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

The respondent preferred an application under Sections 433 and 434 of the Companies Act, 1956 before the Bombay High Court for winding up of the Corporate Debtor pertaining to a debt of Rs 21,63,359. The case was transferred pursuant to Rule 5 of the Companies (Transfer of Pending Proceedings) Rule, 2016 before National Company Law Tribunal (Mumbai). The respondent therein filed Form 5 to treat the same as an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. By the order impugned, NCLT admitted the application, passed an order of moratorium and appointed Interim Resolution Professional. The appellant – Director of the Corporate Debtor, challenged the order on the ground that notice under Section 8(1) was issued on the same date when Form 5 was filed.

The Appellate Tribunal perused Section 9 of the I&B Code and observed that an application under Section 9 preferred before the completion of 10 days from the giving of notice under Section 8(1) cannot be entertained and admitted by the Adjudicating Authority. Holding the application under Section  9 as not maintainable on the date on which it was filed, the High Court set aside the order impugned. Resultantly, the order passed by NCLT appointing Interim Resolution Professional, declaring moratorium, freezing of account, etc. were declared illegal. The appeal was, thus, allowed. [Jaya Patel v. Gas Jeans (P) Ltd., 2018 SCC OnLine NCLAT 783, dated 08-10-2018]

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National Company Law Appellate Tribunal (NCLAT): A two-member bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice A.I.S. Cheema, Member (Judicial), allowed an appeal filed against the order of National Company Law Tribunal, Mumbai whereby an application preferred by the respondent (Operational Creditor) under Section 9 of the Insolvency and Bankruptcy Code, 2016 was admitted; order of moratorium was passed; and Insolvency Resolution Professional was appointed.

The appellant (Corporate Debtor), referring to the emails exchanged between the parties, submitted that there was an existence of dispute prior to issuing of demand notice under Section 8(1). The dispute as alleged was regarding the quantum of payment, which was subsequently settled and the agreed amount plus GST had already been paid to the respondent. It is pertinent to note that originally, as submitted by the respondent, the appellant agreed to pay a fee of Rs 1 crore as brokerage towards the TATA-Neptune deal. However, the respondent accepted that the same was settled at Rs 75 lakhs plus GST, part payment of which was already done. The appellant submitted that though there was an existence of dispute, inspite of the same the NCLT admitted respondent’s application under Section 9 and passed the order impugned.

For settling the issue at hand, the Appellate Tribunal made a reference to the Supreme Court decision in Innoventive Industries Ltd. v. ICICI Bank(2018) 1 SCC 407 and perused Section 7 (when it comes to financial creditor triggering the process, this section becomes relevant) and Section 9 of the Code. It was observed that the Supreme Court, in the case mentioned herein, held that in a petition under Section 9, the Corporate Debtor has a right to show that there is an existence of dispute  about the quality of goods and services provided, as well as a right to dispute the debt including the quantum of payment. In view of the Appellate Tribunal, the emails exchanged between the parties clearly show that negotiations were going on relating to the quantum of payment. Originally, the payment to be made was Rs 1 crore which was finally settled at Rs 75 lakh. In such circumstances, it could be accepted that there was an existence of dispute about the payment of the debt. The Appellate Tribunal held, if the debt has been disputed, the question of default does not arise. Accordingly, the appeal filed by the Corporate Debtor was allowed; the order impugned passed by the National Company Law Tribunal, Mumbai was set aside, and the application preferred by Operational Creditor was dismissed. [Nayan Shah v. Viral Rajarashi Mehta, 2018 SCC OnLine NCLAT 411, dated 29-06-2018]

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

The appellant submitted that their claim was admitted by the respondent and the NCLT wrongly relied on other evidence to come to a conclusion that there was an existence of dispute. It was on record that series of emails were exchanged between the parties alleging non-submission of work completion certificate, non-completion of work, amount deductible for lead piping and non-removal of scrap material, and exorbitant tonnage claim made by the appellant contrary to existing industry practices.

The Appellate Tribunal noted that the aforementioned disputes were raised by the respondent much prior to issuance of demand notice by the appellant under Section 8(1). There was nothing on record to suggest any correctional measure taken by the appellant. On the other hand, the respondent pleaded that there was an existence of dispute. It was observed that there were disputed question of facts as to whether, subsequently, the scrap material was removed and exorbitant tonnage claim made by the appellant was corrected. It was held that such disputed questions cannot be determined by NCLT. The Appellate Tribunal, accordingly, upheld the decision of the NCLT not to admit the application under Section 9. The appeal was dismissed holding it to be sans merit. [Laina Power Engineering v. Sokeo Power (P) Ltd.,2018 SCC OnLine NCLAT 414, dated 16-08-2018]

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National Company Law Appellate Tribunal (NCLAT): A two-member bench comprising of Justice S.J. Mukhopadhaya and Balvinder Singh, Member (Technical) restored the Corporate Insolvency Resolution Process as initiated against the appellant – Corporate Debtor.

Brief facts of the case are that the respondent Bank preferred applications under Section 9 of the I&B Code against the appellant which were admitted by the National Company Law Tribunal, New Delhi. The said decision was challenged by the appellant before the Appellate Tribunal whereby the order of admission was dismissed. Thereafter, against the decision of the Appellate Tribunal, the respondent filed an appeal in the Supreme Court. The Court remitted the matter back to the Appellate Tribunal for reconsideration, pursuant to which instant proceedings were held.

The Appellate Tribunal, while reconsidering the matter, took note of the fact that the appeals were filed by the suspended Board of Directors. Reliance was placed on Innoventive Industries Ltd. v. ICICI Ltd., (2018) 1 SCC 407 to hold that an appeal filed under I&B Code by Corporate Debtor through suspended Board of Directors is not maintainable. That apart, it was reiterated that in view of the substantive provisions of the Code, it was always open to the respondent to file applications under Section 9 in case of debt or a default. Resultantly, the Corporate Insolvency Resolution Process initiated against the appellant was restored. The NCLT was directed to proceed with the matter in accordance with law. [Shilpi Cable Technologies Ltd. v. Macquarie Bank Ltd.,2018 SCC OnLine NCLAT 383, dated 08-08-2018]

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National Company Law Appellate Tribunal (NCLAT): A two-member bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Bansi Lal Bhat, Member (Judicial) allowed an appeal filed challenging the proceedings initiated under Section 9 Insolvency and Bankruptcy Code, 2016.

The appellant preferred the present appeal against the proceedings initiated by the National Company Law Tribunal, New Delhi by admitting an application under Section 9 filed by the respondent. Vide the order impugned,  the NCLT admitted the said application, passed the order of moratorium, and appointed the Interim Resolution Professional. The appellant, Corporate Debtor, challenged the order on the ground that no demand notice was served on the Corporate Debtor in terms of Section 8(1) of the Code.

The Appellate Tribunal found that the a demand notice had been served but on the old address of the appellant. The registered office of the appellant was shifted from Delhi to Noida; and further, the Noida office was also sealed by a civil court of competent jurisdiction. It was noted that the demand notice was issued in a wrong address. Further, the Operational Creditor had notice of the changed address at Noida, but no demand notice was issued to that address. Finding that no notice was served on the appellant in terms of Section 8(1), the Appellate Tribunal set aside the order impugned passed by NCLT. In effect, the process initiated vide the order impugned was held illegal and set aside. The application filed by the Operational Creditor under Section 9 was dismissed with a liberty to issue fresh demand notice under Section 8(1). The appeal was allowed in the above terms. [Sharad Kesarwani v. Planetcast Media Services Ltd., 2018 SCC OnLine NCLAT 385, dated 07-08-2018]

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National Company Law Appellate Tribunal (NCLAT): A two-member bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial), dismissed an appeal filed by the Operational Creditor against the judgment of the National Company Law Tribunal, Mumbai whereby appellant’s application under Section 9 I&B Code was dismissed.

The appellant had filed an application for initiation of Insolvency Resolution Process against the Corporate Debtor. Before the NCLT, the respondent submitted that the principal amount of debt due was already paid. The NCLT dismissed the application of the appellant. Aggrieved thus, the present appeal was filed. The appellant, placing reliance on Section 3(11) of the Code which defines debt, contended that 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. It was submitted that the debt as defined in the Code, includes the interest due on the principal amount as well.

The Appellate Tribunal was of the view that such submission was untenable. It is NCLT, not every interest that can be treated as a debt. If in terms of the agreement, interest is payable to the Operational or Financial Creditor, then the debt will include interest; otherwise, the principal amount is to be treated as debt which is the liability in respect of the claim that can be made from the Corporate Debtor. The Court noted that in the present matter, the principal amount had already been paid, and as per the agreement, no interest was payable. As such, the application under Section 9 on the basis of entitlement of payment of interest was not maintainable. The appeal was accordingly dismissed. [Krishna Enterprises v. Gammon India Ltd.,2018 SCC OnLine NCLAT 360, dated 27-07-2018]