IBC – NCLAT Fornightly Summary (October 16, 2023 – October 31, 2023) – Insolvency/Bankruptcy

The following is a snapshot of the important orders passed by
the National Company Law Appellate Tribunal
(“NCLAT“), under the Insolvency and
Bankruptcy Code, 2016 (“Code“), during
the period between October 16, 2023 to October 31, 2023. For ease
of reference, the orders have been categorized and dealt with in
the following categories i.e.,Pre-admission stage, Corporate
Insolvency Resolution Process (“CIRP“)
stage, Liquidation stage, and Miscellaneous.

PRE-ADMISSION STAGE

1. In Dheeraj Raikhy v. Raheja Developers Limited
   (Company Appeal (AT) (Insolvency) No.1336 of 2023), the
   NCLAT relied upon the decision of the Hon’ble Supreme Court in
   Vishal Chelani & Ors. vs. Debashis Nanda
   (Civil Appeal No.3806 of 2023) to observe that, a real
   estate allottee would not be exempted from fulfilling the
   requirement of meeting the threshold applicable for an allottee to
   maintain a section 7 application, merely on the ground of he having
   obtained a decree from RERA.




2. In GRI Towers India Private Limited v. Inox Wind
   Limited (Company Appeal (AT) (Insolvency) No. 1106 of
   2023), the NCLAT held that, where the suit filed by the
   operational creditor was voluntarily withdrawn, such operational
   creditor cannot seek the benefit of section 14 of the Limitation
   Act, 1963, which benefit is applicable only when a suit is
   terminated on the ground of jurisdiction on cause of like nature or
   withdrawn with a liberty from the court to institute fresh
   proceeding.
   
   Further, the NCLAT held that, mere availability of arbitration or
   any other proceeding by the operational creditor cannot preclude
   the operational creditor to initiate proceeding under section
   9.




3. In Bhimsen Apat v. Kalinga Enterprises Private
   Limited (Company Appeal (AT) (Insolvency) No. 209 of 2023 &
   I.A. No. 757 of 2023), the NCLAT held that service of
   advance notice does not dispense with the requirement of issuing
   notice to the respondent to show cause against the application or
   petition on a date of hearing under Rule 37 of the NCLT Rules,
   2016. Accordingly, it is held that the order admitting section 9
   application, which was passed without issuing notice required in
   terms of Rule 37 of NCLT Rules, was erroneous and required
   interference.

CIRP STAGE

1. In Suchi Paper Mills Limited v. Ashish Gupta,
   Resolution Professional in the Matter of Anush Finlease and
   Construction Private Limited (Comp. App. (AT) (Ins) No. 830 of
   2020), the NCLAT held that, in absence of a notification
   issued under the first proviso to Section 419(3) of the Code
   (Benches of Tribunal), an order passed by a single judicial member
   is not tenable under law.
   
   The NCLAT had further observed that an order approving a
   resolution plan would be patently illegal, if the order did not
   record the satisfaction of the Adjudicating Authority regarding
   provisions of Section 30(2) of the Code.




2. In National Small Industries Corporation Limited
   (NSIC), Delhi v. Prabhakar Kumar (Company Appeal (At) (Insolvency)
   No. 841 Of 2021), the NCLAT held the moratorium prescribed
   under section 14(1) of the Code does not bar encashment of a bank
   guarantee, which is not in the nature of performance guarantee, on
   account of the exclusion provided in Section 14(3)(b) of the
   Code.




3. The NCLAT in Devi Trading & Holding Private Limited v. Ravi
   Shankar Devarakonda (Company Appeal (At) (Ch) (Ins.) NO.
   308/2023) decided whether the Adjudicating Authority was
   justified in approving a resolution plan where the manner of
   distribution was proposed and decided by the CoC. The NCLAT noted
   that a deliberated ‘business decision’ of the CoC includes
   deliberations on the feasibility and viability, the financial and
   operational aspects of the Corporate Debtor, and therefore, the
   question of only ‘considering’ the proposal put forth by
   the Resolution Applicant cannot be viewed in a ‘rigid
   manner’. To limit the powers of the CoC only to consider the
   proposals put forward by the Resolution Applicant, would be a very
   narrow interpretation of the CoC acting in its commercial wisdom,
   which would defeat the scope and objective of the Code. The NCLAT
   held that the CoC in its commercial wisdom can propose, consider
   and decide on the distribution mechanism of the resolution plan, as
   long as it is within the domain of Section 30 (2) of the Code.




4. The NCLAT, in Afita Constructions Private Limited v. Dr. G.V.
   Narasimha Rao (COMPANY APPEAL (AT) (CH) (INS.) NO. 326/2023 (IA No.
   992/2023)) observed that a prospective resolution
   applicant does not have a vested right in submitting a resolution
   plan where such applicant failed to submit the plan in due course
   and after participating in a CoC meeting where the other plans were
   discussed.




5. In Ankur Narang & Ors. v. Mr. Nilesh Sharma
   (Company Appeal (AT)(Insolvency) No. 1240 of 2023), the
   NCLAT held that where the authorized representative of home buyers
   had voted in favour of approval of a resolution plan basis approval
   of majority of homebuyers, such resolution plan cannot be
   challenged by minority home buyers.

   Further, the NCLAT held that a resolution plan providing a lesser
   amount than the admitted claim does not make the resolution plan
   illegal. Hence, any hair-cut in payment proposed in the resolution
   plan cannot be construed as being violative of Section 30(2)(e) the
   Code.

LIQUIDATION STAGE

1. In Deputy Commissioner of Income Tax v. Ravinder
   Kumar Goes-Liquidator of Supreme Tex Mart Limited (Comp. App. (AT)
   (Ins) No. 1397 & 1398 of 2022), in relation to
   applications under Section 33(5) of the Code, the NCLAT held that
   assessment order passed by the Income Tax department after the
   passing of the liquidation order, was without jurisdiction.

MISCELLANEOUS

1. InAshok Tiwari v. Tattva & Mittal Lifespaces
   Private Limited (Company Appeal (At) (Insolvency) No. 729 of
   2023), the NCLAT held that where an order passed by the
   Adjudicating Authority has been rectified, the limitation period
   for filing an appeal against such order starts from the date of
   rectification of such order and not the date of passing of the
   original order.
   
   It was further held that, even where the event of default
   vis-à-vis a principal borrower took place during the period
   covered under section 10A of the Code, a proceeding under corporate
   guarantor is maintainable if the guarantee is invoked post the
   expiry of the section 10A period.




2. In Gyan Chandra Misra v. Three C Universal Developers
   Private Limited (Company Appeal (AT) (Insolvency) No.1316 of
   2023), the NCLAT held that, where no fraud has been
   alleged against the corporate debtor itself, failure to file the
   claim in due time due to alleged fraud committed by the management
   of the creditor, would not get the benefit of exclusion of period
   in terms of Section 17(1)(a) of the Limitation Act, 1963 (Effect of
   Fraud or Mistake).




3. In Vidyasagar Parchuri v. State Bank of India
   (Company Appeal (At) (Ch) (Ins.) No. 184 of 2023), the
   NCLAT noted that neither a dispute about the quantum of payment nor
   the decision of a financial creditor to approach a Debt Recovery
   Tribunal for appropriate relief, affects the right of a financial
   creditor to initiate appropriate proceedings under the Code. It
   went on to also observe that where the debt amount is more than as
   prescribed under the Code, the Adjudicating Authority is not
   required to enquire into the reason for inability of the corporate
   debtor to pay its debt.
   
   In the aforementioned case, the NCLAT has further noted that,
   where the balance sheet is signed by the directors, several months
   after the balance sheet date, the acknowledgment of debt would
   relate to the date of the balance sheet as opposed to the date on
   which the directors had signed it.




4. In Anjani Kumar Prashar v. Manab Dutta and Ors.
   (Company Appeal (AT) (Insolvency) No.1367 of 2023) the
   NCLAT while considering a delay of condonation application,
   observed that the benefit of extension of limitation due to the
   last day being a holiday, is only available when the limitation
   period is of 30 (thirty) days, and cannot be utilized if the
   extension is required beyond the 45th day.




5. In Satyan Kasturi v. PPS Enviro Power Private Limited
   (Company Appeal (At) (Ch) (INS.) NO. 337/2023), the NCLAT
   observed that unless sufficient cause is shown, the Authority may
   refuse to condone delay even in refiling of appeal.




6. In Mr. Rahul Gupta v. Chandra Prakash (COMPANY APPEAL
   (AT) (Insolvency) No. 966 of 2022) and Rakesh Gupta v. Mahesh Bansal (COMPANY APPEAL (AT)
   (Insolvency) No. 401 of 2022), the NCLAT held that as the
   offences and penalties under the Code can only be taken cognizance
   by a special court in terms of Section 236 of the Code, despite
   rule 149 of NCLT Rules, 2016, permitting Adjudicating Authority to
   impose cost on the defaulting party and rule 11 of NCLT Rules
   containing the inherent power of the Adjudicating Authority to make
   such order as may be necessary to prevent abuse of the process, the
   Adjudicating Authority lacks jurisdiction to impose fine/ penalty
   under Section 70 of the Code for breach of the directions issued in
   terms of section 19 of the Code.

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