Serving of copy of applications to the Board, as mandated under Rules 4, 6 and 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016
- The Insolvency and Bankruptcy Board of India (IBBI) vide Circular dated March 04, 2023 revised the format for serving a copy of the application for initiating Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor to IBBI, before filing the same with the Adjudicating Authority.
- The said Circular has been issued in supersession of the earlier Circular [Serving of copy of applications to the Board, as mandated under Rules 4, 6 and 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016] issued on October 29, 2020, vide which IBBI had made available on its website the facility for serving a copy to it.
- Recently, the IBBI in a Circular issued on June 15, 2022
provided that the applications for initiating CIRP against
Corporate Debtors served upon the IBBI will be forwarded to the
Information Utility (IU). Vide the said Circular,
the IBBI further provided that upon receiving the applications, the
IU is required to conduct the following additional functions:
- Inform other creditors of the Corporate Debtors by sharing the application with them.
- Issue notice to the applicants, requiring them to file 'information of default' as per the IU Regulations.
- Process the 'information of default' for the purpose of issuing ROD as per the IU.
- In order to ensure compliance with the abovementioned Circular dated June 15, 2022, and to enable the IBBI to share information relating to the application for initiation of CIRP with the IU, the IBBI issued the instant Circular to revise the format for serving a copy of the application to the IBBI. Annexure A to the Circular provides the revised format, whereas Annexure B provides a step-by-step guide for the same.
Diwakar Sharma v. Anand Sonbhadra, RP of Subhkamna Buildtech Pvt Ltd & Anr
- An Appeal was preferred against the Order dated September 12, 2022 (Impugned Order) passed by the National Company Law Tribunal, New Delhi, Court IV (NCLT) allowing the Application filed by Mr. Anand Sonbhadra, the Resolution professional (RP) of Shubhkamna Buildtech Pvt Ltd (Corporate Debtor) filed under Section 30(6) and 31(1) of the Insolvency and Bankruptcy Code, 2016 (IBC) and thereby approving the implementation of the Resolution Plan submitted by Mr. Surendra Kumar Singhal and Mr. Sunil Kumar Agarwal and approved by the Committee of Creditors (COC) of the Corporate Debtor.
- Aggrieved by the Impugned Order, the Appellant preferred an Appeal against the same on November 10, 2022. Along with the Appeal, I.A. No. 4551 of 2022 was filed seeking condonation of the delay in filing the Appeal on the ground that the Appellant, being in jail since September 12, 2018, was not aware of the passing of the Impugned Order until the same was couriered to him by the RP of the Corporate Debtor, on October 11, 2022.
- Based on his lack of knowledge, the Appellant contended that the limitation period for filing of the Appeal under the IBC should be counted not from the date of the Impugned Order, but from the date on which the Impugned Order was received by the Appellant, i.e., October 11, 2022.
Issue at hand?
- Whether a delay of more than 45 days in the filing of an Appeal under Section 61 of the IBC can be condoned by the National Company Law Appellate Tribunal (NCLAT)?
Decision of the Tribunal
- The NCLAT, relying on Section 61 of the IBC which deals with Appeals and the Appellate Authority, observed that the said Section confers a right of Appeal to an aggrieved person within 30 days, which can further be extended by another 15 days upon the satisfaction of the Appellate Authority (NCLAT), however, there is no provisions under the IBC to condone the delay in filing of an Appeal beyond 15 days.
- Further, reliance was placed on the decisions of the Supreme Court in V Nagarajan v. SKS Ispat and Power Ltd1 and National Spot Exchange Ltd v. Mr. Anil Kohli, RP for Dunar Foods Ltd2 to hold that Section 61 of the IBC is clear in providing that the limitation period be calculated not from when the Order is made available to the aggrieved party.
- In view of the above-submissions, NCLAT dismissed the Application seeking condonation of delay in filing the Appeal and consequently, dismissed the Appeal as being time-barred.
VRG Healthcare Pvt Ltd v. VRG Infrastructure Pvt Ltd
- An Appeal was filed against the Impugned Order dated March 20, 2020 passed by the NCLT, Mumbai Bench whereby the Petition filed by the Appellant under Section 7 of the IBC was dismissed by the NCLT, holding that the Petitioner's claim is not a 'financial debt' within the meaning of Section 5(8) of the IBC.
- The Appellant and the Respondent, though not group companies, are companies having common promoter directors and shareholders, viz. inter alia Mr. Ganesh Chakkarwar and Mr. Gitesh Muttemwar.
- On February 12, 2011, a sum of INR 25 lakh was transferred from the Respondent to the Appellant vide Cheque No. 490804. However, the said amount was to be credited to Mr. Muttemwar. The Appellant company repaid this amount to Mr. Muttemwar vide several transactions, the last of which was paid on May 31, 2016. This is reflected in the ledger account of the Appellant.
- On August 30,.2016, Mr. Muttemwar resigned from the Board of Directors of the Appellant. In August 2016, the shareholding of the Appellant company was also altered as Dr. Paltewar purchased the shares of the Appellant Company. Despite the resignation of Mr. Muttemwar, Mr. Chakkarwar continued to be the CMD of the Appellant company, as well as the common director of both the Appellant and the Respondent companies.
- The Appellant company gave an unsecured loan of INR 25 lakh to the Respondent company vide Cheques dated July 21, 2017 and August 05, 2017. It is pertinent to note that at this time, Mr. Chakkarwar was the CMD of the Appellant company and the common director of both the companies. On November 17, 2017, he resigned as the CMD of the Appellant company.
- The Appellant company contends that the Respondent company has not repaid this unsecured loan of INR 25 lakh till date, despite the Appellant company's legal notice dated January 10, 2019 addressed to the Respondent company, seeking repayment of the loan.
- The Respondent company contends that the cheques of INR 25 lakh issued by the Appellant company were in the nature of repayment of the loan previously granted to it by the Respondent company.
- The Respondent company further contends that the amount extended is not a financial debt within the meaning of Section 5(8) of the IBC, as there is no written agreement between the parties, nor is there any demand for payment of interest. Thus, the amount has not been extended against the time value of money, which is a requirement to attract the definition of 'financial debt' under Section 5(8) of the IBC.
Issue at hand?
- Whether a sum of money extended by a company to another, where both the companies are not group companies, but have a common management, qualifies as a 'financial debt' if it hasn't been extended against the time value of money and in the absence of an agreement between the parties?
Decision of the Tribunal
- The NCLAT dismissed the Appeal and affirmed the Impugned Order, observing that the NCLT, Mumbai Bench had correctly held that there was no disbursement made for the time value of money and therefore, there was no financial debt owed by the Respondent company to the Appellant company.
- Recording that the Appellant has not produced any agreement between the Parties that the amount was extended to the Respondent company against the time value of money and that an interest was payable on the same, the NCLAT upheld the findings of the NCLT.
- The NCLAT also affirmed the holding of the NCLT, Mumbai Bench relying on the position as laid down by the Hon'ble Supreme Court in Anuj Jain v. Axis Bank, Civil Appeal No. 8512-8527 of 2019 that in order to qualify as 'financial debt', it is necessary that the amount is advanced against the time value of money.
1. (2022) 2 SCC 244
2. C.A. No. 6187 of 2021
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