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
CIRP STAGE
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.
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.
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.
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
MISCELLANEOUS
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).
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.
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.
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.
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.
This update has been contributed by Arka Majumdar (Partner) and Juhi Wadhwani (Senior Associate) and Ayush Chaturvedi, Vikram Chaudhuri (Associates).
The update was first published on Bar & Bench.
Argus Knowledge Centre is now on WhatsApp! Send us a message on +91 8433523504 to receive updates from our Knowledge Centre.
7A, 7th Floor, Tower C, Max House,
Okhla Industrial Area, Phase 3,
New Delhi – 110020
The rules of the Bar Council of India do not permit advocates to solicit work or advertise in any manner. This website has been created only for informational purposes and is not intended to constitute solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work in any manner. By clicking on 'Agree' below, you acknowledge and confirm the following:
a) there has been no solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;
b) you are desirous of obtaining further information about us on your own accord and for your use;
c) no information or material provided on this website is to be construed as a legal opinion and use of this website will not create any lawyer-client relationship;
d) while reasonable care has been taken in ensuring the accuracy of the contents of the website, Argus Partners shall not be responsible for the results of any actions taken on the basis of information provided in this website or for any error or omission in the website; and
e) in cases where the user has any legal issues, the user must seek independent legal advice.