IBC Case Laws - Snippets December 2018 By CS Arundhuthi Bose


‘IBC Case Laws - Snippets’, is an effort of the Knowledge & Resources Division of Mamta Binani & Associates to compile snippets of few of the Orders of the Honorable Supreme Court, Honourable NCLT and the Honorable NCLAT in relation to the Insolvency and Bankruptcy Code, 2016 for easy reference and convenience.

The extracts have been reiterated from the Orders pronounced by the respective Honorable NCLT and NCLAT, the links to which have been provided for convenience and easy reference.

Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of Mamta Binani & associates whatsoever and the content is to be used strictly for educative purposes only.
 
03.12.2018: In the matter of Crown Realtech Private Limited [C.P. No. IB-769(PB)-2018]
 
“Any amount raised from an allottee under a real-estate project is deemed to be an amount having the commercial effect of borrowing and is covered under financial debt. The amended definition of financial debt includes home-buyers.”

Link: Click Here
 
29.11.2018: In the matter of Rustogi Impex Pvt. Ltd. [Item No. 128 (IB)-77(PB)-2018]
 
“Public notice should be proper. Resolution is the Rule & Liquidation is an exception.”

Link: Click Here
 
30.11.2018: In the matter of Mak Power Transformers Private Limited CP (IB) No. 214-KB-2018
 
“Possibility that the Operational Creditor supplied the Corporate Debtor proper quality of goods which could have been damaged when they were in the custody of the Corporate Debtor.”

Link: Click Here
 
30.11.2018: In the matter of Mrs. Mamatha Vs AMB Infrabuild Pvt. Ltd. & Ors. [CA (AT) (Insolvency) 155-2018]
 
The question arises for consideration in this appeal is whether the application under Section 9 is jointly maintainable against 1st and 2nd Respondents (‘Corporate Debtors’) or not?

“If the two ‘Corporate Debtors’ collaborate and form an independent corporate unit entity for developing the land and allotting the premises to its allottee, the application under Section 7 will be maintainable against both of them jointly and not individually against one or other.

In such case, both the ‘Developer’ and the ‘Land Owner’, if they are corporate should be jointly treated to be one for the purpose of initiation of ‘Corporate Insolvency Resolution Process’ against them.”

Link: Click Here
 
30.11.2018: In the matter of Gaurav Pandey Vs Eternity Investment Services Pvt. Ltd. & Anr. [CA (AT) (Insolvency) 714-2018]
 
“The parties have reached for settlement much prior to the date of admission of application

From the ‘Settlement Deed’ filed it appears that e-stamp was purchased on 30th October, 2018 at 01:41 PM and the settlement was reached on 1st November, 2018. Thus, it is clear that the parties have reached for settlement much prior to the date of admission of application on 13th November, 2018.

From the aforesaid fact, it is clear that there was no default of payment on the part of the appellant as on 13th November, 2018 and thereby no occasion for the Adjudicating Authority (National Company Law Tribunal), Chandigarh Bench, Chandigarh to admit the application under Section 7. Learned counsel for the ‘Resolution Professional’ submits that in view of the settlement, parties have also paid the fees and insolvency cost to the ‘Resolution Professional’. He further submits that there is no more claim to be paid by the parties.

For the reasons aforesaid, we set aside the order dated 13th November, 2018 passed by the Adjudicating Authority, Chandigarh in CP (IB) No. 197/Chd./HP/2018. 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.”

Link: Click Here
 
03.12.2018: In the matter of Ginni Filaments Ltd. [Company Petition (IB) No.325-ALD-2018]
 
Questions:-
  1. Existence of dispute between parties before receipt of demand notice?
  2. Whether claim is barred by limitation?
Answers:-
  1. There was an existence of dispute; reason being that it is evident from the records that were placed that supplies were delayed not only as per the original schedules but also as per mutually agreed upon revised schedule. This caused loss due to the abnormal delay and non-supply of goods. The claim for loss was conveyed to the applicant on 23.07.2015 that is much prior to the demand notice. Thus, it was made clear that dispute did exist much before the demand notice was served.
  1. Claim was barred by limitation; reason being that the Tribunal was of the view that the last date of payment made to the applicant by the corporate debtor is relevant for the purpose for limitation, that is, 04.05.2015 which marks the expiry of the limitation period as on 04.05.2018. Date on which the petition is filed is 20.08.2018 and limitation is to be counted from the last date of transaction to filing the petition, which is 20.08.2018. Whereas, the limitation expired on 04.05.2018. Hence the claim is barred by limitation.
Link: Click Here
 
04.12.2018: In the matter of Associated Machinery Corporation Limited CP (IB) 297-ALD-2018
 
“Unless there is an amount due from the respondent to the petitioner on account of transaction covered by the work order dated 5.5.2017 it cannot be said that there is an operational debt due from the respondent to the petitioner.

In the absence of operational debt due from the respondent to the petitioner, the petitioner cannot be called as an Operational Creditor.”

Link: Click Here
 
05.12.2018: In the matter of Vistar Construction Pvt. Ltd. [Company Petition No. (IB)-521(ND)-2017]
 
“Existence of an undisputed operational debt is sine qua non for initiating CIRP under section 9 of the Code. The Code is not intended to be substitute to a recovery forum. The moment there is an existence of a dispute, the corporate debtor gets out of the clutches of the Code.”

Link: Click Here
 
06.12.2018: In the matter of RHC Holding Pvt. Ltd. [Company Petition No. (IB)-738 (PB)-2018]
 
“The respondent M/s RHC Holding Private Limited, being a financial service provider and having excluded from the definition of the ‘corporate person’; the present application filed under section 7 of the Code against a financial service provider is not maintainable.

Any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy and the right of the Applicants before any other forum shall not be prejudiced on account of dismissal of the instant application.”

Link: Click Here
 
10.12.2018: In the matter of CIL Securities Ltd. [CP (IB) No. 339-9-HDB-2018]
 
“One cannot be permitted to take recourse to the provisions of the Code for settling personal vendetta. CIRP cannot be initiated against the Company when it is prepared to pay or settle the claim of the petitioner.”

Link: Click Here
 
12.12.2018: In the matter of Consolidated Engineering Co. & Anr. Vs. Golden Jubilee Hotels Pvt. Ltd. [CA (AT) No. 501-2018]
 
“Prima facie we are of the view that the Adjudicating Authority has rightly held that 10% of total debt for the purpose of representation in ‘’Committee of Creditors’ is to be calculated on the basis of the claim as collated and noticed by the ‘resolution professional’.

It cannot be based on amount claimed by all the ‘Operational Creditors’, till it is verified and compared. If the claim of ‘Operational Creditors, on verification is found to be less than 10%, the ‘Operational Creditors’ have no right to claim representation in the meeting of the ‘Committee of Creditors’.”

Link: Click Here
 
11.12.2018: In the matter of Ludhiana Scrips Private Limited [CP (IB) No. 331-Chd-Pb-2018]
 
“Sub-section (8) of Section 5 of the Code defines the term "financial debt" meaning a debt along with interest, if any, which is disbursed against consideration for the time value of money and includes various transactions, one of which is the money borrowed against payment of interest. The primary requirement is the disbursement of the loan for consideration of time value of money, which is missing in this case.”

Link: Click Here
 
19.12.2018: In the matter of Enviros India Private Limited [CP-967-IB-2018]
 
“It is a minimum requirement on the part of the creditor to ensure that invoice is raised for the services rendered to the Debtor.”

Link: Click Here
 
20.12.2018: In the matter of Kiev Finance Limited IA No. 905-KB-2018 [In CP (IB) No.110-KB-2018]
 
“…as the NCLT Rules are made applicable even to the Adjudicating Authority under section 5(1) of the Insolvency and Bankruptcy Code, the Rules under Company (Court) Rules 1959 cannot be invoked because they are replaced by NCLT Rules.”

Link: Click Here
 
20.12.2018: In the matter of SBM Paper Mills Ltd. M.A. 827,828,1142 &1396-2018 [C.P. (IB)-1362(MB)-2017]
 
Question:-
  • In a situation when EoI has already been invited then can an application for withdrawal be entertained?
Answer:-
  • “If deem fit such an attempt is required to be discouraged. This Code shall not be made a tool for deferment of payment of liabilities which ought to happen due to declaration of “moratorium”. Subject to the fine imposed (supra) this withdrawal application is hereby allowed by invoking the jurisdiction prescribed u/s 12A of the IBC.”
“This attempt may not be allowed, unless and until circumstances of a case compel to do so. Withdrawal of a Resolution Plan at the stage when it is already approved by CoC has a far reaching effect.”

Link:- Click Here
 
20.12.2018: In the matter of Shailen Shah, RP Vs. DBM Geotechnics & Construction Ltd. [CA (AT) No. 724-2018]
 
Question:
  • Can certain intervening period be excluded for counting the total period of 270 days?
Answer:
  • “As it appears that the earlier ‘Resolution Professional’ had not taken any effective steps due to which the ‘Committee of Creditors’ recommended to appoint the appellant on 15th June, 2018, and the appellant was intimated by the Adjudicating Authority on 16th August, 2018 and the matter is remained pending before the Adjudicating Authority for more than a month after which the order was passed on 6th August, 2018, we are of the view that the period between filing application for approval of the name of the appellant and date of communication of the order i.e.16th August, 2018 should be excluded for the purpose of counting the period of 270 days. This period for exclusion will be in addition to the exclusion of period as already made by the Adjudicating Authority by impugned order dated 26th October, 2018. We accordingly direct to exclude the aforesaid period for counting 270 days. ”
Link:- Click Here
 
12.2018: In the matter of Unimark Remedies Ltd. MA No.1529-2018 [CP No.197 – 2018]
 
Question:-
  • Can a Resolution Professional choose not to open a Resolution Application and simply reject it at his own will?
Answer:
  • “The spirit of the Code is first and then comes the other things. The rejection of the Resolution Plan by the CoC even without opening the envelope containing the Resolution Plan on the ground that the same is submitted after the expiry of the stipulated time fixed by the CoC, is certainly against the law/Code and we hereby direct the Respondent to forthwith consider the Resolution plan of the Applicant on its merits and judicious decision may be taken in the best interest of the parties concerned.”
Link:- Click Here

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