Corporate Law

Law School NewsOthers

Established in 2016, Himachal Pradesh National Law University (HPNLU) is striving toward newer heights daily and is set to scale new benchmarks in the years to come. The university has come up with the MBA course in Corporate Law.

Online applications are invited for 30 seats in MBA (Corporate Law) for the Batch 2022-2024.

The criteria for admission for the Batch 2022-2024 will be on a merit basis. The eligibility criterion is Graduation (or equivalent) degree in any discipline from a recognized University established by Law with at least 55% marks (50% marks in the case of SC/ST candidates). Shortlisted candidates will be invited for Group Discussion (GD) followed by a Personal Interview (PI)

Application Fees is INR 2000 (Non-Refundable). The candidates may apply online mode from (02-09-2022 to 15-09-2022) at www.hpnlu.ac.in. or erphpnlu.ac.in

For any queries related to admission: Please Contact HPNLU Admission Committee during Timings (10:00 AM to 4:00 PM)

Contact Details:

Dr Esha Sharma +91-8894862537

Dr Deepika Gautam +91 – 9816958674

Dr Praveen Kumar +91- 7831018877

High Court Round UpLegal RoundUp

Allahabad High Court

SC and ST Act, 1989

Section 3 (2) (v) of SC and ST Act, 1989 only attracts by way of documentary evidence to prove that the injured belongs to SC or ST; Conviction and sentence, modified

The Division Bench of Kaushal Jayendra Thaker and Ajai Tyagi, JJ. while deciding an appeal which was filed challenging the judgment and order of convicting accused-appellant under Sections 326 of Penal Code, 1860 (‘IPC’) and Section 3 (2) (v) of Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989 (‘SC/ST Act’) observed that to prosecute a person for an offence committed under Section 3(2)(v) of the SC/ST Act, there must be evidence to show that the accused committed the crime knowing that such person/victim is a member of a Scheduled Caste or a Scheduled Tribe.

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Bail

Irony and tragedy of the Indian republic that criminals like Mukhtar Ansari are the law-makers; Former UP MLA denied bail

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Allahabad High Court pained to see minors getting involved in age- inappropriate relations; Grants bail in the interest of infant and minor wife

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High Court can grant transit anticipatory bail in a case registered outside its jurisdiction

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Steps must be taken to break unholy nexus between criminal politicians and bureaucrats; Bail denied to BSP MP

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Parity can only be persuasive in nature and cannot be binding; Bail orders not to be given without assigning any reasons

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Protection of life and liberty

Constitution of India does not permit to issue mandamus when there is no threat perception alleged or transpired; Petition dismissed for filing with a purpose of obtaining seal of this Court on illegal relationship

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Manual Scavenging

No protective gears provided to the sanitation workers; DM and Nagar Ayukt, summoned

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Stray Dog Menace

Allahabad High Court issues notice to Nagar Nigam on compensation to family after stray dog menace leaves one child dead and other seriously injured

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Quashing of FIR

Sections 4 & 5 CrPC only applicable to proceedings under Special Acts; not when criminal jurisdiction is invoked

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Bombay High Court

Doctrine of Proportionality

When assessing the doctrine of proportionality, one looks not only at the immediate cause inviting punishment but also at the entire context; Appeal dismissed

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Trademark

Registrar entitled to determine the registered proprietor of the Trademark [ISKCON v. ISKCON]

The Division Bench of G.S. Patel and Gauri Godse, JJ. disposed of an appeal which was preferred by ISKCON (International Society for Krishna Consciousness) Bengaluru aggrieved by the observations that this well-known trademark (ISKCON) is exclusively associated with the original Plaintiff (“Mumbai ISKCON”) and, by necessary implication, that Mumbai ISKCON is sole and exclusive registered proprietor of the mark in International Society for Krishna Consciousness v. Iskcon Appaeral Pvt. Ltd., 2020 SCC OnLine Bom 729.

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Maintenance

Courts cannot be hyper technical in their approach when it comes to petitions under S. 125, CrPC; son liable to maintain father

Vibha Kankanwadi, J. partly allowed a writ petition setting aside the judgment and order of Additional Sessions Judge and confirming the findings of Judicial Magistrate First Class further modifying the maintenance amount to Rs 3000/- per month.

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Corporate Law

Independent Non-Executive Director not liable for acts of company when not involved in day-to-day business

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Women Rights

Woman cannot be made to choose between career and child; Bombay High Court allows mother to relocate to another country with the child

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Contracts

Yes Bank-Dish TV Case: Beneficial Owner of pledged shares, contractually entitled to all rights, including voting rights in Annual General Meeting

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Right to reproductive choice

Minor sexual assault victim lodged in observation home for murder allowed to terminate pregnancy

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POCSO Act

Slow pace of trial defeating the very purpose of POCSO Act; Court of Sessions to submit report of pending cases, number of Special Courts

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Employee’s State Insurance Act

Nature of activities conducted by BCCI are commercial in nature, liable to pay employees contribution under ESI Act, 1948

Bharati Dangre, J. dismissed an appeal which was filed by Board of Control for Cricket of India (‘BCCI’), being aggrieved by the impugned judgment and order passed by the Employees Insurance Court at Bombay (ESI Court) dated 09-09-2021 where BCCI was held to be under the ambit of Employees’ State Insurance Act, 1948.

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Calcutta High Court

Driving license

ACP, Traffic Department does not have the power to suspend the licence; directions issued to release driving licence

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Transfer of suit

Calcutta High Court transfers Matrimonial suit showing leniency towards wife

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Fundamental Duty

Fundamental duty to protect animals from cruelty; Directions issued to SP for finding out stolen pig from Court premises

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Noise Pollution

Vigil to be maintained to prevent noise pollution in general; Sound levels to be within permissible limits

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Chhattisgarh High Court

Maintenance

Chhattisgarh High Court entitles father-in-law to pay maintenance; “Estate of the husband can be preferred to claim over the estate of father or mother of daughter in law”

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Delhi High Court

Default in payment

Delhi High Court upholds Trial Court ruling in application filed under O. XIII A CPC for default in payment of rent by tenant due to COVID

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Trademark

Gems or James Bond; Delhi High Court directs compensation to Cadbury against trademark infringement by Neeraj Food Products

Prathiba Singh, J. permanently injuncts Neeraj Food Products (‘defendants’) for trading JAMES BOND a chocolate product in pillow packs which is deceptively similar with Mondelez India Foods Private Limited (formerly Cadbury India Ltd.) (‘plaintiff’) GEMS, the name of which has derived inspiration from a copyrighted artistic character GEMS BOND. The Court thus directed the compensation upto 15 lakhs to Cadbury India finding deceptive similarity in the product under challenge.

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Delhi High Court refuses blanket injunction against GODADDY from registering SNAPDEAL trademark; Every infringement must be petitioned separately

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Delhi High Court grants permanent injunction against Facebake or Facecake from using the well known trademark Facebook

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Commercial Courts (Amendment) Act, 2018

‘Thin line between adjudication and legislation’; Delhi High Court rules out retrospective application of Commercial Courts (Amendment) Act, 2018

A Division Bench of Satish Chandra Sharma, CJ and Subramonium Prasad, J. refused to transfer the civil suits pending before the Additional District Judge, Patiala House Courts, New Delhi, to the designated Commercial Court as the Commercial Courts (Amendment) Act, 2018 (‘Amending Act’) shall not apply retrospectively and thus, the advantage provided under Section 19 of the Amending Act cannot be taken, as dispute relates before to the date of commencement of the Act, i.e., 03-05-2018.

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Marriage

Once two adults’ consent to live together as husband and wife, no third-party interference including family is warranted; Directs SHO to provide mobile number

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Bail

Defense of consensual sexual intercourse immaterial if victim is minor; Bail rejected

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Delhi High Court grants Bail to a rape accused in view of the prosecutrix’s deposition as per the requisites of S. 164 CrPC

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Service Charge

Delhi High Court stays CCPA ruling on levying service charges in hotels and restaurants as an unfair trade practice

Yashwant Varma, J. stayed the ruling passed in the form of guidelines by the Central Consumer Protection Authority (‘CCPA’) vide order dated 04-07-2022 holding that the issue of whether the levy of service charge would amount to a restricted and unfair trade practice under Consumer Protection Act, 2019 requires consideration in view of precedents and incidental facts of the subject matter.

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Abortion

Delhi High Court’s ruling that led to Supreme Court recognizing unmarried women’s right to a safe abortion

A Division Bench of Sathish Chandra Sharma, CJ and Subramonium Prasad, J refused termination of pregnancy to an unmarried woman whose pregnancy arose out of a consensual relationship after holding that her case was clearly not covered by any of the categories mentioned under Rule 3B of the Medical Termination of Pregnancy Rules, 2003 as on the date of the judgment.

This order, however, stands modified by the Supreme Court vide order dated 21-07-2022 wherein it has been held that woman cannot be denied right to safe abortion only on the ground of her being unmarried.

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Prevention of Money Laundering Act, 2002

Mere allocation of coal does not amount to ‘proceeds of crime’ u/S 2(1) (u) of PMLA, 2002; Proof of monetary gains wrongfully obtained from such allocation is mandatory

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Maintenance

Delhi High Court emphasizes on the importance of husband’s/father’s obligation towards estranged wife/child; Upholds maintenance decree granted by Family Court

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Copyright

Delhi High Court directs Telegram and Mega to immediately take down any illegal content uploaded on their platform relating to DocTutorials

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Misleading advertisement

Delhi High Court grants ad interim injunction against Dabur India for openly disparaging Nihar Naturals Shanti Amla Oil by WhatsApp message

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Examination

Can examination authorities deny permission for appearance in a competitive exam for violating clothing guidelines? Delhi High Court answers

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Patent

Non-consideration of the grounds raised in a pre-grant opposition while granting patent per se constitutes violation of principles of natural justice

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Central Civil Services (Pension) Rules, 1972

Delhi High Court allows mercy petition filed by widow of a deceased/dismissed employee seeking ‘compassionate allowance’ in view of R. 41 of CCS (Pension) Rules, 1972

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Broadcasting rights

Delhi High Court restrains infringement of broadcasting rights of ‘Sony Ten Network’; Interim directions issued

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Gujarat High Court

Bail

Gujarat High Court denies bail to a 66 year old over recovery of poppy straw in commercial quantity from his property

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Appointment

Delay in appointment of presiding officer of DRT leading to deprivation of legitimate right to speedy justice; Directions issued

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Retirement

Municipality has power to retire a municipal servant at any time on or after he attains the age of 55 years on giving him three months notice

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Gauhati High Court

Bail

Facebook post “only an expression of her feelings”, does not mention ULFA-I; College Student gets bail

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Preferential Appointment

‘Cousin’ not a family member; cannot be considered for Preferential Appointment under Assam Public Services (Preferential Appointment) Rules, 1999

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Retirement

State cannot force subordinate officers to retire prematurely on low physical fitness without following procedure under Assam Rifle Rues, 2010

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Representation of People Act

‘High-time to revisit S.126 of Representation of People Act’ ; Gauhati High Court dismisses proceedings against Assam CM for violating Model Code of Conduct

Rumi Kumari Phookan J. dismissed the criminal proceedings against Chief Minister of Assam, Dr. Himanta Biswa Sarma for violating the provision of the Model Code of Conduct during 2019 General Assembly Elections. The Court was further of the view that the provision mentioned under Section 126 of the Representation of the People Act, 1951 (RP Act) should be reexamined in the light of multi-phased elections and the expansion of digital and electronic media.

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Jammu and Kashmir and Ladakh High Court

S. 80 Civil Procedure Code, 1908

When can Courts dispense off with the requirement of notice u/s. 80, CPC? J&K and Ladakh HC elucidate

While deciding the instant appeal wherein substantial questions of law were raised vis-a-vis SectionS 80, CPC; the Single Judge Bench of Vinod Chatterji Koul, J., held that the language of Section 80 is very clear in stating that at the time of filing a suit, if the plaintiff can establish that there is an urgency to seek relief, then the Court on its satisfaction, may dispense off with the requirement of notice before filing a suit under Section 80.

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Article 14 and 16, Constitution of India

Classification on the basis of educational qualification for the purposes of promotion, is permissible in law and does not offend the Constitution

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Double Jeopardy

Whether concurrent prosecutions under S. 138, NI Act and S. 420, IPC, will amount to double jeopardy? J&K and Ladakh HC analyses

While deciding the instant petitions, the question that came up before that Court was whether a person can be prosecuted for offence under Section 420 of IPC as also for offence under Section 138 of NI Act, on the same set of facts and whether or not it would amount to double jeopardy. The single Judge Bench of Sanjay Dhar, J., observed that the offences under Section 138, NI act and Section 420, IPC, are two distinct offences, therefore the principle of double jeopardy or rule of estoppel does not come into play.

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Administration of justice

For proper administration of justice, Judges should not make derogatory remarks against persons, unless such censuring is necessary for the case

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Hyderpora Encounter Case

J&K and Ladakh HC allows the family of deceased Amir Magrey to perform Fatiha Khawani; upholds compensation awarded by the Single Judge Bench

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Vacancy and appointment

Can waitlist candidates be considered for filling up vacancies caused by resignation of the selected/appointed candidates? J&K and Ladakh HC answers

On the issue of whether wait list candidates can be considered for filling up vacancies caused due to resignation of appointed candidates, the Division Bench of Pankaj Mithal, CJ., and Moksha Khajuria Kazmi, J., observed that “a select/waiting list prepared may remain operative and valid for a period of one year, but that would only be for a limited purpose of appointing the selected/wait list candidates on the vacancies which remains unfilled due to non-joining of the selected candidate for one reason or the other.”

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Jharkhand High Court

Compensation

Date of application or Date of death — From when is the monetary compensation on account of death of an employee to be paid?

S.N. Pathak, J., allowed the writ petition directing Central Coalfields Limited (‘CCL’) to modify the monetary compensation in case of death or an employee who died in harness, calculating it from date of death of the husband of the petitioner.

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Dowry death

Upheld the decision of trial court; Accused convicted for dowry death

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Corporate law

Criminal proceedings against Directors cannot continue when the Company has not been arrayed as a party

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Karnataka High Court

Corruption

‘S.I.R cannot be generated at the drop of a hat’; Karnataka High Court quashes corruption proceedings initiated by ACB under Prevention of Corruption Act, 1988

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Bail matter highlights “corruption” in Anti-Corruption Bureau; Karnataka HC judge alleges transfer threat for his observations against ACB and ADGP

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Alimony

Able bodied person having the ability to earn is not entitled to seek permanent alimony from wife; Karnataka High Court dismisses appeal

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Foreign Exchange Management Act, 1999

Writ petition by XIAOMI India premature when alternate remedy available under S. 37 FEMA, 1999 left unattended

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CENVAT Credit

No suppression of material facts if show cause notice issued is based on balance sheet; Appeal denied

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Handcuffs

Karnataka High Court grants compensation to a law student who was arrested and handcuffed

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Kerala High Court

Citizenship and Marriage

Diplomatic officers empowered to apostille affidavits and do notarial acts; Indo-Canadian couple allowed to get married “online”

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Sexual Assault

Kerala High Court upholds conviction of a father for sexually assaulting his minor daughter

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Bail

Can pre-arrest bail be granted to accused sitting abroad? Co-equal bench doubts order in Vijay Babu’s case; Larger Bench to decide

While adjudicating a question of law as to whether pre-arrest bail can be granted to an accused while he is sitting abroad, P.V. Kunhikrishnan, J., doubted the findings of Single Judge in Vijay Babu v. State of Kerala, 2022 SCC OnLine Ker 3158. Answering the question of law in negative the Court stated,

“If an accused in a case leaves India after knowing that a case with grievous offences is registered against him and files a bail application before the High Court while sitting abroad, he is not entitled to an order not to arrest especially when there is no such power under Section 438 CrPC.”

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Birth certificate

Can Court direct to retrospectively amend birth certificate to expunge father’s name by replacing mother’s name as an only parent? Kerala HC decides

In a significant decision P. V. Kunhikrishnan, J., directed the Registrar of Births and Deaths to expunge the father’s name of the petitioner 1 from his birth certificate and issue a new certificate showing the name of his mother only as a single parent.

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e-Commerce

Received a wrong product while shopping online? Read how Kerala HC addresses grievance of person who received wrong laptop from Flipkart

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Madhya Prdaesh High Court

DNA Test

‘Violation of individual privacy’; Request for DNA test denied in property dispute

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Will

When does a Will becomes a suspicious document? Madhya Pradesh High Court answers

Dwarka Dhish Bansal, J., while dismissing a second appeal held that in presence of prior execution of agreement of Gift, the Will becomes a suspicious document.

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Highway guidelines

Major District Road (MDR) not subjected to 300 metres guidelines, since it is not a National or a State Highway; NOC for petrol pump granted

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Compassionate appointment

Substitution of an appointment on compassionate grounds through contractual appointment held illegal; directions issued

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Police carelessness

Madhya Pradesh High Court lambasts police force for blatant callousness and failure in tracing an 11-year-old missing minor girl

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Compulsory retirement

Irregular grant of bail may reflect upon competency of the Judge but does not mean that he is corrupt; Compulsory retirement set aside

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Madras High Court

Advertisement

Madras High Court directs State Government to include photographs of PM and President in print/electronic media for International Chess Olympiad

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Deception

Madras High Court directs State Police to alter FIR and add Ss. 417 and 420 IPC on alleged concealment of impotency by husband pre-marriage

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Pension

Freedom fighters’ pension cannot be taken as ‘income’ to deny family pension; Objective of Freedom Fighter Pension Scheme is to honour the sacrifices of the fighters

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Termination of pregnancy

Madras High Court allows termination of 27+weeks pregnancy of minor child victim of 13 years; Foetus to be preserved for criminal case under POCSO

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GST

Proper reasons to be given for rejecting GST Registration Applications; Just writing ‘rejected’ would not suffice

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Education

High Court cannot be an expert body for the purpose of forming an opinion on equivalence of degrees; Madras High Court upheld the Government Order

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Divorce

Suspecting the character of spouse and making false allegations of extra marital affair in presence of colleagues/ students amount to mental cruelty; Madras High Court grants divorce

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Professional misconduct

Madras High Court deprecates the practice of implicating Advocates as accused along with their clients for offences allegedly committed by clients

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Admission

Can plea of poor internet connectivity be entertained if it deprives a student of his entitlement to take admission? Madras High Court directs State to compensate

G R Swaminathan J. directed the State to pay compensation of Rs 1 Lakh to a student who could not take admission in the medical course in the academic year 2021-2022 as he was unable to register his name on the portal for NEET counseling even after obtaining marks beyond cut off limit, due to poor internet connectivity.

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Old age homes

Madras High Court exercises parens patriae jurisdiction to deal with the issue of senior citizen welfare and old age homes; Guidelines issued

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Transgender rights

Madras High Court remarks transgenders are already part of most backward classes; Dismisses plea seeking separate reservations for them in government jobs

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Marriage of inter-faiths

Self-respect marriages can be performed only between two Hindus; Madras High Court upholds denial of marriage registration of an inter faith couple

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Patna High Court

Sexual Assault

Sexual assault on minors traumatic, destroys personality: Patna High Courts upholds father’s conviction for raping his minor daughters for 6 years

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Right to chose a life partner

Women have right to marry anyone of choice; Family/Societal Recognition not required under law

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Punjab and Haryana High Court

Property

Co-owners of the joint property cannot prevent each other from using the property; appeal dismissed

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Motor accident

Motor Accident claims must be proved on the touchstone of preponderance of probabilities

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Juvenile

Punjab and Haryana High Court dismisses the order of the Magistrate; Only Juvenile Justice Board to pass orders where there is ‘Juvenile in conflict with law’

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Parole

‘Parole a part of reformative process’; Punjab and Haryana High Court grants parole to murder convict

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Non-compoundable offences

Proceedings in non-compoundable offences can be quashed on the basis of compromise between accused and victim

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Defamation

Relief to actress Kangna Ranaut in ‘Shaheen Bagh Dadi’ defamation case; Trial Court directed to adjourn the matter

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Mental cruelty

Does incessantly filing complaints for tarnishing one’s reputation amount to mental cruelty? Punjab & Haryana High Court answers

While deciding an appeal arising from a divorce petition, the bench of Ritu Bahri, J. and Meenakshi I. Mehta, J. observed that “the facts and circumstances unequivocally speak volumes of the fact that the respondent has incessantly been filing the complaints against the petitioner as well as his family members and the petitioner even had to go behind the bars in connection with one of those complaints, resulting in harm/damage to his image and reputation in the eyes of their relatives and the society at large”.

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Rajasthan High Court

Illegal termination

Alleged illegal termination from Kotak Mahindra Bank pending for relief due to vacancy of competent authority; State appoints Deputy Labour Commissioner

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Order XVI R 1 and 2 Civil Procedure Code, 1908

Trial Court required to prima-facie ascertain the relevancy of the proposed witnesses while deciding application under Order XVI R 1 and 2 CPC

Dinesh Mehta, J. considered the stamp vendor and Sub Registrar as relevant witnesses in a case where registration of relinquishment deed was challenged, and it was pleaded to summon them as witnesses for ascertaining the claim. The Court stated that ascertaining the relevancy of the proposed witnesses while deciding application under Order XVI Rules 1 and 2Civil Procedure Code (‘CPC’) is to be prima facie established by the Trial Court.

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Arbitration

No award can be remitted to the arbitrator where there are no findings in the contentious issues of the award

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Telangana High Court

Employees Compensation Act, 1923

Whether the workwoman employed in Beedi manufacturing process is covered under the purview of Employees’ Compensation Act? Telangana High Court answers

M Laxman, J. allowed the appeal and remanded the matter for adjudication on merits and held that the deceased beedi worker falls under the definition of ‘workman’ as per Section 2(n)(ii) and Clause 2 of Schedule II of Employees’ Compensation Act, 1923 as well as Section 2(k) of Factories Act, 1948.

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Tripura High Court

Appointment

It is not within the domain of the Court to direct the State- Government to create any post; Petition dismissed

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Uttaranchal High Court

Article 21, Constitution of India

Whether writ petition on cancellation of GST Registration affecting the Right to Livelihood is maintainable? Uttaranchal High Court answers

The division bench of Sanjaya Kumar Mishra, acting C.J., Ramesh Chandra Khulbe, J., held in the writ petition is maintainable, as the cancellation of GST registration affects the rights of livelihood enshrined under Article 21 of the Constitution of India.

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Animal slaughter

Uttaranchal High Court allows stay on Government order banning animal slaughter on the occasion of Bakra Eid in Manglaur

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*Suchita Shukla, has put this report together.

NCLAT
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal, New Delhi: The Bench of Ashok Kumar Bhushan, J., Chairperson, M. Satyanarayana Murthy, J., Judicial Member, and Barun Mitra, Technical Member set aside an order given by the National Company Law Tribunal, New Delhi (NCLT, New Delhi) and held that the Appellant, Entertainment City Ltd., is an affiliate of the Unitech Group. Hence, the moratorium imposed by the Supreme Court in orders given in the case of Bhupinder Singh v. Unitech Ltd. Civil Appeal No. 10856 of 2016, on 20-01-2021 and 24-03-2021 would apply to the Appellant and the application filed by the Respondent for initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016 stood adjourned sine die.

The Appeal was filed against the order dated 06-04-2022 wherein NCLT, Delhi rejected the prayer of the Appellant, that the proceedings in Section 7 Application be adjourned sine die because of the Moratorium passed by the Supreme Court in Bhupinder Singh v. Unitech Limited.

The Bench noticed that the order of the Supreme Court dated 20-01-2020, referred to the expression which “included all its affiliates, trusts, subsidiaries, etc.” Hence, the Bench referred to the definition of ‘affiliate‘ defined in the Subscription-cum-Shareholders Agreement. As per paragraph 1 of the agreement, an affiliate refers to “Affiliate” means in relation to any party, (i) any person that directly or indirectly Controls, is Controlled by, such party; or (ii) any person, the legal and beneficial ownership of at least 26% of which is directly or indirectly held (including through one or more persons) collectively or severally by such party; (iii) any trust in respect of which such party is a direct or indirect a beneficiary; and (iv) in the case of a natural person, any Relative of such person.” Further, “the term “Affiliate” shall include (i) any fund, collective investment scheme, trust, partnership (including without limitation anyco-investment partnership), special purpose or other vehicles, or any subsidiary or Affiliate of any of the foregoing, in which any member or subsidiary of Investor is a general or limited partner, shareholder, investment manager or advisor, member of a management or investment committee, nominee, custodian, trustee or unit holder”

In the light of the above definition, the Bench concluded that Unitech Holdings Ltd, a wholly owned subsidiary of Unitech Ltd, has a shareholding to the extent of 41.95% in the Appellant. Hence, the Appellant is an affiliate of Unitech Group.

Therefore, the Bench held that the order dated 06-04-2022 passed by the NCLT, Delhi was set aside and the Application under Section 7 filed by the Respondent was adjourned sine die till the Moratorium imposed by the orders of the Supreme Court.

[Entertainment City Ltd v. Simran Kaur, 2022 SCC OnLine NCLAT 334, decided on 25-07-2022]

Advocates who appeared in this case :

Siddharth Batra, Shivani Chawla, and Chinmay Dubey, Advocates, For Appellants;

Piyush Singh and Aditi Sinha, Advocates, for the Respondents.

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.

NCLAT
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Appellate Tribunal, Mumbai: The Bench of Ashok Bhushan, J., Chairperson, M. Satyanarayana Murthy, Judicial Member, and Naresh Salecha, Technical member has dismissed a company appeal and has held that interest on delayed payment is also a form of debt and therefore, would form a part of the operational debt under Insolvency and Bankruptcy Code, 2016.

Background of the case

Operational Creditor supplies different types of yarns and has supplied goods to Bombay Rayons Fashions Ltd., Corporate Debtor. The Operational Creditor raised invoices between March, 2017 and January 2020, wherein, Operational Creditor supplied goods for Rs. 2,02,26,017/- under nine invoices. The Corporate Debtor paid three invoices with substantial delay; for one invoice part payment made and remaining five invoices, Corporate Debtor failed to make any payment.

Operational Creditor filed an application under Section 9 seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor. The Adjudicating Authority admitted the application and approved initiation of CIRP along with appointment of Insolvency Resolution Professional. The company appeal was filed against the order passed by the Adjudicating Authority dated 07-06-2022.

Analysis and decision

First, the Bench referred to the definition of debt, as per Section 3(11) of the IBC, “a debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt.” Therefore, the Bench observed that the definition of debt includes ‘claim’ which is being defined under Section 3(6) of the IBC. As per the provision of IBC a claim means-

“(a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured;

(b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured.”

Further, the Bench observed that vide the Notification No S.O. 1205 (E) dated 24.03.2020, issued by the Ministry of Corporate Affairs, the threshold Limit to initiate a CIRP has increased from Rupees 1 Lakh to Rupees 1 Crore.

Therefore, in the light of the above analysis, the Bench held that the total amount for maintainability of claim will include both principal debt amount as well as interest on delayed payment which was clearly stipulated in the invoice. Thus, in light of this the outstanding debt amounts to Rs. 1,60,87,838/- (principal debt amount of Rs. 97,87,220/- plus interest @18% p.a.).

Hence, as the total debt outstanding was above Rs. 1 crore as per requirement of Section 4 IBC read with notification No. S.O 1205 (E), the present Application was maintainable.

[Prashat Agarwal v. Vikash Parasrampuria, Company Appeal (AT) (Ins) No. 690 of 2022, decided on- 15-07-2022]

Advocates who appeared in this case :

Abhijeet Sinha, Sunil Vyas, Nausher Kohli, Palzer Moktan, Dipti Das, Deep Morabia, and Aditya Shukla, Advocates, for the Appellant;

Saurabh Pandya, Viraj Parikh, Mahur Mahajan, Advocates, for R-1;

Rubina Khan & Rohit Gupta, Advocates, for R-2.

Jharkhand High Court
Case BriefsHigh Courts

Jharkhand High Court: Sanjay Kumar Dwivedi, J., quashed the criminal proceeding registered under Sections 420, 406, 34, 120-B of the Penal Code on the ground that only the directors of the company were made accused in the FIR and not the Company. There was no mention of the bad intentions of the directors in the FIR too.

Facts:

The FIR was lodged by the informant alleging that the informant and his wife opened two Demat Trading Accounts through franchisee agent, Jitendra Agarwal, in M/S Bonanza Portfolio Ltd (‘Company’), with its proprietary/partners with S.K.Goyal, S.P. Goyal, V.K. Agarwal, Shiv Kumar Goyal and Narendra Singh.

The informant used to invest money in Yes Bank Shares’ Future and delivery stock. The Company sold the shares of the informant without disclosing it to the franchisee broker and committed a breach of trust. The shares were valued at the lowest price of Rs. 4.95 with a credit balance of Rs. 5,43,150.46 in the accounts of the informant and his wife.

Allegedly, instead of just selling those shares whose value equaled the short amount, the Company sold all the shares from the informant’s and his wife’s account, from the Delhi office. The Company was not supposed to sell the shares as the trading work for the informant was done by the local broker, Jitendra Agarwal. The Company neither informed the informant nor the local broker about the sale and the difference margin.

The informant claimed that the five partners of the Company, under a conspiracy, committed fraud, cheating and breach of trust by selling all shares of Yes Bank of informant’s and his wife’s account. It is also claimed that on 06-03-2020, mighty share brokers with the help of the operators cause fall of Yes Bank shares by 85% for few seconds and sold off all shares for making wrongful gains. Due to this, there was a loss of Rs. 41,78,307.67 in both the accounts. On 11-03-2022 and 12-03-2022 the informant made representation to the Company but did not receive any reply.

Arguments:

Senior counsel, M.S. Mittal, appearing for the petitioners/ partners of the Company submitted that the Company has not been accused in the FIR and relied on the Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781, in which the Supreme Court quashed the criminal proceeding on on the same ground.

Relying on the case Shiv Kumar Jatia v. State (NCT of Delhi), (2019) 17 SCC 193, he submitted that as no specific allegation were made against the Directors in the FIR and in absence of any material to prove that the Directors had criminal intent, continuation of such proceedings would be an abuse of the process of law.

Lastly, he submitted that the Court is competent to quash the FIR itself as the dispute is purely civil in nature and there is mechanism of arbitration and the Member Client Agreements are safeguarding the company. He submitted that as the Directors are not directly alleged and the company is not made an accused, the entire proceeding is fit to be quashed.

The counsel for the informants submitted that in the judgment relied on by senior counsel in the case Sharad Kumar Sanghi v. Sangita Rane (Supra), the complaint was filed, cognizance was taken by the Court against the Managing Director of the Company, and the Company was not made as an accused, this was the reason the entire proceeding was quashed. In none of the cases relied on by the petitioners, the FIR has been quashed. Hence, it was not justified for the Court to interfere at this stage as the investigation was still going on in the case at hand and there are parameters for quashing FIR.

Observation and Analysis:

The Court observed that law is well settled that if a wrong has been done by a company, the representatives of the wrong doer can be proceeded with, where the company is made a party, which is lacking in the case in hand. The entire allegation is civil in nature.The Court further noted that there is no doubt that criminal proceedings and civil proceedings can go simultaneously if there are allegations of criminality, and it is proved both the cases can go simultaneously. However, it is well settled that if the criminality is not made out, the continuation of criminal case will amount to an abuse of the process of law.

After considering the arguments of both sides, the Court analyzed that it is a fit case to exercise the power under Section 482 of the Code of Criminal Procedure, 1973. Accordingly, the FIR and the entire criminal proceeding was quashed.

[S.K. Goel v. State of Jharkhand, 2022 SCC OnLine Jhar 654, decided on 12-07-2022]

Mr. M.S. Mittal, Sr. Advocate, Mr. Salona Mittal, Advocate, for the Petitioners;

Mr. Ashish Kumar, A.C. to G.A. II, for the State;

Mr. Shailesh, Advocate, for the O.P. No.2.

Financial Creditor
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, Mumbai: The coram of H.V. Subba Rao, Judicial Member and Chandra Bhan Singh, Technical Member, declared that the auction purchaser of the Corporate Debtor company, as a going concern is responsible for any claims/ liabilities/ obligations of the Corporate Debtor.

An interlocutory application was filed by the applicant to resolve the issue whether the sale of the Corporate Debtor as a going concern under Section 60(5) of Insolvency and Bankruptcy Code, 2016 [IBC] and Regulation 32-A of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 [IBBI Regulations] includes both assets and liabilities or assets alone without any liabilities. The applicant prayed for not making him responsible for any claims/ liabilities/ obligations payable by the Corporate Debtor, (Gajanan Industries Limited) to the Financial Creditors (Harsh Vinimay Pvt. Ltd) or any other stakeholders including Government dues.

After becoming a successful auction purchaser, the applicant, in respect of an e-auction dated 03-03-2021 conducted by Liquidator, , he was declared as the highest bidder of the Corporate Debtor. Further, a letter of intent was issued by the liquidator as per the requirements of the banker and on the request of the applicant. On 31-05-2021, the applicant made the full payment to which the liquidator confirmed the amount of interest and communicated- “on the payment of the full amount, the sale shall stand completed, the liquidator shall execute certificate of sale or sale deed to transfer such asset and the assets shall be delivered to him in the manner specified in terms of sale”.

Further, the applicant wanted to know about the process to be followed for completion of the deal and to clarify certain issues. The liquidator in reply to this said that the procedure must be followed as per the law and indicated that the entire responsibility of the Corporate Debtor falls on the applicant.

The Tribunal relied on a similar matter in Visisth Services Limited v. S.V. Ramani, 2022 SCC OnLine NCLAT 24, where the same bench held that the sale of Corporate Debtor as a going concern as is where basis under Regulation 32-A of IBBI Regulations and the IBC includes that where the committee of creditors has not identified the assets and liabilities, the liquidator has to do the same and group the assets and liabilities.

The Tribunal held that the applicant is not entitled for the relief sorted in his prayer. Therefore, the above application was dismissed.

[Gaurav Agarwal v. CA Devang P Sampat, 2022 SCC OnLine NCLT 182, decided on 06-05-2022]

Advocates who appeared in this case :

Nausher Kohli, Amey Hadwale and Geeta Lundwani, Advocates, for the Applicant;

Rohaan Cama, Kunal Mehta and Gauri Joshi, Advocates, for the Respondents.

Financial Creditor
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, New Delhi: In a case where a Resolution Professional (RP) had submitted a report even prior to the order by the Adjudicating Authority that had appointed him, the bench of of H. V. Subba Rao, Judicial Member and Chandra Bhan Singh, Technical Member, has asked him to submit a fresh report.

The petition was filed by Bank of Baroda for initiation of Insolvency Resolution Process under Section 95(1) of Insolvency and Bankruptcy Code, 2016. It was passed against Mr. Pawan V Kikavat, Personal Guarantor of Mahavir Roads and Infrastructure Pvt. Ltd.

The counsel for the Bank of Baroda mentioned the demand notice dated 06-11-2020 invoking the Guarantee against the Personal Guarantor. He also gave proof of delivery of the demand notice. The deed of Guarantee dated 26-04-2012 executed by Bank of Baroda was also brought to the notice of the Bench. The petitioner also suggested the name of RP, Mr. Kairav Anil Trivedi, to conduct the Insolvency Resolution Process.

The counsel for the Personal Guarantor opposed the maintainability of the Petition pointing out that the RP has already filed his report without there being any order passed by the Adjudicating Authority appointing him and directing him to do so.

The issue was whether the report filed by RP without him receiving directions can be taken on record or a separate order should be filed by RP on the directions given.

The Bench appointed Kairav Anil Trivedi to submit a fresh report after examining the petition within 10 days of the date of this order.

[Bank of Baroda Limited v Pawan V Kikavat, 20 C.P. (IB)-140(MB)/2022, decided on 29-06-2022]

Counsels:

For Petitioner: Kairav Trivedi, PCA

For Personal Guarantor: Advocate Nausher Kohli

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]

Case BriefsSupreme Court

Supreme Court: The Division Bench of M.R. Shah* and Sanjiv Khanna, JJ., directed to speed up the insolvency resolution process of Amtek Auto Ltd., one of the largest integrated automotive component manufacturers in India. Pointing at the long litigation delay, the Bench stated that any further delay would defeat the very object and purpose of providing specific time limit for completion of the insolvency resolution process, as mandated under Section 12 of the IBC.

Initiation of Insolvency Process

Pursuant to an application made under Section 7 of the Insolvency and Bankruptcy Code, 2016, the corporate insolvency resolution process was initiated against Amtek Auto Limited – Corporate Debtor. Accordingly, the resolution professional invited prospective resolution applicants to submit a Resolution Plan. The Resolution Plans submitted by Deccan Value Investor LP (DVI) and M/s Liberty House Group Private Limited (Liberty) were considered by the Committee of Creditors of Amtek (COC). However, DVI withdrew its Resolution Plan and therefore the revised plan of Liberty was considered.

DVI’s attempt to Renege

Subsequently, Liberty did not acted as per the approved plan and a prayer was made by the COC before the Adjudicating Authority to grant 90 days to the resolution professional to make another attempt for a fresh process. The Adjudicating Authority, though granted liberty to the COC and the resolution professional to approach the appropriate authority under the IBC for the determination of the wilful default by Liberty, it did not accede to the request for carrying out a fresh process by inviting the plans again but directed the reconstitution of the COC for re-consideration of the Resolution Plan submitted by DVI. The appeal of COC got rejected by NCLAT as well and the NCLAT virtually ordered the liquidation of the Corporate Debtor.

Noticeably, the liquidation proceeding was stayed by the Supreme Court’s interim order dated 06-09-2019. Similarly, the Court permitted the resolution professional to invite fresh offers within a period of 21 days. DVI also submitted the fresh resolution plan which was approved by the COC with 70% majority.  Later on, DVI tried to withdraw from resolution plan, which was disallowed by the Court.

Since the approved resolution plan submitted by the DVI was not acted upon, the COC filed Contempt Petition before the Supreme Court. Similarly, DVI also filed an application for rectification of the earlier order dated 18-06-2020 by which the Supreme Court had rejected  DVI’s prayer for withdrawal of the offer. The Supreme Court rejected both the application observing that DVI’s application for rectification was an attempt to renege from the resolution plan which it submitted and to resale from its obligations.

Grievances of the Parties

The appellant contended that was not acting as per the approved resolution plan.  Under the Resolution Plan, the one of the steps to be undertaken by the DVI was to deposit Rs.500 crores “Upfront Cash Amounts” but the same was not done.

The submission on behalf of the DVI was that the said amount was lying in a deposit account in India with their custodian Standard Chartered Bank and was ready for disbursement to lenders but unless and until the other steps were undertaken as per the Resolution Plan, the aforesaid amount of Rs.500 crores would not be transferred to Amtek Auto Limited.

Findings and Decision

Considering that that contentions of the respective parties was that the obligations be performed mutually and simultaneously, the Bench held that the Corporate Debtor had also to perform its obligations simultaneously so that the amount of Rs.500 crores be transferred to the financial creditors/lenders of the Corporate Debtor.

The Bench reminded the parties that the approved resolution plan had to be implemented at the earliest and that is the mandate under the IBC. As per Section 12 of the IBC, subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of 180 days from the date of admission of the application to initiate such process, which can be extended by a further period of 180 days.

Thus, the Bench stated that entire resolution process had to be completed within the period stipulated under Section 12 of the IBC and any deviation would defeat the object and purpose of providing such time limit. Therefore, the Bench directed the parties concerned to the approved resolution plan and/or connected with implementation of the approved resolution plan to complete the implementation of the plan within a period of four weeks, without fail.

[Committee of Creditors of Amtek Auto Ltd. v. Dinkar T. Venkatsubramanian, 2021 SCC OnLine SC 1151, decided on 01-12-2021]

Kamini Sharma, Editorial Assistant has put this report together

*Judgment by: Justice M. R. Shah

Know Thy Judge | Justice M. R. Shah

Case BriefsSupreme Court

Supreme Court: In a landmark case the Division Bench of Dhananjaya Y Chandrachud* and A S Bopanna, JJ., clarified the residuary powers of NCLT under Insolvency and Bankruptcy Code (IBC). The Bench stated,

“In terms of Section 238 and the law laid down by this Court, the existence of a clause for referring the dispute between parties to arbitration does not oust the jurisdiction of the NCLT to exercise its residuary powers under Section 60(5)(c) to adjudicate disputes relating to the insolvency of the Corporate Debtor.”

Factual Background

The appellant and the Corporate Debtor had entered into a Build Phase Agreement followed by a Facilities Agreement whereby the Corporate Debtor was obligated to provide premises with certain specifications and facilities to the appellant for conducting examinations for educational institutions. Clause 11(b) of the Facilities Agreement states that either party is entitled to terminate the agreement immediately by written notice to the other party provided that a material breach committed by the latter is not cured within thirty days of the receipt of the notice.

Invoking the termination clause, a termination notice was issued by the appellant owing to multiple lapses in fulfilling its contractual obligations; i.e. insufficiency of housekeeping staff and their malpractices in respect of entering attendance etc. by the Corporate Debtor when the malpractices were not rectified by the Corporate Debtor despite being highlighted from time to time. The said notice came into effect immediately.

Proceedings before the NCLT and NCLAT

The Corporate Debtor instituted a miscellaneous application before the NCLT under Section 60(5)(c) of the IBC for quashing of the termination notice. The NCLT passed an order granting an ad-interim stay opining that the contract was terminated without serving the requisite notice of thirty days. In appeal, the NCLAT upheld the interim order NCLT.

Question of Law

Based on the appeal, two issues had arisen for consideration:

(i) Whether the NCLT can exercise its residuary jurisdiction under Section 60(5)(c) of the IBC to adjudicate upon the contractual dispute between the parties; and

(ii) Whether in the exercise of such a residuary jurisdiction, it can impose an ad-interim stay on the termination of the Facilities Agreement.

Is NCLT empowered to intervene where the agreement expressly provides for Arbitration?

Although, Clause 12 (d) of the Facilities Agreement provides that the disputes between the parties shall be a subject matter of arbitration, Section 238 of IBC provides that the IBC overrides other laws, including any instrument having effect by virtue of law.

While considering whether a reference to arbitration made under Section 8 of the Arbitration and Conciliation Act 1996 in terms of the agreement between the parties would affect the jurisdiction of the NCLT, the Supreme Court in Indus Biotech (P) Ltd. v. Kotak India Venture (Offshore) Fund, (2021) 6 SCC 436, had held that “even if an application under Section 8 of the 1996 Act is filed, the adjudicating authority has a duty to advert to contentions put forth on the application filed under Section 7 of IB Code, examine 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 by the adjudicating authority 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 indisputably contains an arbitration clause.”

Further, Section 60(5) (c) grants residuary jurisdiction to the NCLT to adjudicate any question of law or fact, arising out of or in relation to the insolvency resolution of the Corporate Debtor. Therefore, despite Clause 12 (d) providing that any dispute between the parties relating to the agreement could be the subject matter of arbitration, the Facilities Agreement being an ‘instrument’ under Section 238 of the IBC can be overridden by the provisions of the IBC.

NCLT’s Residuary Powers under IBC    

In Gujarat Urja Vikas v. Amit Gupta, (2021) 7 SCC 209, it was held that the NCLT’s jurisdiction is not limited by Section 14 of IBC in terms of the grounds of judicial intervention envisaged under the IBC. It can exercise its residuary jurisdiction under Section 60(5)(c) to adjudicate on questions of law and fact that relate to or arise during an insolvency resolution process.

Therefore, rejecting the argument of the appellant that the NCLT and NCLAT had re-written the agreement changing its nature from a determinable contract to a non-terminable contract overlooking the mandate of Section 14 of the Specific Relief Act 1963, the Bench opined that IBC is a complete code and Section 238 overrides all other laws. Therefore, the NCLT in its residuary jurisdiction is empowered to stay the termination of the agreement if it satisfies the criteria laid down in the Gujarat Urja’s case. Hence, the Bench stated,

“In any event, the intervention by the NCLT and NCLAT cannot be characterized as the re-writing of the contract between the parties. The NCLT and NCLAT are vested with the responsibility of preserving the Corporate Debtor’s survival and can intervene if an action by a third party can cut the legs out from under the CIRP.”

Factual Analysis

Noticeably, the Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor and electricity supply was disconnected for the Corporate Debtor by the Electricity Board. The Corporate Debtor in its email alleged that the appellant had failed to make the requisite payments and the electricity was disconnected as a result.

Before the initiation of the CIRP, the appellant had on multiple instances communicated to the Corporate Debtor that there were deficiencies in its services. The Corporate Debtor was put on notice that the penalty and termination clauses of the Facilities Agreement may be invoked. The termination notice dated 10 June 2019 also clearly laid down the deficiencies in the services of the Corporate Debtor.

Therefore, the Bench opined that there was nothing to indicate that the termination of the Facilities Agreement was motivated by the insolvency of the Corporate Debtor. The Bench observed,

“The trajectory of events makes it clear that the alleged breaches noted in the termination notice dated 10 June 2019 were not a smokescreen to terminate the agreement because of the insolvency of the Corporate Debtor.”

Thus, the Bench held that the NCLT did not have any residuary jurisdiction to entertain the instant contractual dispute which had arisen dehors the insolvency of the Corporate Debtor and in the absence of jurisdiction over the dispute; the NCLT could not have imposed an ad-interim stay on the termination notice.

A Cautionary Note to NCLT and NCLAT

Additionally, the Bench issued a note of caution to the NCLT and NCLAT regarding interference with a party’s contractual right to terminate a contract; i.e. even if the contractual dispute arises in relation to the insolvency, a party can be restrained from terminating the contract only if it is central to the success of the CIRP. Crucially, the termination of the contract should result in the corporate death of the Corporate Debtor. The Bench added,

“The narrow exception crafted by this Court in Gujarat Urja (supra) must be borne in mind by the NCLT and NCLAT even while examining prayers for interim relief.”

Verdict

The Bench held that the NCLT had merely relied upon the procedural infirmity on part of the appellant in the issuance of the termination notice, i.e., it did not give thirty days’ notice period to the Corporate Debtor to cure the deficiency in service but there was no factual analysis on how the termination of the Facilities Agreement would put the survival of the Corporate Debtor in jeopardy to invoke residuary powers of NCLT. Accordingly, the judgment of NCLT and NCLAT was set aside with a direction to dismiss proceedings initiated against the appellant. [TATA Consultancy Services Ltd. v. SK Wheels Pvt. Ltd., 2021 SCC OnLine SC 1113, decided on 23-11-2021]

Kamini Sharma, Editorial Assistant has put this report together

Appearance by:

For the Appellant: Advocate Fereshte D Sethna

For the Respondent: Advocate Sowmya Saikumar

*Judgment by: Justice Dhananjaya Y Chandrachud

Call For PapersLaw School News

About the Conference: The Centre for Corporate Governance [hereinafter “CCG”] alongside the Journal on Corporate Law and Governance [hereinafter “JCLG”] of National Law University Jodhpur is organizing a National Conference on Corporate Law and Governance [hereinafter “Conference”]. This Conference will be organized from 15th September, 2018 to 16th September, 2018 in collaboration with the National Foundation for Corporate Governance, a division of the Ministry of Corporate Affairs (MCA).

The Conference seeks to analyze and understand the nature of the current state of affairs of Corporate Governance in India. Further, it is an extended effort to provide a national and international forum for debate on the comparative, analytical aspects and issues surrounding Corporate Governance in India.

Structure of the Conference: The Conference shall feature panel discussions and speeches by eminent practitioners, academicians, policy makers and business executives in corporate law. Each panel discussion will be followed by an interactive session with the participants of the conference. In addition to this, paper presentations will also be held at the Conference.

Theme: The main theme of the Conference is ‘The Changing Regime in Indian Corporate Governance’.

Sub-Themes:

1. Resolving cross-border insolvency.

2. Loopholes in the auditing process in the wake of the aftermath of the Satyam Fiasco.

3. Implications of the Kotak Committee Report on Corporate Governance in India.

4. Resolution of Stressed assets: Is RBI taking the right steps to address the ever increasing problem of stressed assets in India?

5. Effect of the Insolvency & Bankruptcy Code: Resolution over Liquidation & working of the Insolvency & Bankruptcy Code and emerging trends.

6. Role of Corporate Governance in addressing the issue of growing Non Performing Assets.

7. Emerging trends in Mergers & Acquisitions in India.

8. Analysing the Insider Trading Regulations, 2015 in light of SEBI expanding the scope of “connected persons”.

The above areas of law and sub-themes are indicative in nature. The participants are free to choose an inter-disciplinary topic involving one or more of the above areas of law or sub-themes, provided that it fits within the broad theme of the Conference.

Important Dates

* Deadline for Registration (for both, participants as well as paper presenters): August 17, 2018.

* Deadline for Submission of papers: August 26, 2018.

Eligibility: The Centre invites academicians, practitioners and students of law pursuing their LL.B. (Hons.)/ LL.B./ LL.M. from any recognized university to register as a participant or to submit research papers for paper presentations to be held at the conference.

Guidelines for Registration (for both, participants as well as paper presenters)

* Any eligible academician, practitioner and student of law can register to be a participant of the conference.

* Interested participants are requested to send a fully filled Registration form to journal.governance@gmail.com with the subject as “[Name of the Applicant] –Registration for Conference.”

* The University will provide accommodation to every participant of the Conference.

Guidelines for Paper Presentations

Apart from participation in the Conference, we also welcome submissions from students, academicians, researchers and legal practitioners on any of the themes mentioned above.

* The Conference shall have paper presentations (including articles, notes and comments) that shall be selected after a blind review procedure to be conducted by the Editorial Board of the JCLG.

* The presenters will present their papers before a panel of experts who shall adjudge the paper presentations.

* The participants may adopt any suitable means for presenting the papers including audio-visual aids, PowerPoint presentations etc.

* Authors whose papers are selected for presentation in the Conference shall be required to pay an amount of INR 1000 for single author entries and INR 1500 for co-authored entries. [Also refer to the section “Registration Fee and Details” below for further details]

* The University will provide accommodation to all the authors who are selected to present their papers at the Conference.

Submission Guidelines: Please note that the submissions must conform to the following requirements:

* Authors are requested to send an electronic version of their manuscripts in .doc or .docx format to journal.governance@gmail.com with the subject as “Submission- [Name of Author] – Submission for Conference.”

* The acceptable length of Articles is between 5000-8000 words, and of Notes and Comments is between 3000-5000 words, including footnotes.

* All submissions must include an abstract of not more than 300 words, explaining the main idea, objective of the article and the conclusions drawn from it.

* The Article should be in Garamond, font size 13, 1.5 line Spacing and 1 inch margins on each side. Footnotes should be in font size 10 and with single line spacing.

* The authors should conform to the Harvard Bluebook (20th edition) system of citation. The relevant sources should be duly acknowledged through footnotes.

* Authors should provide their contact details, designation and institutional affiliation only in the covering letter for the submission. The authors are to refrain from mentioning their details in the submission itself considering the evaluation of the submission is subject to a blind review. Each submission may have up to two authors.

* The submission must be the original work of the authors. Any form of plagiarism will lead to direct rejection.

* Authors of the shortlisted submissions will be intimated regarding the review process.

* The decision of the Editorial Board in this regard shall be final.

Awards

* All participants will be issued a Certificate of Participation by the Centre for Corporate Governance, NLU Jodhpur.

* The paper presenters at the Conference will be issued a Certificate of Participation and a Certificate of Presentation of Research Paper by the Centre for Corporate Governance, NLU Jodhpur.

* Three best research papers will stand a chance of getting their research paper published in the upcoming issue of the Journal on Corporate Law and Governance subject to editorial review of the Editorial Board.

* The three best presenters will also be awarded exciting cash prices. Details will follow soon.

Registration Fee and Details: The registration fee, including the accommodation, is as follows:

Students:

* For Paper Presenters (whose papers are selected): INR 1000 (single author entries) and INR 1500 (co-authored entries)

* For Participants: INR 1200 per head

Professionals:

* For Paper Presenters (whose papers are selected): INR 1000 (single author entries) and INR 1500 (co-authored entries)

* For Participants: INR 2400 per head

The registration fee may be deposited through online fee deposit link (only) available on the National Law University- Jodhpur website. The following is the link to the website- http://www.nlujodhpur.ac.in/index-main.php. For the ‘Payment Category’ option, click on ‘Other Payments’ and then proceed further. It is mandatory for all participants to mention “NLUJ-NFCG Conference on Corporate Law and Governance’ as ‘Purpose of Payment’.

All participants (including both, delegates as well as paper presenters) are directed to send the .pdf file of the receipt upon payment to journal.governance@gmail.com along with the completed registration form.

Contact Information

1. Adithyan Sreekumar, Editor-in-Chief, JCLG: +91-7073856161 | adithyan15@gmail.com

2. Anushka Kadiresan, Senior Content Editor, JCLG: +91-9602509059 | anushka.kadiresan@gmail.com

3. Nupur Sharon Nag, Managing Editor, JCLG: +91-9928036354 | nupurnag28@gmail.com

Important Links

Guidelines: Click here

Facebook Page: Click here

Registration Form: Click here