India: Insolvency And Bankruptcy Code, 2016 - Weekly Updates

Last Updated: 14 August 2019
Article by AMLEGALS  

I. When the Appellant had Approached Appropriate Forum for Appropriate Remedy in time with continuous  cause of action, then the claim is not barred by Limitation.

Sanghvi Movers Ltd. v. Tech Sharp Engineers Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 118 of 2019, NCLAT, Date: 23.07.2019

The NCLAT, while relying upon Section 137 of the Limitation Act, 1963 concluded that the Appellant had approached an appropriate forum for relief in time and hence the application was not barred by limitation.

AMLEGALS REMARKS:

The NCLAT took into consideration the complete facts as well as the laws which were previously not considered in several cases.

The Hon'ble Supreme Court in BK Educational Services Pvt. Ltd. v. Parag Gupta and Associates (2018 SCC OnLine SC 1921) had very categorically held that the Limitation Act shall be applicable prospectively, since the very inception of the IBC.

Further, Section 137 of the Limitation Act provides that the application for initiating CIRP has to be filed within a period of 3 years from the date on which the right to apply accrued.

The right to apply accrued under the IBC from 01.12.2016 as laid down in Pushpa Shah & Anr v. IL&FS Financial Services Ltd. (Company Appeal (AT)(Insolvency) No. 521 of 2018) since it's the date on which IBC came in force.

The present judgment of NCLAT has made it crystal clear that if the creditor had already approached the appropriate forum for appropriate relief in time, before the commencement of IBC then the application is very well within the limitation period. The NCLAT has kept the essence of the above mentioned two judgments and the Limitation Act intact.

II. Exclusion of certain days from the completion of CIRP can be granted to the RP for delay caused due to non-cooperation of the suspended directors of CD.

Ramchandra D. Choudhary Resolution Professional OfMaharashtra Shetkari Sugar Limited v. Committee Of Creditors Of Maharashtra Shetkari Sugar Limited [Company Appeal (AT) (Insolvency) No. 633 OF 2019], NCLAT, Date: 24.07.2019

The Court held that the Promoters had neither handed over the records of the management which are required for the process of CIRP of the CD to the IRP nor to the RP.

The court held to exclude 90 days for the purpose of counting the period of CIRP of 270 days in place of 145 days to enable the RP/ CoC to complete the CIRP at an early date preferably within 45 days.

AMLEGALS REMARKS:

The order of the NCLAT is just as the RP and the IRP cannot perform their duties without the co-operation of the management/ directors of the CD. There needs to be stricter implications for penalizing the directors / management of the CD in case of non-cooperation.

III. Rejection of application under Section 9 of the IBC on the basis that the amount of payment couldn't be determined, cannot be allowed.

Pedersen Consultants India Pvt. Ltd. v. Nitesh Estates Limited [Company Appeal (AT) (Insolvency) No.720 of 2019], NCLAT, Date: 24.07.2019

The NCLAT held that application under Section 9 should not have been rejected on the ground that dispute regarding the quantum of payment could not be determined.

AMLEGALS REMARKS:

The NCLAT aptly observed the fact that the claim means a right to payment even if there is a dispute raised in relation to it.

Mere dispute with regards to a claim by showing a counter claim does not show that there is pre-existence of dispute. The dispute regarding the amount cannot be a basis to reject the application under Section 9 of the Code.

IV. If the notice is served to the CD before admitting the application then it is not a ground for rejection of application filed under Section 9 of IB Code.

Mr. Paresh Patel v. M/s. Shah Kirit Babulal Ni Company & Ors., Company Appeal (AT)(Insolvency) No. 684 of 2019, NCLAT, Date: 29.07.2019

The NCLAT observed that the debt was undisputed and there was no reply to the demand notice issued by the operational creditor. It held that if the notice is served to the corporate debtor before admitting the application then it is not a ground for rejection of application filed under Section 9 of IB Code. If the said appeal is allowed and the matter is remanded to NCLT then it will be a futile exercise as NCLT will also admit the application for undisputed debt.

AMLEGALS REMARKS:

The NCLAT in the present case has just reiterated principle laid down in the major precedents. The Hon'ble Supreme Court itself in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., (2018) 1 SCC 353 has held that if the debt is undisputed the application under Section 9 shall be admitted if it is complete.

Hence, the Hon'ble NCLAT has correctly interpreted the provision and the Supreme Court judgment and thereby not admitted the appeal.

V. The claim under IBC, cannot be rejected on the ground that it is time barred or that the claim is by an entity other than the Financial Creditor.

Sunil Kumar Aggarwal v. New Okhla Industrial Development Authority & Ors.[Company Appeal (AT) (Insolvency) No. 775 of 2019] Date: 31.07.2019

The NCLAT in this case held that the Interim Resolution Professional will examine the claim submitted by the Applicant and the same will not be rejected on the basis that it is time barred or filed by an entity other than Financial Creditor. The Adjudicating Authority had already made it crystal clear that "the claim can't be rejected because it is time barred or it is claimed by an entity other than financial creditor."

AMLEGALS REMARKS:

The Adjudicating Authority and NCLAT had the similar views and approach that the claim submitted to the IRP cannot be rejected on the mere ground that it was time barred or the Financial Creditor has not raised the claim. The order given to the IRP is correct in the sense that the claim submitted by the applicant will be examined by the IRP.

This will provide an opportunity to the creditors of the Corporate Debtor to submit the claims without mentioning the category of the creditors and the same will be examined by the IRP.

VI. The resolution plans or schemes not accepted in CIRP, can be accepted by the liquidator in the liquidation process.

Kautilya Industries Pvt. Ltd. v. Parasrampuriya Synthetic Ltd. & Anr. [Company Appeal (AT) (Insolvency) No. 282 of 2019] Date: 31.7.2019

The NCLAT held that it is open to the Liquidator or the class of creditors or the class of members to consider resolution plans which were filed but were not taken up for the purpose of the scheme.

AMLEGALS REMARKS:

The NCLAT herein has rightly observed and examined the fact that there was no case made out for exclusion of any of the period for the purpose of counting 270 days which stands completed on passing the impugned order of liquidation.

The duty of the liquidator is to ensure the fact that the company remains as a going concern during liquidation, and it will be a helping hand to the acquirer as company will not be started from the scratch.

The selling off of a company with the employees, in case there is no approval of any scheme under section 230 of Companies Act, 2013, will surely have a positive effect on the growth of the economy as well as the company.

Considering the scheme or arrangement under Liquidation would result in the saving of time, money and resources but would be subject to scrutiny of the Liquidator.

VII. Can Adjudicating Authority pass an ex-parte order without issuing and serving of any notice on the Corporate Debtor.

Mr. Abhishek Jaiswal v. M/s Raj Process Equipments & Systems Pvt Ltd & Anr., [Company Appeal (AT) (Insolvency) No.316 of 2019], NCLAT, Date: 02.08.2019

The NCLAT held that passing of an ex-parte order without the notice being served to the Corporate Debtor is violative of the principles of natural justice.

AMLEGALS REMARKS:

In the present case, Hon'ble NCLAT has clearly observed the importance of serving of notice to the Corporate Debtor and how it plays an important role. Here more significance is given to observing and implementing the basis of principles of natural justice i.e. no order can be passed without giving an opportunity of hearing to both the parties.

VIII. RTI can be rejected on the basis that the information asked for is not available as existing material in the records of IBBI.

Mr. Ravindra Gopal Karle v. CPIO, IBBI [Appeal No. ISBBI/A/2019/60006], FAA of IBBI, Date: 05.08.2019

The Authority referred the decision of CIC in the matter of Shri Alok Shukla vs. CPIO, SEBI wherein it was held that "while dealing with RTI, we should not forget that information means only an existing material record. The CPIO can provide the copy of the available record; he cannot create new records in order to address specific queries of the Appellant."

Based on the above the authority rejected the application of the RTI request filed by the Appellant requesting the details of all registered valuers registered on the basis of their post-graduation qualification from Annamalai University along with the date of registration.

AMLEGALS REMARKS:

The Authority herein has taken a narrow view of the rights available under the RTI Act here by not allowing the RTI Appeal, wherein a request was made to make all the information available of certain valuers. The Authority has taken a strict view by stating that the information would mean only an existing material record and not the records that need to be created in order to address a specific query.

IX. Selling off of the assets of the Corporate Debtor should be the last resort.

S. Vijayalaskhmi v. M. Murugesan (RP), [Company Appeal (AT) (Insolvency) No.792 of 2019], NCLAT, Date: 05.08.2019

The NCLAT held that during the liquidation process, steps are required to be taken for revival and continuance of the 'Corporate Debtor' by protecting the 'Corporate Debtor' from its management and from a death by liquidation.

Thus, the steps which are required to be taken are as under:

  1. By compromise or arrangement with the creditors, or class of creditors or members or class of members in terms of Section 230 of the Companies Act, 2013.
  2. On failure, the liquidator is required to take steps to sell the business of the 'Corporate Debtor' as a going concern in its totality, along with the employees.

The last stage will be death of the 'Corporate Debtor' by liquidation, which should be avoided.

AMLEGALS REMARKS:

NCLAT is of the clear view that all the required and possible measures are to be taken so that the Corporate Debtor can be revived and kept as a going concern. Importance has been given to the option of Compromise available under Section 230 of the Companies Act, 2013 and to the revival of the Corporate Debtor. The Liquidator before taking steps for selling of the assets of the Corporate Debtor is required to take steps in terms of Section 230.

X. The dispute must exist prior to serving of the Demand Notice

R.S. Cottmark (India) Pvt. Ltd. v. Rajvir Industries Ltd. [Company Appeal (AT) (Insolvency) No. 653 of 2018
With
M/s. Krishna Bio Tech vs. Rajvir Industries Ltd. [Company Appeal (AT) (Insolvency) No. 654 of 2018, Date: 05.08.2019

The NCLAT held that the dispute had already been raised by the Respondent in respect of the quality of cotton supplied by the Petitioner, which was seen when the goods were rejected due to their quality. NCLAT observed that the proceedings under IBC are not a recovery proceedings and subsequently the applications were rejected.

AMLEGALS REMARKS:

The Appellant herein has rightly observed and examined the fact that the dispute had already arisen before the demand notice was served.

Section 5(6) of the IBC 2016 defines dispute, in which clause (b) clearly mentions dispute relating to "the quality of goods or services", and the respondent via invoices had informed to the appellants regarding the quality of cotton bales supplied and it had been done much before the issuance of Demand Notice by the Appellants to the Respondents.

This content is purely an academic analysis under "Legal intelligence series".

© Copyright AMLEGALS.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions