointed by the impugned order to proceed in accordance with the law and it shall be open for the appellant to participate in liquidation process.

[Cimco Projects Ltd. v. Anup Kumar, 2022 SCC OnLine NCLAT 330, decided on 01-08-2022]

Advocates who appeared in this case :

Mr Ashish Makhija and Mr. Deep Bisht, Counsel for the Appellants;

Ms Abhijeet Sinha and Mr. Aditya Shukla, Counsel for the Respondent 1;

Ms. Shankari Mishra, Counsel for the Respondents (other).

*Ritu Singh, Editorial Assistant has put this report together.

NCLAT
Case BriefsTribunals/Commissions/Regulatory Bodies

   

National Company Law Appellant Tribunal, New Delhi: The Bench of Ashok Bhushan, J., Chairperson, and Shreesha Merla, Technical Member, while dismissing a company appeal held that when a Corporate Debtor as a Guarantor has not invoked the Corporate Guarantee before the initiation of Corporate Insolvency Resolution Process (hereinafter as ‘CIRP') under the provisions of Insolvency and Bankruptcy Code, 2016 (Hereinafter as ‘IBC') then the ‘right to payment' cannot be accrued by the Corporate Debtor.

Background of the Case

The Appellant, IDBI, was appointed as a Debenture Trustee for the benefit of the Holders of certain Debentures issued by M/s. Saha Infratech Pvt. Limited (Principal Borrower) as per the Debenture Trustee Agreement dated 18-05-2016. The first Respondent, Mr. Abhinav Mukherjee, is the Homebuyer of Palm Developers Pvt. Ltd., ‘Corporate Debtor' having a claim of Rs.2,94,43,634/-; the second Respondent Mr. Krit Narayan Mishra is the Resolution Professional of the ‘Corporate Debtor', appointed vide letter dated 13-07-2021 in I.A. 1742/2021 replacing the erstwhile IRP, Mr. Manoj Kumar Singh. The Appellant, ECL Finance Limited is the original Debenture Holder which executed the Assignment Agreement dated 27-03-2020 whereby all rights regarding the Financial Assistance were assigned in favour of Assets Care and Reconstruction Enterprise Limited (‘ACRE').

The appeals were filed under Section 61 (1) of the IBC challenging the impugned order dated 14-03-2022 passed by the National Company Law Tribunal, New Delhi, wherein the application filed by a homebuyer was allowed and held that ‘IDBI Trusteeship Services Limited' and ‘ECL Finance Ltd.', the Appellants are not ‘Financial Creditors' and also observed that the Appellants are ‘Related Parties' to the ‘Corporate Debtor'.

Analysis and Decisions

  • Whether the NCLT, Delhi was right in applying the ratio of ‘Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited v Axis Bank and holding that the Appellants are not ‘Financial Creditors' since there was no ‘direct disbursal' of the amount to the ‘Corporate Debtor'/Guarantor.

The Bench observed that a ‘Guarantee is included' as one of the illustrations which specify the definition of ‘Financial Debt' under Section 5(8)(i) of the IBC. Further, the Bench referred to the judgment given in Ascot Realty Private Limited v. Ajay Kumar .', (2020) SCC OnLine NCLAT 732, where it was held that for initiation of Insolvency Proceedings against the Corporate Guarantor, the element of disbursal for ‘Time Value of Money' is not required. Hence, the Bench opined that there was no direct disbursal of the amount to the Corporate Guarantor, any amounts released to the Principal Borrower and not to the Corporate Guarantor do constitute ‘Financial Debt' as defined under Section 5(8) of the IBC and it cannot be said that such amounts do not have consideration for ‘Time Value of Money'.

Therefore, the Bench held that the ratio of Anuj Jain Interim Resolution Professional for Jaypee Infratech Ltd v. Axis Bank, 2019 SCC OnLine SC 1775 is not applicable.

  • Whether the locus of the ‘Individual Homebuyer' or Financial Creditor to challenge the Constitution of the Committee of Creditors (‘CoC')?

The Bench in this regard referred to the judgment of the Supreme Court in Phoenix Arc Pvt.Ltd.' v. Spade Financial Services Ltd. (2021) 3 SCC 475, wherein it was held that ‘Financial Creditors' forming part of the CoC must be heard during proceedings which would establish the status of other ‘Financial Creditors'. Further, the Bench even referred to the judgment given in Aashray Social Welfare Society v. Saha Infratech Pvt. Ltd. & Ors., Comp. (AT) (Ins) No. 904 of 2021, wherein it was held, “It cannot be said that since the Authorised Representative has not come up before the Adjudicating Authority for filing the impleadment application, the Appellants who themselves are Homebuyers have no right to participate in the adjudication initiated by filing applications”.

Therefore, in the light of the above cases, the Bench held that the Homebuyer has every right to be heard and has the locus to challenge the Claim of the Appellants.

  • Whether the Appellants are ‘Related Parties' of the ‘Corporate Debtor' and were in a ‘position' to ‘control' the affairs of the ‘Corporate Debtor', to fall within the ambit of the definition of ‘Related Party' as defined under Section 5(24) of the IBC.

The Bench observed that the purpose of excluding a related party of a ‘Corporate Debtor' from the CoC is to obviate conflicts of interest that are likely to arise if a related party is allowed to become a part of the CoC. The Supreme Court in many judgments has held that the exclusion under the first proviso to Section 21(2) of the IBC was related not to the debt itself, but to the relationship existing between the related party ‘Financial Creditor' & ‘Corporate Debtor'.

Hence, the Bench relied on the judgment given in the case of Arcelormittal India Pvt. Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1, and held that the Appellants do have ‘Positive Powers'and are in a position to directly and indirectly control the management and the policy decisions of the ‘Corporate Debtor'.

  • Whether the Appellant can make a ‘Claim' based on the ‘Guarantee Deed' which was never invoked pre-commencement of the CIRP, and remained uninvoked even as on the date of filing of the ‘Claim', thereby meaning that ‘Right to Payment' has not yet accrued?

The Bench relied on the observation of the Supreme Court in Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17, where it was observed that “Whereas a “claim” gives rise to a “debt” only when it becomes “due”, a “default” occurs only when a “debt” becomes “due and payable” and is not paid by the debtor. It is for the reason that a financial creditor has to prove “default” as opposed to an operational creditor who merely “claims” a right to payment of a liability or obligation in respect of a debt which may be due.” Therefore, the Bench opined that he Appellants cannot Claim the amounts in the CIRP of the ‘Corporate Debtor' who is a ‘Corporate Guarantor ‘based on the Deed of Guarantee which was never invoked as on the date of filing of the Claims.

Further, the Bench placed reliance on the judgment of the Supreme Court in Ghanshyam Mishra and Sons Pvt Ltd v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657 and held that when the ‘Corporate Debtor' is a ‘Guarantor' and the ‘Corporate Guarantee' was not invoked before the commencement of the CIRP, as on the date of filing of the Claims, the ‘Right to Payment' cannot be accrued.

Hence, the Bench dismissed the company appeals.

[IDBI Trusteeship Services Ltd. v. Abhinav Mukherjee, 2022 SCC OnLine NCLAT 267, decided on 12-07-2022]

Appearances before the tribunal

COMPANY APPEAL (AT) (INSOLVENCY) No. 356 of 2022

Dr. Abhishek Manu Singhvi, Sr. Advocate with Gaurav Mitra, Dev Roy, Himanshi Rajput, Atul Sharma, and Aditya Vashisth, Advocates, for the Appellants;

Abhijeet Sinha, and Raghavendra M. Bajaj, Advocates, for the Respondent No.1;

Milan Singh Negi, Advocate, for the New IRP.

COMPANY APPEAL (AT) (INSOLVENCY) No. 358 of 2022

Ramji Srinivasan, Sr. Advocate with Gaurav Mitra, Dev Roy, Atul Sharma, Renuka Iyer, Aditya Vashisth and Ms. Himanshi Rajput, Advocates, for the Appellants;

Abhijeet Sinha and Raghavendra M. Bajaj, Advocate for R-1;

Milan Singh Negi, Advocate, for the New IRP.

Financial Creditor
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]

NCLAT
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.

Case BriefsHigh Courts

Bombay High Court: A very interesting question was considered by G.S. Kulkarni, J., the question being, whether mere filing of a proceeding under Section 7 of the Insolvency and Bankruptcy Code, 2016 would amount to an embargo on the Court considering an application under Section 11 of the Arbitration and Conciliation Act, 1996, to appoint an arbitral tribunal?

Factual Background

 In the present matter, the respondent provided financial assistance to the applicant of an amount of Rs 4,50,00,000 for which a loan agreement was entered between the applicant and the respondent, referred to as Agreement 1.

Due to a change in the business scenario, another Agreement was executed referred to as Agreement 2, under which the date of repayment of the borrowing was extended.

There were defaults on the part of the applicant in the payment of the loan instalments.

Applicant’s case was that in the discharge of its liability towards the respondent under the above-stated agreements, the applicant issued a cheque to the respondent, of an amount of Rs 31,08,33,457 being the repayment of the respondent’s dues, which was in accordance with the terms and conditions of the loan agreement.

Respondent had approached the NCLT by initiating proceedings against the applicant under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Though, so far, no order had been passed by the NCLT admitting the petition as per the provisions of Section 7(5) of the IBC.

Analysis and Decision

High Court observed that there was no dispute in regard to the arbitration agreements between the parties and there was a dispute in regard to the invocation of the arbitration agreement.

Thus, the primary considerations for this Court to exercise jurisdiction under Section 11(6) were certainly present.

The Bench stated that, even if an application under Section 8 of the ACA is filed, the adjudicating authority has a duty to advert to the contentions put forth under an application filed under Section 7 of the IBC by examining the material placed before it by the financial creditor and record a satisfaction as to whether there is default or not.

“…if the irresistible conclusion of the adjudicating authority (NCLT) is that there is default and the debt is payable, the bogey of arbitration to delay the process would not arise despite the position that the agreement between the parties contains an arbitration clause.”

The Bench observed that,

“…mere filing of the proceedings under Section 7 of the IBC cannot be treated as an embargo on the Court exercising jurisdiction under Section 11 of the ACA, for the reason that only after an order under sub-section (5) of Section 7 of the IBC is passed by the NCLT, the Section 7 proceedings would gain a character of the proceedings in rem, which would trigger the embargo precluding the Court to exercise jurisdiction under the ACA, and more particularly in view of the provisions of Section 238 of IBC which would override all other laws.”

Hence, as noted in the present case, the Corporate Insolvency Resolution Process initiated by the respondent is yet to reach a stage of the NCLT passing an order admitting the said proceedings, the Court would not be precluded from exercising its jurisdiction under Section 11 of the ACA, when admittedly, there was an arbitration agreement between the parties and invocation of the arbitration agreement had been made, which was met with a refusal on the part of the respondent to appoint an arbitral tribunal.

While concluding the matter, Bench held that, the Court would be required to allow the present application by appointing an arbitral tribunal for adjudication of the disputes and differences which arose between the parties under the agreements in question.

Though the Court added that a formal order appointing an arbitral tribunal was not required to be made as after the judgment was reserved, the parties just two days back, settled the disputes stating that arbitration was not warranted. [Jasani Realty (P) Ltd. v. Vijay Corpn., 2022 SCC OnLine Bom 879, decided on 25-4-2022]

Advocates before the Court:

Dr. Birendra Saraf, Senior Advocate a/w. Anshul Anjarlekar i/b. Raval- Shah & Co., Advocate for the Applicant.

Mr.Yusuf Iqbal Yusuf i/b. Y. and A Legal, Advocate for the Respondent.

National Company Law Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal (NCLT): The Coram of Kapal Kumar Vohra, Technical Member and Justice P.N. Deshmukh, Judicial Member, while addressing a matter wherein Jet Airways requested Mumbai Airport not remove its assets from its premises, expressed that,

“…it is to be noted that one of the principal objectives of the Code is to provide for revival of the CD and every attempt ought to be made to revive the CD and Liquidation being the last resort.”

An application was filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 in relation to the strategic assets of the Applicant (Jet Airways) which were placed at the respondent’s Hangar and other places at the airport, contending that the applicant had ceased its operation as commercial airline, prior to commencement of Corporate Insolvency Resolution Process (CIRP) and respondent requested the applicant to vacate the facility made available as aforesaid which is in use of the Applicant contending that permission of subject premises granted to the Applicant for its use stood revoked.

The purpose of filing the present application was to restrain the respondent from removing the applicant’s assets lying at the respondent’s premises at Mumbai International Airport Limited (MIAL).

Request for unhindered access to applicants including his representatives, workmen, nominees, etc. was also made.

Analysis and Decision

Coram stated that the Resolution Mechanism was at an advanced stage and since admittedly the premises were made available to the applicant prior to when it ceased its operation as commercial Airlines and it was the applicant’s specific case that the aircrafts, engines, and auxiliary power units etc. were lying at MIAL Airport which required maintenance at regular intervals of seven, fifteen, thirty, ninety and three sixty-five days, for instance, regular check-ups of tyre pressures of aircrafts, the battery recharges and the engine runs.

In Tribunal’s opinion, if the applicant won’t be allowed to have access to the subject premises, it would certainly cause great hardships to the applicant to perform the above-stated activities which in turn would result in severe deterioration in value assets.

Applicant also stated that despite cessation of Airline operations of the CD, the Erstwhile Resolution Professional had, with the approval of the Committee of Creditors, retained a team of personnel to look for the maintenance of aircraft and engines placed at MIAL Airport including Hangar.

Therefore, the respondent was restrained from removing applicant’s assets from its premises including MIAL Hangar and not to deny access to the applicant’s representatives, workmen, nominees, etc. till the adjourned date.

Matter to be listed on 4-3-2022. [SBI v. Jet Airways, 2022 SCC OnLine NCLT 17, decided on 9-2-2022]

Appearance (via video-conference):

For the Applicant: Mr. Rohan Rajadhyaksha, Advocate

For the Respondent: Mr. Vikram Nankani, Sr Advocate

Also Read:

NCLAT | Joint CIRP against Jet Airways to continue, Dutch Trustee allowed to attend CoC meetings as observer

NCLT | Whether Resolution Plan can be shared with Jet Airways employees or not? Verdict explains provisions revolving around confidentiality, purpose of code and more

Once Adjudicating Authority approves Resolution Plan, does it still remains a confidential document? Read what NCLAT says

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.

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.

Fallout

(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: namansinghbagga@gmail.com.

†† 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: maneesh.ms10@gmail.com.

††† 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: anuragnluo@gmail.com.

1 <http://www.scconline.com/DocumentLink/86F742km>.

2 <http://www.scconline.com/DocumentLink/9kKr2L6f>.

3 <http://www.scconline.com/DocumentLink/6k1QKjWn>.

4 <http://www.scconline.com/DocumentLink/G98723Qc>.

5 <http://www.scconline.com/DocumentLink/52aWIpgI>.

6 <http://www.scconline.com/DocumentLink/h2o3bY7O>.

7 <http://www.scconline.com/DocumentLink/gvPKCciX>.

8 2020 SCC OnLine Del 1479

9 <http://www.scconline.com/DocumentLink/KaRKCw3S>.

10 2020 SCC OnLine Del 1479

11 <http://www.scconline.com/DocumentLink/PRN1Rndd>.

12 2020 SCC OnLine Del 1479

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

14 <http://www.scconline.com/DocumentLink/pit9G4eg>.

15 2020 SCC OnLine Del 1479

16 <http://www.scconline.com/DocumentLink/rB6ALe98>.

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  <http://www.scconline.com/DocumentLink/LhNrU8Vb>

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

Case BriefsHigh Courts

Calcutta High Court: Sabyasachi Bhattacharya, J., reiterated the decision of Supreme Court in Embassy Property Developments (P) Ltd. v. State of Karnataka, 2019 SCC OnLine SC 1542, regarding whether NCLT and Resolution Professional have jurisdiction to take control and custody of any asset except as subject to the determination of ownership by a court or authority.

“…the power of the resolution professional to take control of any asset, itself, is subject to the determination of ownership by a court or authority.”

Factual Matrix

Kolkata Municipal Corporation filed the present petition challenging an order passed by the National Company Law Tribunal (NCLT) acting as Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 for handing over physical possession of the office premises.

KMC, in exercise of its authority under Sections 217-220 of the Kolkata Municipal Corporation Act, 1980, had distrained the said property in the recovery of municipal tax dues from an assessee.

Debt of the assessee came within the purview of a Corporate Insolvency Resolution Process (CIRP), thus prompting respondent 4, the Resolution Professional, representing the owner of the asset, to approach the NCLT for handing over of such physical possession of the property-in-question from the KMC.

In view of the above, the instant petition was filed.

Questions that arise in the instant matter are:

  • Whether the writ jurisdiction of this court under Article 226 of the Constitution of India can be invoked in the matter, despite the availability of an alternative remedy;
  • Whether the property-in-question, having been seized by the KMC in recovery of its statutory claims against the debtor, can be the subject matter of a Corporate Resolution Process under the Insolvency and Bankruptcy Code, 2016.

While considering the first question, Bench referred to the decision of Embassy Property Developments (P) Ltd. v. State of Karnataka, 2019 SCC OnLine SC 1542, wherein it was held that, in so far as the question of exercise of the power conferred by Article 226, despite the distinction between lack of jurisdiction and the wrongful exercise of the available jurisdiction, should certainly be taken into account by High Courts, when Article 226 is sought to be invoked by passing a statutory alternative remedy provided by a special statute.

Petitioners urged that the NCLT and the Resolution Professional have no jurisdiction to take control and custody of any asset except as subject to the determination of ownership by a court or authority. KMC exercised its powers under Sections 217 to 220 of the 1980 Act to distraint the asset of the debtor and to attach the property, to be followed by sale in future, but the said exercise of power was argued to be beyond the purview of IBC. Resolution Professional and the NCLT acted de hors their statutory powers in seeking to take control and custody of the asset.

Hence, the challenge in the present petition was on the ground of absence of jurisdiction and not ‘wrongful exercise of the available jurisdiction’, thus bringing it within the fold of Article 226 of the Constitution. Therefore, petition is maintainable.

“…although a wrongful exercise of available jurisdiction would not be sufficient to invoke the High Court’s jurisdiction under Article 226 of the Constitution, the ground of absence of jurisdiction could trigger such invocation.”

Considering the second questions posed above, Bench stated that it would be particularly apt to consider the tests laid down by the Supreme Court in Embassy Property Developments (P) Ltd. v. State of Karnataka, 2019 SCC OnLine SC 1542.

In the above-referred decision, while discussing Section 60(5)(c) of IBC, Supreme Court held, “…a decision taken by the government or a statutory authority in relation to a matter which is in the realm of public law, cannot, by any stretch of imagination, be brought within the fold of the phrase “arising out of or in relation to the insolvency resolution”.

Further, the Court, while moving ahead in the analysis of the matter and reaching a conclusion expressed that there cannot be any doubt about the proposition that the contours of the powers conferred on the Adjudicating Authority, being the NCLT, under Section 60 of the IBC, are defined by the duties of the interim resolution professional under Section 18.

What is to be seen to examine the charter of the interim resolution professional is whether the assets, of which control and custody is sought to be taken by the professional, are sub judice before a court or authority for the purpose of “determination of ownership” thereof.

In the instant matter, petitioner proceeded with acquiring the possession of the property-in-question and putting up the same for attachment under its powers as flowing from Sections 217-220 of the 1980 Act.

The above-said provision envisages a situation where an amount of tax, for which a bill has been presented under Section 216 of the Act, is not paid within 30 days from the presentation thereof.

In view of the event, Municipal Commissioner may cause a demand notice to be served on the person for such liability and on the non-payment of such tax, petitioner shall under Section 219 of the 1980 Act issue a distress warrant, for distraint of the property. Further in the process, person charged with the execution of the warrant in the presence of two witnesses, makes an inventory of the property which he seizes under such warrant. Thereafter, steps are taken for disposal of such property, including attachment and sale.

KMC followed the above-laid procedure and took possession of the disputed property for non-payment of tax. Hence, there was no scope of any ‘determination’ of ownership of the property by the KMC. Thus, in view of the Supreme Court decision in Embassy Property Developments (P) Ltd. v. State of Karnataka, 2019 SCC OnLine SC 1542  a finalised claim would come within the purview of “operational debt” under Section 5(21) of the IBC. Hence, the Resolution Professional has jurisdiction to take custody and control of the same.

Parameters of powers of the NCLT, as an Adjudicating Authority under Section 60 of the IBC, is defined and circumscribed by the scope of Section 18(f)(vi) of the IBC. Such exercise of power would fall within the ambit of the expression “arising out of or in relation to the insolvency resolution”, as envisaged in Section 60(5)(c) of the IBC.

Crown Debts

Referring to the decision of Supreme Court in Commr. of Income-tax v. Monnet Ispat Energy Ltd., [Special Leave to Appeal (C) No (S) 6438 of 2018], wherein it was held that income tax dues, being in the nature of crown debts do not take precedence even over secured creditors, Bench stated that the said proposition holds true in the present matter as well.

Hence, KMC’s claim being in the nature of crown debts, cannot gain precedence over other secured creditors, as contemplated in the IBC.

Therefore, in view of the Supreme Court decision in Embassy Property Developments (P) Ltd. v. State of Karnataka, 2019 SCC OnLine SC 1542 Finalised claim of the KMC can very well be the subject-matter of a Corporate Resolution Process under the IBC.

Accordingly, the Court decided the above two questions in affirmative.[Kolkata Municipal Corpn. v. Union of India, 2021 SCC OnLine Cal 145, decided on 29-01-2021]

Advocates who appeared:

For Petitioners:

Ashok Kumar Banerjee, Sr. Adv.,

Rajdip Roy,
Anindya Sundar Chatterjee,
Goutam Dinda

For Respondent 3:

Jishnu Chowdhury,

Dilwar Khan,
Sondwip Sutradhar

For Respondent 4:

Rishav Banerjee,

Pronoy Agarwal,

Ankita Baid

Kerala High Court
Case BriefsHigh Courts

Kerala High Court: A.M. Badar, J., while dismissing the present petition, reiterated the observations of the Supreme Court in the words, “In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have a serious adverse impact on the financial health of such bodies/institutions, which (sic will) ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters.”

 Background

The petitioner who happens to be the Managing Director of one Heera Construction Company; a corporate debtor, is challenging orders namely, P3, P4 and P4(a) and is seeking further direction against the respondent 1 to keep in abeyance all further proceedings pursuant to Ext P3, P4 and P4(a) till the disposal of CP(IB) 4447/2018. It is to be noted that Ext P3 is a notice of sale under Rule 8(6) of Security Interest (Enforcement) Rules, 2002, Ext P4 is a further notice under the said Rules for sale of secured assets and Ext P4 (a) is e-auction sale notice issued in terms of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

 Observations

On the contention that parallel proceedings under SARFAESI is impermissible

“… argument advanced by the learned counsel for the petitioner that because of pendency of proceedings before the NCLT, parallel proceedings under the SARFAESI Act are not maintainable, needs to be rejected. Even otherwise Section 7 of the Insolvency and Bankruptcy Code has application against the corporate debtor. It cannot be said that there is bar for proceedings against the guarantor under the SARFAESI Act because of pendency of corporate insolvency resolution process against the corporate debtor.”

 On interference of Court under Article 226 if an alternative statutory remedy is available

Court placed reliance on the case of, Authorized Officer, State Bank of Travancore v. Mathew K.C., 2018 (1) KLT 784; “…the discretionary jurisdiction under Article 226 is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well defined exceptions…”

Further reference was made to the alternate remedy available under DRT Act through, Punjab National Bank v. O.C. Krishnan, (2001) 6 SCC 569; “The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions”

 Decision

Dismissing the present petition, the Court said, “Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same.”[Dr Abdul Rasheed v. IFCI Limited, 2020 SCC OnLine Ker 8293, decided on 03-12-2020]

Sakshi Shuka, Editorial Assistant has put this story together

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Bench of Justice Bansi Lal Bhat (Acting Chairperson) and Justice Anant Bijay Sing (Judicial Member) and Kanthi Narahari (Technical Member) set aside the Adjudicating Authorities decision while establishing whether a pre-existing dispute existed between the parties.

The instant appeal was filed against the order of the National Company Law Tribunal, New Delhi wherein the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the respondent was admitted.

Pre-Existing Dispute

Aggrieved by the above, suspended director of the Corporate Debtor filed the present appeal challenging the admission and initiation of Corporate Insolvency Resolution Process against the Corporate debtor for the reason that there is a pre-existing dispute between the Corporate Debtor and the Operational Creditor.

Brief facts

Corporate Debtor invited tender in carrying out electrical works and respondent/Operational Creditor was assigned the same. In terms of the agreement and Letter of Intent, the payment terms were specifically incorporated therein.

In terms of LOI, a specific mention the time of completion is the essence of the contract and milestones were accordingly incorporated. The work was to be completed within 120 days. However, the work was delayed and the same was communicated by the Operational Creditor.

Further, it was submitted that the Operational Creditor has not completed the work and the Corporate Debtor time and again reminded Operational Creditor to complete the work by pointing out the defects.

Issue for Consideration

Whether there is an existence of dispute prior to the issuance of Demand Notice dated 11-04-2019 or not?

Bench noted that various email were exchanged between the parties. Respondent addressed to the appellant whereby it had been stated that the project was delayed much beyond the original schedule leading to enhanced overheads and stated that they needed funds to source materials with respect to work progress.

Deficiency in Service

Tribunal opined that the Adjudicating Authority instead of taking technical objection that the email dated 29-04-2019 may not be a response to the demand notice issued by respondent, however, the contents raised by the appellant should have been taken into consideration for the purpose of deciding the issue to elucidate any pre-existing dispute keeping in view of the trail of exchange of e-mails regarding deficiency in service.

Letters/e-mails of respondent dated 29-12-2018:

“Dear Sir,

We are handing over Electrical Works, Documents Details at Triumph Resort 336/1A, village Calwaddo, Benaulim, Goa- 403716.”

From the perusal of correspondences between the Appellant and Respondent, Appellant/Corporate Debtor submitted that the Respondent did not complete the project in time thereby the Project got delayed thereby they suffered losses. On the other side, the stand of Respondent/Operational Creditor that they completed the project and handed over to the Appellant/Corporate Debtor, however, Appellant/Corporate Debtor failed to pay bills even after completion of the project.

Bench stated that it is unequivocal that there exists a dispute between the parties prior to the issuance of Demand Notice dated 11-04-2019.

Adjudicating Authority instead of taking a technical objection that the Appellant/Corporate Debtor did not respond to the Demand Notice issued by the Respondent/Operational Creditor within the statutory period of 10 days as contemplated under Section 8(2) of IBC, should have analysed the documents placed before it, before taking such objection.

Tribunal observed that it is bound by the Supreme Court decision in, Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC 353, wherein it was held that:

“…Within a period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of the operational creditor the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute [Section 8(2)(a)]. What is important is that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice, as the case may be.”
Another Supreme Court decision was referred to, Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407, wherein it was decided that the dispute must exist before the receipt of the Demand Notice or Invoices as the case may be.
In Gajendra Parihar v. Devi Industrial Engineers,  2020 SCC OnLine NCLAT 274, Bench was of the view that existence of dispute prior to the issuance of Demand Notice, the Application under Section 9 IBC is not maintainable and once there is the existence of such dispute, the Operational Creditor gets out of the clutches of the Code.

Decision

Bench held that in view of the email/letters there existed a dispute prior to the Demand Notice.

Exchange of e-mails/correspondences, as referred above, clearly establishes that there is a pre-existing dispute between the parties regarding completion of the work and the Appellant/Corporate Debtor continuously made complaints regarding non-completion of work and deficiency in services, thereby loss caused to the Appellant/Corporate Debtor.

Hence, the Adjudicating Authority ought not to have admitted the application under Section 9 of IBC filed by the respondent.

Bench reiterated that,

Code is a beneficial legislation intended to put the Corporate Debtor on its feet and it s not a mere money recovery legislation for the Creditors.

In view of the above discussion, initiation of Corporate Insolvency Resolution Process is quashed and set aside.

While remitting back the matter to Adjudicating Authority, the tribunal directed Interim Resolution Professional/ Resolution Professional will hand over the assets and records to the Corporate Debtor/Promotor/Board of Director. [Umesh Saraf v. Tech India Engineers (P) Ltd.,  2020 SCC OnLine NCLAT 677, decided on 19-10-2020]

Legislation UpdatesStatutes/Bills/Ordinances

The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020 received Presidential assent on 23-09-2020.

Insolvency and Bankruptcy Code (Second Amendment) Act, 2020

Key Features:

Suspension of Initiation of Corporate Insolvency Resolution Process

In light of the extraordinary situation caused by the COVID-19 pandemic, a need was felt to temporarily suspend the initiation of the corporate insolvency resolution process under the Code, initially for a period of 6 months not exceeding one year from 25th March, 2020 to provide relief to the companies in order to recover from the financial stress.

Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 was promulgated by the president on 05-06-2020 as the Parliament was not in session at that time.

New Section 10 A replacing Sections 7, 9 and 10 [Temporary Suspension]

(a) To insert a new Section 10A in the Code to provide for temporary suspension of Sections 7, 9 and 10 in respect of any default arising on or after 25-03-2020 for a period of six months or such further period, not exceeding one year from such date, as may be notified in this behalf; and

EXPLAINER: Temporary suspension of initiation of the corporate insolvency resolution process

Amendment of Section 66

(b) to insert a new sub-section (3), in Section 66 of the Code to provide that no application shall be filed by a resolution professional under sub-section (2), in respect of such default against which initiation of the corporate insolvency resolution process is suspended as per Section 10A.

EXPLAINER: Resolution Professional from filing such an application in relation to the defaults for which initiation of CIRP has been prohibited.

Please read the Amended Act here: ACT

Ministry of Law and Justice

Legislation UpdatesStatutes/Bills/Ordinances

President promulgates Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020

Insertion of new Section 10 A after Section 10.

Suspension of initiation of corporate insolvency resolution process.

“Notwithstanding anything  contained in Sections 7, 9 and 10, no application for initiation of corporate insolvency process of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020 for a period of 6 months or such further period, not exceeding 1 year from such date, as may be notified in this behalf:

Provided that no application shall ever be filed for initiation for corporate insolvency resolution process of a corporate debtor for the said default occurring during the period.

Provisions of this Section shall not apply to any default committed under the said section before 25th March.

Amendment of Section 66

In Section 66, after sub-section (2) following sub-section shall be inserted:

“(3) Notwithstanding anything contained in this section, no application shall be filed by a resolution professional under sub-section (2) in respect of such default against which initiation of corporate insolvency resolution process is suspended for Section 10 A”

 

ORDINANCE

Ministry of Law and Justice

[Notification dt. 05-06-2020]

COVID 19Legislation UpdatesNotifications

The Insolvency and Bankruptcy Board of India (IBBI) amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) on 29-03-2020.

2. Government of India has declared a lockdown of twenty-one days with effect from 25th March, 2020 as a measure to combat and contain the spread of COVID-19. It is difficult for the insolvency professionals to continue to conduct the process, for members of committee of creditors to attend the meetings, and for prospective resolution applicants to prepare and submit resolution plans, during the period of lockdown. Therefore, it may be difficult to complete various activities during a corporate insolvency resolution process within the timelines specified in the CIRP Regulations.

3. To address this difficulty, the IBBI amended the CIRP Regulations to provide that the period of lockdown imposed by the Central Government in the wake of COVID-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to the lockdown, in relation to a corporate insolvency resolution process. This would, however, be subject to the overall time-limit provided in the Code.

4. The amended regulations are effective from 29-03-2020. These are available at www.mca.gov.in and www.ibbi.gov.in.

Insolvency and Bankruptcy Board of India

[Press Release dt. 29-03-2020]

Case BriefsSupreme Court

Supreme Court: The bench of AM Khanwilkar and Dinesh Maheshwari, JJ has restored the NCLT order wherein it was held that the lenders of Jaiprakash Associates Limited (JAL) were not the financial creditors of the corporate debtor Jaypee Infratech Limited (JIL) and that the transactions in question were to defraud the lenders of the corporate debtor JIL. The Court held,

“such lenders of JAL, on the strength of the mortgages in question, may fall in the category of secured creditors, but such mortgages being neither towards any loan, facility or advance to the corporate debtor nor towards protecting any facility or security of the corporate debtor, it cannot be said that the corporate debtor owes them any ‘financial debt’ within the meaning of Section 5(8) of the Code; and hence, such lenders of JAL do not fall in the category of the ‘financial creditors’ of the corporate debtor JIL.”

The Court was hearing the case relating to JAL, a public listed company with more than 5 lakh individual shareholders, which was facing insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. In the year 2003, JAL was awarded the rights for construction of an expressway from Noida to Agra. A concession agreement was entered into with the Yamuna Expressway Industrial Development Authority. Coming on the heels of this project, JIL was set up as a special purpose vehicle. Finance was obtained from a consortium of banks against the partial mortgage of land acquired and a pledge of 51% of the shareholding held by JAL. The banks in question instituted a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the NCLT, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against JIL, while alleging that JIL had committed a default in repayment of its dues to the tune of Rs. 526.11 crore.

NCLT in it’s order held,

“the transactions in question were to defraud the lenders of the corporate debtor JIL, as 858 acres of unencumbered land owned by the corporate debtor to secure the debt of the related party JAL was mortgaged in the midst of the corporate debtor’s immense financial crunch, while continuing with default towards the home buyers and financial creditors and after it had been declared as Non Performing Asset, in utter disregard to fiduciary duties and duty of care to the creditors; and further that the mortgage of land was created without any counter guarantee from the related party and with no other consideration being paid to the corporate debtor.”

While interpreting Section 43 of the Code, the Supreme Court noticed that the transfers in question could be considered outside the purview of sub-section (2) of Section 43 of the Code only if it could be shown that same were made in the ‘ordinary course of business or financial affairs’ of the corporate debtor JIL and the transferees. It, however, further explained that even when furnishing a security may be one of normal business practices, it would become a part of ‘ordinary course of business’ of a particular corporate entity only if it falls in place as part of ‘the undistinguished common flow of business done’; and is not arising out of ‘any special or particular situation’.

“It is difficult to even surmise that the business of JIL, of ensuring execution of the works assigned to its holding company and for execution of housing/building projects, in its ordinary course, had inflated itself to the extent of routinely mortgaging its assets and/or inventories to secure the debts of its holding company. It had also not been the ordinary course of financial affairs of JIL that it would create encumbrances over its properties to secure the debts of its holding company.”

Holding that the NCLAT had not been right in interfering with the well-considered and justified order passed by NCLT, the Supreme Court said,

“the transactions in question are hit by Section 43 of the Code and the Adjudicating Authority, having rightly held so, had been justified in issuing necessary directions in terms of Section 44 of the Code.”

The Court, hence, concluded:

“1) The impugned order dated 01.08.2019 as passed by NCLAT in the batch of appeals is reversed and is set aside.

2) The appeals preferred before NCLAT against the order dated 16.05.2018, as passed by NCLT on the application filed by IRP, are dismissed; and consequently, the order dated 16.05.2018 so passed by NCLT is upheld in regard to the findings that the transactions in question are preferential within 171 the meaning of Section 43 of the Code. The directions by NCLT for avoidance of such transactions are also upheld accordingly.

3) The appeals preferred before NCLAT against the orders passed by NCLT dated 09.05.2018 and 15.05.2018 on the applications filed by the lender banks are also dismissed and the respective orders passed by NCLT are restored with the findings that the applicants are not the financial creditors of the corporate debtor Jaypee Infratech Limited.”

[Anuj Jain v. Axis Bank Ltd., 2020 SCC OnLine SC 237, decided on 26.02.2020]

Reserve Bank of India
Business NewsNews

The Reserve Bank filed an application for initiation of corporate insolvency resolution process against Dewan Housing Finance Corporation Limited (DHFL) under Section 227 read with clause (zk) of sub-section (2) of Section 239 of the Insolvency and Bankruptcy Code (IBC), 2016 read with Rules 5 and 6 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudication Authority) Rules, 2019 (“FSP Insolvency Rules”).

As per Rule 5 (b) (i) of the FSP Insolvency Rules, an interim moratorium shall commence on and from the date of filing of the application till its admission or rejection. The explanation to Rule 5 (b) provides that “interim moratorium” shall have the effect of the provisions of sub-sections (1), (2) and (3) of Section 14. Sub-sections (1), (2) and (3) of Section 14 of the IBC have been reproduced below:

“(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:

(a) 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;

(b) transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein;

(c) 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 Act, 2002 (54 of 2002);

(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

(2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.

(3) The provisions of sub-section (1) shall not apply to —

(a) such transaction as may be notified by the Central Government in consultation with any financial regulator;

(b) a surety in a contract of guarantee to a corporate debtor.

Reserve Bank of India

[Press Release dt. 29-11-2019]

National Company Law Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal (NCLT): Justice Rajeswara Rao Vittanala (Judicial Member) allowed the Company Petition filed by CloudWalker Streaming Technologies Pvt. Ltd. (Corporate Creditor) under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016 read with Section 6 of the Insolvency and Bankruptcy(Application to Adjudicating Authority) Rules, 2016 against Flipkart India Pvt. Ltd. (Corporate Debtor). The instant petition sought initiation of the Corporate Insolvency Resolution Process (CIRP) on the ground that Flipkart had committed default for an amount of Rs 26.95 crores. 

Anjit Anekar along with Ms. Urvi Vaidya appeared for the petitioners while the respondents were represented by Senior Counsel Dhyan Chinappa, Chinmay. J.  Mirzi and Charitha V.

CloudWalker had entered into a Supply Agreement with Flipkart, but the latter started to delay in taking deliveries and in some cases did not collect them at all. The ramification of this delay was that the Creditor CloudWalker started facing heavy financial losses. When the Debtor Flipkart defaulted in collecting more than 70 per cent of the stock ordered by it, CloudWalker threatened to invoke the arbitration clause of the Supply Agreement. 

The petitioners CloudWalker alleged that the Corporate Debtor company is commercially insolvent and poses a threat to commercial morality. The respondents Flipkart argued that they had already paid in excess of 85 crores towards the invoices raised by the Creditor CloudWalker, and therefore the question of being commercially insolvent was baseless, frivolous and bears mala fide intentions. 

The fact that the respondent company Flipkart had no material proof to deny the charges of committing default and the e-mail exchange presented before the Tribunal, tilted the case in favour of the petitioner CloudWalker.

After examining the facts of the case, the Tribunal opined that the Debtor had committed the default in question and the instant petition met all the essentials of proviso 2 of Section 9 of the IBC. Therefore, the Tribunal allowed the initiation of CIRP in respect of Flipkart India Pvt. Ltd. (Corporate Debtor). [CloudWalker Streaming Technologies (P) Ltd. v. Flipkart India (P) Ltd.,  2019 SCC OnLine NCLT 671, decided on 24-10-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): A Bench of Justice Bansi Lal Bhat, Member (Judicial) and Balvinder Singh, Member (Technical), dismissed an appeal filed by the Chairman of the Corporate Debtor challenging the order passed by the National Company Law Tribunal whereby the application filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor was admitted.

The Operation Creditor initiated the insolvency process alleging that the Corporate Debtor failed to pay the dues pending under the contract entered into between parties whereby the Operational Creditor supplied broken rice and coal to the Corporate Debtor.

S.K. Sahijpal, Rakhi Sahijpal, Manisha Saini and Mihika Gupta, Advocates for the appellant-Chairman contended that there was no privity of contract between the Operational Creditor and the Corporate Debtor. It was contended that the Corporate Debtor had entered into the said supply agreement with one Arun Agarwal and Annapurna Agrawal. It was submitted that the Operation Creditor — Priya Trading Company — was not a party to the said agreement. Per contra, Sangram Patnaik representing Priya Trading Company supported the impugned order passed by NCLT.

Perusing the lawyer’s notice brought on evidence which was sent by Corporate Debtor to Arun Agrawal and Annapurna Agrawal, the Appellate Tribunal noted:

“It is therefore abundantly clear that the ‘Corporate Debtor’ was conscious of the fact that Arun Agrawal and Annapurna Agrawal supplying raw material to it were operating under the name and style of ‘Priya Trading Company’. This admission on the part of ‘Corporate Debtor’ stares at its face and there is no scope for taking a U-turn. The fact that ‘Priya Trading Company’ was the name and style under which Arun Agrawal and Annapurna Agrawal have been operating was never a fact required to be discovered or rediscovered. Both are synonyms and well within the knowledge of the ‘Corporate Debtor’ as also the ‘Appellant’. The ground raised to offset the triggering of CorporateInsolvency Resolution Process at the instance of ‘Priya Trading Company’ as ‘Operational Creditor’ by taking plea of there being no privity of contract between the ‘Operational Creditor’ and the ‘Corporate Debtor’ falls flat and has to be dismissed as being absurd and repugnant to the admitted position in regard to the status and locus standi of the ‘Operational Creditor’.”

Hence, the Appellate Tribunal held that the impugned order does not suffer from any infirmity and therefore, the instant appeal was dismissed.[Vijay Kumar v. Priya Trading Co., 2019 SCC OnLine NCLAT 585, decided on 11-09-2019]

Case BriefsHigh Courts

National Company Law Appellate Tribunal (NCLAT), New Delhi: The 3-Judge Member Bench comprising of Justice S.J. Mukhopadhaya (Chairperson) and Justice A.I.S Cheema (Judicial Member) and Kanthi Narahari (Technical Member), while pronouncing an order in regard to the “Jet Airways” setback addressed the following question:

“Whether separate proceeding(s) in ‘Corporate Insolvency Resolution Process’ against common ‘Corporate Debtor’ can proceed in two different countries, one having no territorial jurisdiction over the other?”

Further, noting the fact that separate ‘Corporate Insolvency Resolution Process’/ liquidation proceedings have been initiated against Jet Airways (India) Limited — ‘Corporate Debtor’, the one in India and another in Netherland, the point of determination as framed was,

“Whether by a Joint Agreement between the ‘Resolution Professional’ of ‘Corporate Debtor’ in India and Administrator in Netherland, as may be approved  by Appellate Tribunal, one proceeding in India can proceed for maximization of the asset of ‘Corporate Debtor’ and balancing all stakeholders, including Indian/Offshore/Creditors/Lenders”?

State Bank of India-Respondent 1, was represented by Ramji Srinivasan, Senior Advocate along with Counsel Karan Khanna.

It was directed to Respondent 1 that it may file a reply suggesting a procedure that may be followed in the facts and circumstances of the case, without any conflicting interest of stakeholders of both the countries.

Tribunal directed case for admission on 21-08-2019.

NCLAT also stated that during the pendency of the appeal, appellant administrator and Respondent 2 – ‘Interim Resolution Professional’ will cooperate with each other. It will be open to the appellant administrator to collate the claims of offshore creditors including ‘Financial Creditors’, ‘Operational Creditors’ and other stakeholders and forward their details to Respondent 2-‘Resolution Professional’ for purpose of preparing the Information memorandum with approval of ‘Committee of Creditors’.

Counsel, Sumant Batra who appeared on behalf of appellant administrator assured that-

  • Appellant Administrator will cooperate in the proceedings in India;
  • Will not sell, alienate, transfer, lease or create any 3rd party interest on the offshore movable and immovable assets of ‘Corporate Debtor’.

In respect to the above undertaking by an appellant administrator, the impugned order dated 20-06-2019 passed by NCLT, so far as it relates to the declaration that offshore proceeding is not maintainable, shall remain stayed.

  • Interim Resolution Professional of this country will ensure that ‘Corporate Debtor’ remains a going concern and will take the assistance of the (suspended) Board of Directors, paid directors and employees.
  • Person authorised to sign bank cheques may issue cheques only after Interim Resolution Professional’s authorisation.
  • Bank accounts of Corporate Debtor be allowed to be operated for the day-to-day functioning of the company such as for payment of current bills of suppliers, salaries and wages of paid director, employees’/workmen electricity bills, etc., subject to availability of fund.[Jet Airways (India) Ltd. v. SBI, 2019 SCC OnLine NCLAT 385, decided on 12-07-2019]