Kalpraj Dharamshi & Anr vs. Kotak Investment Advisors Ltd & An1

“NCLT/NCLAT Can't Interfere With Commercial Wisdom Of CoC Except Within Limited Scope Under Sections 30 & 31 IBC.”

The Supreme Court has reiterated that the National Company Law Tribunal (NCLT) or the National Company Law Appellate Tribunal (NCLAT) cannot interfere with the 'commercial wisdom' of the Committee of Creditors (CoC), except within the limited scope under Sections 30 and 31 of the IBC. Based on this well-settled principle, a 3-judge bench comprising Justices AM Khanwilkar, BR Gavai and Krishna Murari set aside an order of the NCLAT which had annulled the decision of CoC to accept a resolution plan.

"It would thus be clear, that the legislative scheme, as interpreted by various decisions of this Court, is unambiguous. The commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Sections 30 and 31 of the IBC", the Supreme Court observed referring to precedents such as Committee of Creditors of Essar Steel India Ltd vs. Satish Kumar Gupta and Ors., Maharashtra Seamless Ltd vs. Padmanabhan Venkatesh and Ors., K. Sashidhar vs. Indian Overseas Bank etc.

The Court stated that “it will therefore be clear, that this Court, in unequivocal terms, held, that the appeal is a creature of statute and that the statute has not invested jurisdiction and authority either with NCLT or NCLAT, to review the commercial decision exercised by CoC of approving the resolution plan or rejecting the same", the judgment authored by Justice BR Gavai stated.

"We are of the considered view, that in view of the paramount importance given to the decision of CoC, which is to be taken on the basis of 'commercial wisdom', NCLAT was not correct in law in interfering with the commercial decision taken by CoC by a thumping majority of 84.36%", the Court observed.

Gujarat Urja Vikas Nigam Limited vs. Mr Amit Gupta & Or2

“NCLT Has Jurisdiction To Adjudicate Contractual Disputes Which Arise Solely From Or Which Relate To Corporate Debtor's Insolvency.”

The Supreme Court observed that the National Company Law Tribunal has jurisdiction to adjudicate contractual disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor. However, for adjudication of disputes that arise dehors  the insolvency of the Corporate Debtor, the RP must approach the relevant competent authority, the bench comprising Justices DY Chandrachud and Justice MR Shah observed while upholding the order of the National Company Law Tribunal which stayed the termination by the Gujarat Urja Vikas Nigam Limited of its Power Purchase Agreement with Astonfield Solar (Gujarat) Private Limited.

Tata Sons (Private) Limited vs. Cyrus Pallonji Mistr3

The Supreme Court quashed the order passed the order passed by NCLAT which had given relief to Cyrus Pallonji Mistry (“CPM”).

The Supreme Court set aside the NCLAT's order with consequential relief and on the issues decided. The Honb'le Court found that there was no prayer for reinstatement even then he was reinstated. Therefore, despite there being no prayer for reinstatement of CPM either as a Director or as an Executive Chairman of Tata Sons, NCLAT directed the restoration of CPM as Executive Chairman of Tata Sons and as Director of Tata Companies for the rest of the tenure.

It is observed that sections 241 and 242 of the Companies Act, 2013 do not specifically confer the power of reinstatement, nor is there any scope for holding that such a power to reinstate can be implied or inferred from any of the powers specifically conferred.

Surender Kumar Singhal & Ors. vs. Arun Kumar Bhalotia & Ors4

“Jurisdictional Objection under Sec. 16 of Arbitration and Conciliation Act has to be raised at the earliest stage.”

The Delhi High Court observed that a jurisdictional objection under sec. 16 of the Arbitration and Conciliation Act by its very nature would be one which has to be raised at inception. The Court also observed that under the scheme of the Act, such an objection has to be raised with a "sense of alacrity" which must be decided by the Arbitral Tribunal with a "sense of urgency".

The statute intends by an overall reading of Section 16 and especially Section 16(5) of the Act, there is no doubt that the Tribunal also ought to decide the objection with a sense of urgency. The Hon'ble Court observed that “such dispensation would be favoured especially in order to ensure that parties to whom the arbitral proceedings may not even be applicable are not entangled to long drawn arbitral proceedings with substantial costs being incurred."

M/s. Avion Builders Pvt. Ltd. & Ors. vs. State of West Bengal & An5

“Non issuance of duplicate share certificates does not indicate malice of company at the inception of transaction.”

The Calcutta High Court quashed a criminal case of cheating instituted against a company and its Directors over non-issuance of duplicate share certificates to the complainant, claiming to be a shareholder in the company.

The Hon'ble Court observed that when the shares were issued against a consideration, loss or misplacement of such shares by the Opposite Party is considered to be a "subsequent event" and cannot be contemplated by the company at the time of issuance of the shares.

M/s Kripa Cashew Exports vs. M/s Royals International Trade and Allied Products Pvt. Lt6

“Person claiming to be an operational creditor should establish their claim which can be treated as operational debt under the IBC.”

The Kochi Bench of the NCLT has emphasized the significance of examining the nature of debt involved in a transaction before a CIRP is instituted upon an application to the effect.

The judicial member iterated the following prerequisites for the institution of a CIRP under the Insolvency and Bankruptcy Code (IBC). First, the applicant must demonstrate a claim as defined in Section 3(6) of the IBC. Second, the claim must be capable of being classed as a debt in terms of the IBC, and third, the debt must arise out of a transaction for goods and services. The Tribunal also made observations on the need for privity of contract between the person claiming to be an operational creditor and the debtor for the former to institute a CIRP against the latter.

Jaypee Kensington Boulevard Apartments Welfare Association vs. NBCC (India) Ltd7

The ruling came in the dispute relating to the resolution plan in the corporate insolvency resolution process concerning the corporate debtor, Jaypee Infratech Limited (JIL), impacting a large number of persons/entities, including the buyers of flats/apartments in its real estate development projects.

The Hon'ble Supreme Court in this matter granted further 45 days for submission of the modified/fresh resolution plans by the resolution applicants, for their consideration by CoC and for submission of report by IRP to the Adjudicating Authority. The Court held that while the Adjudicating authority has the authority to disapprove the resolution plan approved by the Committee of Creditors (CoC), it cannot modify the same.

Government of Maharashtra vs. Borse Brothers Engineers And Contractors Pvt. Ltd.8

“A delay is to be condoned by way of exception and not by way of rule.”

The Hon'ble Supreme Court held that given the object of speedy disposal sought to be achieved both under the Arbitration and Conciliation Act, 1996 and Commercial Courts Act, 2015, for appeals filed under section 37 of the Arbitration Act that are governed by Articles 116 and 117 of the Limitation Act or section 13(1A) of the Commercial Courts Act, a delay beyond 90 days, 30 days or 60 days, respectively, is to be condoned by way of exception and not by way of rule.

The Hon'ble Court overruled last year's judgment in N.V. International v. State of Assam, (2020) 2 SCC 109 , wherein it was held that any delay beyond 120 days in the filing of an appeal under Section 37 from an application being either dismissed or allowed under Section 34 cannot be allowed. It was further, clarified that the said period of 120 days, comprises of a grace period of 30 days under Section 5 of the Limitation Act added to the prescribed period of 90 days.


Insurance (Amendment) Act, 20219

The Rajya Sabha on 18th March, 2021 has passed the Insurance (Amendment) Bill, 2021. The Bill amends the Insurance Act, 1938. 

The Act provides the framework for working of insurance businesses and regulates the relationship between an insurer, its policyholders, its shareholders, and the regulator (the Insurance Regulatory and Development Authority of India).

The Bill increases the limit on foreign investment in an Indian insurance company from 49% to 74%, and removes restrictions on ownership and control.  However, such foreign investment may be subject to additional conditions as prescribed by the central government.

SEBI's Consultation Paper Makes Minority-Shareholder Friendly Proposals on Independent Directors

The Securities and Exchange Board of India (“SEBI”) has released a  consultation paper making minority-shareholder friendly proposals mainly relating to independent directors (“IDs”). The paper proposes a dual-approval process for appointment and removal of IDs, which includes a “majority of minority shareholders” approval. If this approval is not received, a special resolution would be required should the same director be proposed again. The audit committee would now not have any promoter related or nominee directors, thus removing their influence. Remuneration of IDs is also proposed to be enhanced by increasing sitting fees (which the Ministry of Corporate Affairs (“MCA”) will have to decide on) and permitting grant of employee stock options (“ESOPs”) with a vesting period of at least five years.

Master Circular on Surveillance of Securities Market Dated10

In order to enable the users to have an access to all the applicable circulars at one place, the Master Circular on Surveillance of Securities Market has been prepared. The Master Circular is a compilation of the circulars issued by Integrated Surveillance Department, which are operational as on date of this circular.

Companies (Audit and Auditors) Rules, 2014 (“Audit Rules”), Companies (Accounts) Rules, 2014 (“Account Rules”) and Schedule III of the Companies Act, 2013 (collectively “the Amendment”).11

The Amendments is to come into effect on April 1st 2021. The key points of the Amendments are as follows:

  1. Additional matters to be omitted and included in Auditors Report
  2. The Amendment has omitted Rule 11(d) of the Audit Rules where the auditors report is to comment on the aspect as to whether the company has made disclosures in its financial statements on its holdings as well as its dealings in specified bank notes during the period of 8th November 2016 to 30th December 2016 in its financial statements.
  3. The auditors report are to now include comments of the auditor on whether the management of a company has represented that, to the best of its knowledge, no funds (other than as disclosed in the notes to the accounts) are loaned, invested, or advanced by the company to or in any other person(s) or entities, including foreign entities/ Intermediaries.
  4. The Amendment to Rule 3(1) of the Account Rules has included specific instructions for companies using accounting software to maintain its books of account. The Amendment mandates that such accounting software is to mandatorily record audit trail of each and every transaction, and capture details of the edits made to the books of accounts.
  5. The Amendments have modified multiple provisions of the Schedule III (General instructions for preparation of Balance Sheet and statement of Profit and Loss of a company) of the Companies Act, 2013. Certain pertinent aspects are as follows:
    1. A company's profit and loss statement shall also include details of investment or trading conducted by such company in cryptos in a financial year.
    2. The P&L shall contain disclosures of CSR activities by companies getting covered under the threshold mentioned under section 135 (Corporate Social Responsibility) of the Companies Act, 2013.
    3. The Amendment has introduced certain disclosure requirements to be made regarding regulatory information and the same is included as Item no. Y under Schedule III of the Companies Act 2013. These disclosures are to be made in the balance sheet of the company, some of the details required to be disclosed are:
      • Details of the immovable property (other than lease agreement where the company is the lessee);
      • Whether the company has revalued its Property, Plant and Equipment;
      • Loans and Advances given to promoters, directors, KMPs and related parties that are repayable either on demand or without specifying any terms or period of repayment;
      • The effect of such scheme of arrangement (if any) to be accounted for in the books of account of the company 'in accordance with the Scheme' and 'in accordance with accounting standards';

Implications of Union Budget on Companies.

  1. Decriminalization of Limited Liability Partnership Act, 2008
  2. FDI in the insurance sector was increased from 49% to 74%.
  3. Proposal to consolidate the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationalized single Securities
  4. Markets Code.
  5. Startup incentives were provided by allowing OPCs to grow without any restrictions on the paid up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow Non Resident.
  6. The amendments proposed to OPC are intended to benefit NRIs to incorporate OPCs in India.
  7. The definition under the Companies Act, 2013 for 'Small Companies' was proposed to be amended by increasing their thresholds for paid up capital from "not exceeding `50 Lakh" to "not exceeding `2 Crore" and turnover from "not exceeding `2 Crore" to "not exceeding 20 Crore".

Companies (Incorporation) Second Amendment Rules, 202112

The changes that have been brought about are with respect to the ‘One Person Company (OPC)”.

These amendments were made to the respective rules of Companies (Incorporation) Rule, 2014:

Rule 3: The eligibility criteria for directors was revised to include non-residents. Further, the number of days of residence for Resident Indians was reduced to 120 days.

Rule 3(7): This rule which provided for the criteria for conversion from OPC to any other form of company; has now been omitted.

Rule 6: Provided for the conversion procedure and compliance requirement; which has been completely omitted. The new rules provide as follows:

  1. MOA and AOA can be altered by passing a resolution as per § 122(3) for conversion of OPC
  2. OPC may convert into a Private or Public Company, other than a Section 8 company by fulfilling the below requirements-
    1. Increasing the minimum number of members and directors to two (For Pvt. Company) and seven members and three directors (For Public Company),
    2. Maintaining the minimum paid-up capital as per the requirements of the Act for such class of company and
    3. By making due compliance of § 18 of the Act for conversion
  3. Form, Fees and Documents required for filing Conversion-
    1. e-Form No. INC-6 to be filled
    2. Fees to be as per Companies (Registration offices and fees) Rules, 2014
    3. Documents required-
      • Altered MOA and AOA;
      • Copy of resolution;
      • List of proposed members and its directors along with consent;
      • List of creditors; and
      • Latest audited balance sheet and profit and loss account.
  4. After completion of all requirements, ROC shall approve form and Issue New Certificate of Incorporation

Companies (Specification of definitions details) Second Amendment Rules, 202113

Under this amendment the definition of the term ‘limited company' has been amended. According to Section 2(52) of the Companies Act, a "listed company" means a company which has any of its securities listed on any recognized stock exchange. The amendment to the Act in the month of January has added a proviso to the section which states that “provided that such class of companies, which have listed or intend to list such class of securities, as may be prescribed in consultation with the Securities and Exchange Board, shall not be considered as listed companies”.

By virtue of the amendment Rule 2A has been added which is as follows:

‘The following companies shall not be considered as listed companies:

  1. Public co. which have not listed their equity shares on a recognized stock exchange but have listed their –
    1. Non-convertible debt securities issued on private placement basis in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008; or
    2. Non-convertible redeemable preference share issued on private placement basis in terms of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Reg.,2013; or
    3. Both categories of (i) and (ii) above.
  2. Private companies which have listed their non-convertible debt securities on private placement basis on a recognized stock exchange in terms of SEBI (Issue and Listing of Debt Securities) Reg., 2008;
  3. Public co. which have not listed their equity shares on a recognized stock exchange but whose equity shares are listed on a stock exchange in a jurisdiction as specified in sub-section (3) of section 23 of the Companies Act.

Companies (Specification of Definitions Details) Rules, 2014

The amendment brought changes to the definition of ‘small company' under S. 85 (i) and (ii) and now provides that paid up capital and turnover of the small company shall not exceed rupees two crores and rupees twenty crores respectively.

Companies (Compromises, Arrangements and Amalgamations) Rules, 2016

An amendment has been brought to include certain other classes under the scheme of arrangement under Section 233 of Companies Act, 2013.

Now the scheme of fast-track merger can be entered into by the following companies:

  1. two or more small companies;
  2. holding company and its wholly-owned subsidiary company;
  3. two or more start-up companies;
  4. one or more start-up company with one or more small company.

Previously, a scheme of arrangement could be entered only between two or more small companies or between a holding company and its wholly-owned subsidiary company.


1 Supreme Court, March 10th, 2021

2 Supreme Court, March 8th, 2021

3 Civil Appeal Nos.13-¬14 Of 2020, The Supreme Court

4 Delhi High Court, March 25th, 2021

5 Calcutta High Court, March 25th, 2021

6 National Company Law Tribunal Kochi Bench, Kerala, March 19th, 2021

7 2021 SCC Online SC 253

8 2021 SCC Online SC 233

9 https://prsindia.org/files/bill_track/2015-03-15/The%20Insurance%20(Amendment)%20Bill,%202021.pdf

10 March 1, 2021

11 http://www.mca.gov.in/Ministry/pdf/AccountsAmendmentRules_24032021.pdf,

12 Notified on February 1st, 2021 and to be in force from April 1st, 2021

13 Notified on February 19th , 2021 and to be in force from April 1st, 2021

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