Insolvency and Bankruptcy Code 2016

COVID 19Op EdsOP. ED.

Amid the outbreak of Novel Coronavirus or COVID-19, the Government of India on 24-3-2020, announced a nationwide lockdown. The Ministry of Home Affairs, Government of India vide Order dated 24-03-2020 issued certain directions which ensued the closure of majority of Government and private offices and other commercial establishments barring a few essential services. As a result of this country wide lockdown, many Micro, Small and Medium Enterprises (MSME) faced the imminent threat of going out of business. To curtail the panic among the MSME sector and alleviate the imminent threat of insolvency, a slew of measures have been taken to provide a cushion to the companies likely to face the downturn. Among these measures were the increased threshold of invoking insolvency to Rs 1,00,00,000 (Rupees one crore only) from the earlier amount of Rs 1,00,000 (Rupees one lakh only) and exclusion of the lockdown period from the 330-day timeline prescribed under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) for completion of the insolvency process.

Section 4(1) of IBC provides for the threshold limits for triggering the insolvency proceeding. Section 4(1) of the IBC reads as follows: 

“4. (1) This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees:

Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one crore rupees.”

Exercising the powers conferred upon it under Section 4 of IBC, the Central Government vide Notification dated 24-03-2020 in the Official Gazette of India [1], has increased the minimum amount of default for the purpose of initiating a proceeding under IBC to Rs 1 Crore , which is the maximum threshold limit that the Central Government is empowered to prescribe.

A special provision, namely, Regulation 40-C has also been inserted in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 to exclude the lockdown period from the timelines prescribed under the IBC vide Notification dated 29.03.2020 [2] which reads as follows:

“40-C. Special provision relating to time-line.— Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of COVID19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process.”

Thus, the present timeline of 330 days prescribed in the proviso to Section 12(3) of the IBC for the insolvency resolution process would not include the lockdown period of 21 days.

In a suo motu action, taking a cue from the Supreme Court, the National Company Law Appellate Tribunal (“NCLAT”) vide order dated 30-03-2020 in Suo Motu – Company Appeal (AT) (Insolvency) No. 01 of 2020 [3] held the following:

“(1) That the period of lockdown ordered by the Central Government and the State Governments including the period as may be extended either in whole or part of the country, where the registered office of the corporate debtor may be located, shall be excluded for the purpose of counting of the period for ‘Resolution Process under Section 12 of the Insolvency and Bankruptcy Code, 2016, in all cases where ‘Corporate Insolvency Resolution Process’ has been initiated and pending before any Bench of the National Company Law Tribunal or in appeal before this Appellate Tribunal.

(2) It is further ordered that any interim order/stay order passed by this Appellate Tribunal in anyone or the other appeal under Insolvency and Bankruptcy Code, 2016 shall continue till next date of hearing, which may be notified later.”

IMPLICATIONS OF INCREASED THRESHOLD LIMIT

It is pertinent to note that Section 7(1) of the IBC envisages initiation of Corporate Insolvency Resolution Process (“CIRP”) against a corporate debtor by a financial creditor either by itself or jointly with other financial creditors. The Explanation to Section 7(1) of the IBC provides that for the purpose of financial creditors, the default would include a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor. Such an explanation is significantly absent from Section 8 of the IBC, which lays down provisions for operational creditors. Section 8(1) of the IBC provides that an operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. In absence of a provision of joint action by operation creditors, the increased threshold limit of Rupees one crore  would essentially drive out the operational creditors from the realms of IBC as most of the operational debts would fail to meet the one crore mark individually, especially with respect to MSME.

It is further pertinent to note that the Notification dated 24-03-2020 deals with Part II of the IBC which is concerned with Insolvency Resolution and Liquidation for Corporate Persons. The threshold limits pertaining to personal guarantors specified under PartIII of the IBC, namely, Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms have been left untouched. The provisions of Part III of the IBC so far as they are applicable to personal guarantors to corporate debtors were brought into force from 1-12-2019 [4]. Section 78 of the IBC which provides for threshold limit for triggering insolvency and bankruptcy proceedings against individuals reads as under:

“78. Application.- This Part shall apply to matters relating to fresh start, insolvency and bankruptcy of individuals and partnership firms where the amount of the default is not less than one thousand rupees:

Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one lakh rupees.”

The minimum amount of default for initiation of insolvency resolution against personal guarantors of corporate debtors continues to be pegged at Rs. 1000 (Rupees one thousand). Consequently, while the revised threshold limits have made it difficult to initiate insolvency proceedings against an MSME, the applications for initiation of insolvency proceedings against the personal guarantors of such MSME might witness an increase in numbers.

EFFECTS ON PENDING AND FUTURE CASES

The said Notification dated 24.03.2020 does not provide for retrospective application of the revised limits. Therefore, the earlier threshold of Rupees one lakh would continue to apply to cases that are pending. The new applications seeking commencement of CIRP would necessarily have to meet the revised criterion of default of minimum Rupees one crore by the corporate debtor.

The financial distress may also pose difficulties for companies undergoing CIRP to complete the process within the period of 330 days prescribed in the proviso to Section 12(3) of the IBC even after the exclusion of the lockdown period. Section 12(3) of the IBC which read as follows:

“Provided further that the corporate insolvency resolution process shall mandatorily be completed within a period of three hundred and thirty days from the insolvency commencement date, including any extension of the period of corporate insolvency resolution process granted under this section and the time taken in legal proceedings in relation to such resolution process of the corporate debtor:”

In this regard, it is pertinent to refer to the judgement in Committee of Creditors of Essar Steel India Ltd. Through Authorised Signatory v. Satish Kumar Gupta [5], whereby the Supreme Court struck down the word “mandatorily” used in the abovesaid proviso as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant’s right to carry on business under Article 19(1)(g) of the Constitution and held as follows: (SCC OnLine para 108)

“108. …The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days…”

Furthermore, in view of the uncertainty caused by the pandemic, the companies that are presently undergoing the CIRP would possibly find it difficult to attract resolution applicants. In cases where a resolution plan has been submitted by the resolution applicant and is pending approval of the Committee of Creditors or the Adjudicating Authority, the resolution applicant might seek modification of the resolution plans already submitted or cancellation of the process of submission/finalisation as the valuations and viability of businesses is likely to be severely affected due to the COVID-19 outbreak. Although there is no provision in the IBC that allows the resolution applicant to modify or withdraw a resolution plan which is pending approval of the Adjudicating Authority, the National Company Law Tribunal, Mumbai has vide order dated 27.09.2019 in State Bank of India v. Metalyst Forgings Ltd.[6] allowed the prayer of the resolution applicant seeking cancellation of the process of submission of the resolution plan and held as follows:

“72. The IBC neither confers the power or jurisdiction on the Adjudicating Authority to compel specific performance of a plan by an unwilling resolution applicant. The letter and spirit of the IB Code mandate the acceptance of only a viable and lawful resolution plan being implemented at the hands of a willing resolution applicant. Absence of these factors renders the Section 31 application liable to be rejected. The IB Code envisages a scheme whereby the corporate debtor is taken over by the successful resolution applicant. This scheme must contain a provision for its implementation and supervision under Section 30(2)(d) and as required by the proviso to Section 31(1).

73. At this point, it is fit to refer to the sub-section (4) of Section 30 of the IB Code as it lays down the basis on which a resolution plan would be approved by the Committee of Creditors. For the sake of reference, the said clause is reproduced below:

“(4) The committee of creditors may approve a resolution plan by a vote of not less than sixty-six per cent of voting share of the financial creditors, after considering its feasibility and viability, and such other requirements as may be specified by the Board.”

74. Thus, a resolution plan is to be approved by the CoC only after being satisfied that it is feasible and viable. This clearly implies that if a resolution plan is not viable and found unfit for implementation or does not have proper provisions for its successful implementation or is based on incorrect assumptions which would lead to failure of the resolution plan and eventual, inevitable death of the corporate debtor, then the CoC ought to reject such a resolution plan. Regulation 38(3) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that the resolution plan shall demonstrate with (a) it addresses the cause of default, (b) it is feasible and viable, (c) it provides for effective implementation, (d) it provides for approvals required and the time lime for the same, and (e) the resolution applicant has the capability to implement the resolution plan.”

(emphasis in original)

The National Company Law Appellate Tribunal vide order dated 07-02-2020 in Committee of Creditors of Metalyst Forging Ltd. v. Deccan Value Investors LP [7] upheld the order dated 27-09-2019 passed by the NCLT, Mumbai Bench in State Bank of India v. Metalyst Forgings Ltd. (supra) and observed that the IBC does not confer any power and jurisdiction on the Adjudicating Authority to compel specific performance of a plan by an unwilling resolution applicant.

CONCLUSION

The exclusion of lockdown period and the increased threshold limit are welcome steps taken by the legislature to ensure that the Micro, Small and Medium Enterprises have enough cushion to recover from the financial distress caused by the COVID-19 pandemic and would also declutter the cases under IBC by filtering out the frivolous ones. The low threshold of Rupees one lakh was hitherto criticised for potentially pushing an otherwise strong enterprise into liquidation for a default of a small amount at the instance of a single operational creditor. The critiques of the earlier threshold limit have hailed the revision as a positive move as it curtails the expansive powers of trigger-happy operational creditors who were more interested in recovery rather than resolution. It is ought to be remembered that the operational creditors do not stand to benefit in case a company undergoes liquidation as they are below the financial creditors in the line of proportionate repayment. The  IBC is only a measure of last resort for the operational creditors. However, in cases where there is a personal guarantee, mostly given by the promoters/directors, it might still be used as a mechanism for recovery as the limit for initiation of the proceedings has not proportionately been increased and could possibly be a route that may be used to put pressure on the companies.

Nevertheless, in the times of the unprecedented downturn being experienced on account of the COVID-19 pandemic, the aforesaid measures would prove to be beneficial for resurrection of the enterprises facing the heat. After all, the key objective of the IBC is to ensure that the corporate debtor keeps operating as a going concern.

*Abhinav Shrivastava, Partner, GSL Chambers

**Sana Kamra, Associate, GSL Chambers

[1] https://www.ibbi.gov.in/uploads/legalframework/48bf32150f5d6b30477b74f652964edc.pdf

[2] https://ibbi.gov.in/uploads/whatsnew/be2e7697e91a349bc55033b58d249cef.pdf

[3] Suo Motu, In re, 2020 SCC OnLine NCLAT 206

[4] https://ibbi.gov.in//uploads/legalframework/1fb8c2b785f35a5126c58a2e567be921.pdf

[5] 2019 SCC OnLine SC 1478

[6] CP 1555(IB)/MB/2017, https://nclt.gov.in/sites/default/files/Interim-Order-pdf/SBI%20vs%20Metalyst%20Judgement%20CP%201555-2017%20NCLT%20ON%2027.9.2019.pdf

[7] Company Appeal (AT) (Insolvency) No. 1276 of 2019, https://nclat.nic.in/Useradmin/upload/8392498195e4106c6488b1.pdf

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]

Cyril Amarchand MangaldasExperts Corner

The enactment of the Insolvency and Bankruptcy Code, 2016 (IBC) in 2016 was one of the most significant reforms introduced by the Government of India (GoI) in the recent years. However, it lacked clarity on its interface with various other regulatory authorities, particularly the Competition Commission of India (CCI). Pertinently, the IBC did not contemplate the timelines for a resolution applicant to notify and seek the approval of the CCI, thereby posing several complex questions, in particular—what would qualify as a binding agreement for insolvency cases? Whether notification process can be triggered prior to approval of a resolution plan? Whether IBC related cases would be granted an expedited approval? Whether preferential treatment would be granted to companies approaching the CCI post obtaining an approval from the Committee of Creditors (CoC)?

With the notification of the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 (Second Amendment), the Ministry of Corporate Affairs has provided much needed clarity to all stakeholders in relation to the above issues. The Second Amendment by way of introduction of a new provision, mandates the approval of the CCI prior to the approval of a resolution plan by the CoC, thereby taking away the discretion exercised earlier by resolution applicants as to the timelines of notifying the CCI. In this backdrop, the article touches upon the merits of the amendment, active role of the CCI in the past two years and the way forward.

Legal Framework

The corporate insolvency resolution process (CIRP) is initiated with the admission of an application against a corporate debtor to the National Company Law Tribunal (NCLT). Thereafter, a resolution professional issues request for resolution plans inviting the interested bidders to submit resolution plans in relation to resolution of the corporate debtor. This is followed by approval of such resolution plan by the CoC and stamping of final approval by the NCLT. The IBC mandates a 180-day period which can be extended to 90 days for the completion of the CIRP.

In the construct of Section 5 of the Competition Act, 2002 (Competition Act), where certain jurisdictional thresholds prescribed under it are breached, a transaction under the CIRP would trigger a mandatory approval from the CCI before closing such a transaction. Under the Competition Act, the CCI is required to form a prima facie opinion of whether a transaction notified to it causes an appreciable adverse effect on competition (AAEC) within a period of 30 working days from the date of such notification. Besides the 30 working day period, the CCI is required to approve/reject/approve with modification any notified transaction within 210 days from the date of such notification, which can be extended to 60 days in limited cases where remedies are warranted. It is important to note that a majority of the cases notified to the CCI have been approved in Phase I of the review period i.e. within the preliminary 30 working day period.

Reasons for the Second Amendment vis-à-vis Competition Act

The Ministry of Corporate Affairs by way of its Notification dated 17-8-2018 added Section 31(4) to the IBC, which inter alia provides that—

… where the resolution plan contains a provision for combination, as referred to in Section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.

The above amendment is a welcome step as it clarifies the trigger event for a transaction under the CIRP i.e. essentially the stage at which the CCI approval should be sought. Having a clear mandate to obtain approval from the CCI will go a long way in preventing complex situations which have come up due to the regulatory uncertainties around the CCI approval process.

In the past, we have seen certain cases being notified to the CCI both prior to and post the approval of the CoC. For instance, in the acquisition of Binani Cement Limited (BCL) (one of the first few IBC matters examined by the CCI) two resolution applicants i.e. Dalmia Cement Limited (Dalmia) and UltraTech Cement Limited (UltraTech), both filed separate notifications with the CCI prior to receiving an approval from the CoC. The CCI accorded an approval, finding no AAEC to both Dalmia and UltraTech. However, the approval to UltraTech was accorded by the CCI post the CoC’s approval of the Dalmia resolution plan, thereby making CCI’s approval of UltraTech immaterial.

In another case on point relating to the acquisition of Electrosteel Steels Limited (Electrosteel) by Vedanta Limited (Vedanta), the CCI was notified post the approval of the resolution plan by the CoC. Importantly, Vedanta’s resolution plan was subsequently approved by the NCLT during the CCI’s review process. Such a situation i.e. approval by the NCLT pending the CCI approval could possibly lead to two issues — (1) disqualification of Vedanta and ultimately liquidation of Electrosteel assuming that CCI’s approval took more than 270 days (mandated under the IBC); and (2) potential gun-jumping concerns under the Competition Act because of the conflict between the IBC and the Competition Act resulting from the implementation of “control” provisions under a resolution plan (pursuant to the approval of NCLT).

CCI, IBC and the Way Forward

The CCI has up until now expeditiously assessed a number of IBC transactions and approved such transactions, with an average of 20 days per transaction. As mentioned above, the Second Amendment is a welcome step given that it clarifies the exact timelines for notifying the CCI in the CIRP framework. The Second Amendment emphasises the intent of the GoI to ensure expedited clearances for transactions, defined roles for the various regulators and harmony between the implementation of the statutes.

More importantly, the mandate of the Second Amendment requiring a resolution applicant to obtain approval from the CCI prior to the CoC approval of a resolution plan ensures that the two potential issues highlighted above are avoided, even if it results in multiple filings for the same transaction before the CCI by different resolution applicants.

While the Second Amendment (to the extent it applies to the Competition Act) is an outcome of the need for streamlining regulatory approval process, it would also be interesting to see whether further amendments will be rolled out in this regard or, whether the GoI, following the suit of Securities and Exchange Board of India, would resort to exempting such transaction from the purview of CCI altogether.

*Anshuman Sakle is a Partner with the Competition Law Practice at Cyril Amarchand Mangaldas and can be contacted at anshuman.sakle@cyrilshroff.com.  Dhruv Rajain, Senior Associate can be contacted at dhruv.rajain@cyrilshroff.com and Ruchi Verma, Associate, can be contacted at ruchi.verma@cyrilshroff.com with the Competition Law Practice at Cyril Amarchand Mangaldas.

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): A two-member bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial) dismissed an appeal filed against the order of the National Company Law Tribunal, Mumbai.

The directors of Fortune Pharma (P) Ltd., Corporate Debtor, had executed a  personal guarantee in favour of State Bank of India, Financial Creditor. Subsequently, the Bank enforced Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 and the company was directed to hand over possession of the factory premises to the Bank. Thereafter, the company filed an application under Section 10 of the Insolvency and Bankruptcy Code, 2016 which was allowed. Subsequently, the director of the company assigned his debt in favour of the appellant. The appellant was inducted as member of the committee of creditors by the Resolution Professional. This was objected to by the Bank, contending that the appellant was a related party. The NCLT upheld the objection of the Bank. Aggrieved thus, the appellant filed the instant appeal.

The Appellate Tribunal, at the outset, observed that the assignor was a director of the Corporate Debtor, therefore, he was a related party under Section 5(24) of the Code. Further, a debt assignment is a transfer of debt with all the rights and liabilities associated with it. The assignor assigns its debt in favour of the assignee, who steps in the shoes of the assignor. The assignee thereby takes over the right and also takes over the disadvantages by virtue of such assignment. Accordingly, the director being a related party, with assignment of debt, the disadvantage also goes to the appellant. For the aforesaid reasons, it was held that the issue was rightly decided by the NCLT. The appeal was dismissed sans merit. [Pankaj Yadav v. State Bank of India, 2018 SCC OnLine NCLAT 389, dated 07-08-2018]