IBC 2016–NCLAT Judgments–Summary

Asset Reconstruction V GPT Steel–15.02.2019

This Appellate Tribunal has observed in a recent judgment that Corporate Insolvency Resolution Process is not a recovery proceeding and the Adjudicating Authority has to strictly adhere to the rules of procedure and the timelines set out in the I&B Code.

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Narayana Electric V HDFC–15.02.2019

This appeal, directed against the impugned order dated 17th October, 2018, passed by the Adjudicating Authority (National Company Law Tribunal) Bengaluru Bench, by virtue whereof Corporate Insolvency Resolution Process has been triggered against the Appellant – Corporate Debtor by exercising powers under Section 7(5)(a) of the I&B Code, 2016 is hopelessly time barred. This is apart from the fact that the appeal has been filed by the Corporate Debtor, which goes against the dictum of the Hon’ble Apex Court laid down in “Innoventive Industries Ltd. Vs. ICICI Bank and Ors.” – (2018)1 SCC 407. On both counts the appeal is not maintainable.

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Gigi George Anitha Kumaran–12.02.2019

Learned counsel appearing on behalf of the Appellant submits that the Appellant cannot be held to be bound by the settlement reached between the Promoter and other Promoter. In this regard, we only observe that the settlement is reached between ‘S. Venkatasubramaniam’, Promoter and the Financial Creditor and if the present Appellant is not party to the settlement no specific finding is required to be given. The appeal stands disposed of.

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Roop Kishore V Roopali Agarwal–12.02.2019

In effect, order (s) passed by Ld. Adjudicating Authority appointing ‘Interim Resolution Professional’, declaring moratorium, freezing of account and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action taken by the ‘Resolution Professional’, including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by the Respondent under Section 7 of the ‘’I&B Code’ is dismissed. The Adjudicating Authority will now close the proceeding. The ‘Corporate Debtor’ is released from all the rigour of law and is allowed to function independently through its Board of Directors from immediate effect.

The ‘Resolution Professional’ has already been paid the dues vide postdated cheque and in case the cheque is not encashed, it will be open to the Resolution Professional to bring it to the notice of this Appellate Tribunal to take appropriate action against the Corporate Debtor.

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Coal India V Gult Coil–11.02.2019

5. It is submitted that such settlement has already been made prior to the constitution of the ‘Committee of Creditors’. 6. In the case of ‘Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors. – Writ Petition (Civil) No. 99 of 2018’, the Hon’ble Supreme Court observed as follows:

  • “52. It is clear that once the Code gets triggered by admission of a creditor‘s petition under Sections 7 to 9, the proceeding that is before the Adjudicating Authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. A question arises as to what is to happen before a committee of creditors is constituted (as per the timelines that are specified, a committee of creditors can be appointed at any time within 30 days from the date of appointment of the interim resolution professional). We make it clear that at any stage where the committee of creditors is not yet constituted, a party can approach the NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the concerned parties and considering all relevant factors on the facts of each case.”

7. In view of the fact that the parties have now settled the matter prior to the constitution of the ‘Committee of Creditors’ and the Adjudicating Authority has failed to notice that the principal amount has already been paid and original plea of the ‘Corporate Debtor’ was that no interest was payable in terms of the Agreement/ Contract, we set aside the impugned order dated 19th December, 2018 passed by the Adjudicating Authority.

9. The Adjudicating Authority will fix the fee of ‘Interim Resolution Professional’ and the ‘Corporate Debtor’ will pay the fees of the ‘Interim Resolution Professional’ for the period he has functioned.

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Centram Capital Ltd Vs Orient Green and Shriram EEC–08.02.2019

19. The Appellant has enclosed an e-mail dated 8th September, 2015 sent by Mr. P.R Kalyanaraman, of the Appellant- ‘Centrum Capital Limited’ to Mr. Ravish Bansal of ‘Shriram EPC Limited’. In reply to the said e-mail, one Mr. Kotteswari by his reply dated 8th September, 2015 intimating Mr. Ravish Bansal that they have never agreed to pay the full fee as per mandate terms. The said e-mail enclosed at Page 169 also shows              pre-existing dispute.

20. Thus, as there is a pre-existence of dispute raised by the Respondent by their e-mail dated 8th September, 2015 stating that the Respondent never agreed to pay full fee to the Appellant and the terms and agreement letter dated 20th February, 2014 do not bear the signatures of both the parties, the Adjudicating Authority rightly rejected the application by impugned order dated 31st August, 2018

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SBI V ai Balaji Industries–08.02.2019

14. In “Unigreen Global Private Limited v. Punjab National Bank & Ors.− (2018) 145 SCL 272”, this Appellate Tribunal held:

“28. In a case where a winding up proceedings has already been initiated against a Corporate Debtor by the Hon’ble High Court or Tribunal or liquidation order
has been passed in respect of Corporate Debtor, no application under Section 10 can be filed by the Corporate Applicant in view of ineligibility under
Section 11(d) of I & B Code, as quoted below:

“11. Persons not entitled to make application – The following persons
shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter, namely:—
(a) … or
(b) …or
(c) …or
(d) a corporate debtor in respect of whom a liquidation order has been made.

29. In view of the aforesaid provision where a winding up proceeding has already been initiated under the Companies Act, 1956 / 2013 by the Hon’ble High Court such cases have not been transferred to National Company Law Tribunal, pursuant to “Companies (Transfer of Pending Proceedings) Rules,
2016”, framed by the Central Government.

30. Clause (d) of Section 11 refers to “liquidation order”, against a Corporate Debtor. The word ‘winding up’ has not been mentioned therein. For the said
reason by Section 255 read with Schedule 11 of the I & B Code, in Section 2 of the Companies Act, 2013 for clause (23), the following clause has been substituted :
“1. In section 2,—
(a) for clause (23), the following clause shall be substituted, namely:—
xxx xxx xxx
“(23) “Company Liquidator” means a person appointed by the Tribunal as the
Company Liquidator in accordance with the provisions of section 275 for the winding up of a company under this Act”;
(b) after clause (94) , the following clause shall be inserted, namely:—
“(94A) “winding up” means winding up under this Act or liquidation under
the Insolvency and Bankruptcy Code, 2016, as applicable.

31. By aforesaid amendment, the legislatures have made it clear that the word “winding up” mentioned in the Companies Act, 2013 is synonymous to the word “liquidation” as mentioned in the I & B Code.”

15. In the present case, as we find that no specific order of winding up/liquidation has been passed by the Hon’ble High Court of Calcutta and whatever the order of admission or winding up earlier issued has been recalled by the Division Bench, we hold that the application under Section 7 preferred by the ‘State Bank of India’ is maintainable

16. In the present case, such application under Section 7 was filed on 27th December, 2017 and more than a year has passed. As it is not the case of the ‘Corporate Debtor’ that no debt is payable in law or in fact and the Adjudicating Authority has not held that application was incomplete, the Adjudicating Authority should have admitted the application and should have passed order of ‘Moratorium’, etc.

17. For the reasons aforesaid, we set aside the impugned order dated 10th October, 2018 and remit the matter to the Adjudicating Authority, Kolkata Bench, Kolkata with direction to admit the application under Section 7. Before such admission, intimation to be given to the ‘Corporate Debtor’, but no further hearing is required to be given to any person, this Appellate Tribunal having heard all the parties and having held that it is a fit case for admission.

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Raghu Singhwal V Sarvottam Rolling–08.02.2019

Supreme Court in ‘Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors. – Writ Petition (Civil) No. 99 of 2018’, wherein Hon’ble Supreme Court observed as follows:

“52. It is clear that once the Code gets triggered by admission of a creditor‘s petition under Sections 7 to 9, the proceeding that is before the Adjudicating  Authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is
necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. A question arises as to what is to happen before a committee of creditors is constituted (as per
the timelines that are specified, a committee of creditors can be appointed at any time within 30 days from the date of appointment of the interim resolution professional). We make it clear that at any stage where the committee of creditors is not yet constituted, a party can approach the NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the concerned parties and considering all relevant factors on the facts of each case.”

3. Mr. Arjun Sanjay, learned counsel appearing on behalf of the respondent – ‘M/s. Sarvottam Rolling Mills (P) Ltd. (‘Operational Creditor’) accepts that the parties have settled the matter. Mr. Rohit Rathi, learned counsel appearing on behalf of the ‘Resolution Professional’ also accepts that the ‘Committee of Creditors’ had not been constituted before the parties settled the matter. He further submits that a sum or Rs. 8.37 Lakhs is payable to Mr. Rameshwar Dayal, ‘Resolution Professional’ towards the fee and the cost incurred.

4. Having heard the learned counsel for the parties and taking into consideration that the parties have settled the matter prior to constitution of the ‘Committee of Creditors’ and ‘pre-existing dispute’ as emanating from the FIR enclosed at page 138, we set aside the impugned order dated 17th December, 2018

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Sarang Bhand V West Coast–08.02.2019

the present appeal has been preferred by the shareholder of the ‘Corporate Debtor’. Learned counsel appearing on behalf of the appellant submitted that the application under Section 7 was filed on 28th September, 2017. The case was heard on the question whether the respondent is a ‘financial creditor’ or not and thereafter the impugned order was passed on 30th August, 2018. This order has not been even shown on the website and certified copy of the impugned order was received by the ‘Corporate Debtor’ on 20th November, 2018. Learned counsel for the appellant submitted that the main issue whether the respondent can be termed to be a ‘financial creditor’ within the meaning of Section 5(7) of the I&B Code has not appropriately considered. Learned counsel submits that ‘West Coast Ventures (India) Pvt. Ltd.’ (so called Financial Creditor) formed a joint venture with M/s. Organic Recycling Systems Pvt. Ltd. (Corporate Debtor) for project to project basis. Both the parties desired to bid, execute and operate various municipal solid waste to Energy Project in consortium with each other. 

Thus, we find that both the ‘corporate debtor’ and the respondent ‘West Coast Ventures (India) Private Limited’ invested money for the purpose of projects of equity share of third party and, therefore, it cannot be held that the respondent ‘West Coast Ventures (India) Private Limited’ invested in the company namely ‘M/s. Organic Recycling Systems Pvt. Ltd.’ (Corporate Debtor) and thereby ‘West Coast Ventures (India) Private Limited’ cannot be termed to be a ‘financial creditor’ of M/s. Organic Recycling systems Pvt. Ltd. (Corporate Debtor). The Adjudicating Authority though noticed that such investments were made for purchase of equity share of 3rd party but failed to consider the real issue whether the respondent ‘West Coast Ventures (India) Private Limited’ can be termed to be a ‘financial creditor’ of ‘Organic Recycling Systems Pvt. Ltd.’ (Corporate Debtor).

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Vikas Aggarwal V SBI and Asian Colour–08.02.2019

Para–7— SC Judgment on Section 7 of Code –Innoventive Industries Vs ICICI Bank–Para 27 and Para 28–

8. From the aforesaid finding –it will be evident that the definition of claim means a right to payment even if it is disputed. The Corporate Debtor is only entitled to point out that the default had not occurred in the sense that the ‘debt’ which may also include disputed claim is not due. The moment the Adjudicating Authority is satisfied that a default has occurred the application must be admitted unless it is incomplete. It is not the case of the Appellant or the Corporate Debtor that the debt is not payable in law or in fact. Therefore, the Code gets triggered the moment the Adjudicating Authority noticed that the default is of Rupees One Lakh or more (Section 4).

9. We have noticed that the ‘Financial Creditor’ has removed the defects, it is only thereafter the Adjudicating Authority passed the impugned order of admission. The Appellant in his appeal has also taken plea that documents were produced as quoted and noticed in the preceding paragraph.

10. It was next contended that the person who filed the application under Section 7 was not competent having not authorised as per law, being an officer of lower rank. However, the record shows that one Mr. Abhishek Kumar,Assistant General Manager – cum – Relationship Manager of the Bank was empowered to sign and submit the application by Authorisation Letter dated 16th June, 2017 issued by the Chairman of State Bank of India in accordance with regulation 27 of State Bank of India General Regulation, 1955 r/w Gazette Notification dated 27th March, 1987 issued by the State Bank of India, Central Office.

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Fire Trix V Maxitech–08.02.2019

4. Learned counsel for the Appellant submits those are all wrong allegations and advocate’s reply should not be relied upon. However, we are not inclined to express any opinion as it was open for the Corporate Debtor to give reply through lawyer and it is not possible for the Adjudicating Authority or this Appellate Tribunal to decide whether allegations are correct or wrong.

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Bank of India V Indu Projects–06.02.2019

After hearing the learned counsel for the appellant, I am of the view that the appellant is concerned about the inordinate delay in consideration of his application under Section 7 of the I&B Code which is stated to have been filed on 7th June, 2018 and no order in regard to its admission or otherwise has been passed by the Adjudicating Authority though it is claimed by the appellant that the application is complete and conforms to all the requirements of law in terms of dictum of Hon’ble Supreme Court in ‘Innoventive Industries Ltd. v. ICICI Bank – (2018) 1 SCC 407]. In the given circumstance, it would be appropriate to direct the Adjudicating Authority to consider the application filed by the appellant under Section 7 of the I&B Code’ on its merit and in terms of provisions of law
as explained by the Hon’ble Apex Court in ‘Innoventive Industries Ltd.’ (Supra)
without further loss of time. The effect of moratorium, if the application is admitted, on the properties of the ‘Corporate Debtor’ said to have been attached by the ED can be considered after consideration of the application and passing of an appropriate order
thereon. The Adjudicating Authority is accordingly directed to pass appropriate
order on the application of the appellant under Section 7 of the I&B Code by 25th
February, 2019.

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K Bharathi V Kotak Mahindra Bank–05.02.2019

3. It is manifestly clear that the impugned order has been passed to carry out the earlier directions given on 18th December, 2018 and 19th December, 2018. Even otherwise also, any decision taken by the‘Committee of Creditors’ has been subjected to the decision of this Appellate Tribunal. In this context, it is futile on the part of the Appellant
to contend that any prejudice has been caused to her.

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Tata Steel Vs Liberty House –04.02.2019

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Jai Prakash Bansal V Agarwal Alloys–04.02.2019

2. Learned counsel appearing on behalf of the appellant submits that there was no document or demand notice in support of the claim. The Adjudicating Authority did not ask to produce the same and passed the impugned order. He further submits that the ‘corporate debtor’ has disputed the claim. However, it is not in dispute that the ‘corporate debtor’ has not raised any objection prior to the Demand Notice issued under Section 8 (1) of the I&B Code.

3. From the application under Section 9 (Form 5), we find that the ‘operational creditor’ has not only enclosed the ledger account but also enclosed the ‘confirmation of accounts’ of the ‘corporate debtor’ dated 22nd August, 2015 and the Demand Notice dated 15th November, 2016. Thereafter, the ‘corporate debtor’ having failed to pay the amount due, the Demand Notice under Section 8(1) was issued on 14th September, 2017. The Adjudicating Authority having noticed the same and there being no pre-existence of dispute, admitted the application under Section 9 of the I&B Code.

4. We found no illegality in the impugned order. In absence of any merit, the appeal is dismissed

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Amit Katyal V Manjula Khullar–04.02.2019

4. In the present case, as we find that the parties have reached settlement before constitution of the Committee of Creditors, exercising our power under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016, we set aside the impugned order dated 16th January, 2019 and thereby dismiss C. P. No. (IB)-1148(PB)/2018 as withdrawn. The parties are directed to abide by the settlement reached on 27th January, 2019, which should be treated as direction of this Appellate Tribunal.

5. In so far as Mr. Jyoti Handa, who claims to be another Financial Creditor is concerned, we are not expressing any opinion in view of the observation made by the Adjudicating Authority (National Company Law Tribunal) Special Bench, New Delhi in C.P. No. (IB)-113(PB)/2019. It will be also open to the Corporate Debtor to settle the matter with Mr. Jyoti Handa without admission of the application under Section 7 filed by Mr. Jyoti Handa. If it is revived, in case of non-settlement, the Adjudicating Authority may pass appropriate order in accordance with law uninfluenced by the order passed by the Appellate Authority

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Naresh Kumar Dhingra Vs Indian Overseas

2. Learned counsel appearing on behalf of the Appellant submits that the person who signed the Form-1 has signed in personal capacity. However, such ground is not acceptable as the Form-1 being submitted by authorized officer of the Indian Overseas Bank. It is further contended that date of default as shown is wrong as in terms of subsequent development date of default goes to some other date. However, such submission also cannot be accepted in view of decision of Hon’ble Supreme Court in “Innoventive Industries Ltd. Vs. ICICI Bank and Ors. – (2018) 1 SCC 407”, wherein the Hon’ble Supreme Court observed and held as under

“27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning nonpayment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of “debt”, we have to go to Section
3(11), which in turn tells us that a debt means a liability of obligation in respect of a “claim” and for the meaning of “claim”, we have to go back to Section 3(6) which defines “claim” to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is
owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an
operational debt under Section 5(21) means a claim in respect of provision of goods or services.

28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor – it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules,
2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the
corporate debtor in Part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that
a default has not occurred in the sense that the “debt”, which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred,
the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.

3. As it is apparent that there is debt due payable by the Corporate Debtor in fact and they have not disputed it and the records being complete, we hold that the Adjudicating Authority rightly admitted the application under Section 7 of I&B Code. In absence of any merit, the appeal is dismissed

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