Pre Packaged Insolvency under IBC, 2016
Chapter III-A is in Part 2 of IBC, 2016. Part 2 of IBC is titled as Insolvency Resolution and Liquidation for Corporate Persons.
Chapter III-A of IBC, 2016 deals with pre packaged insolvency resolution process under IBC, 2016. This chapter was introduced through an Amendment Act, 2021. This chapter was introduced in IBC after COVID.
S.54A (3) of IBC requires approval of financial creditors representing not less than 66% in value of financial debt.
IBC : Important Decisions of May 2024 (Part 1)
Insolvency and Bankruptcy Code, 2016 was enacted with a purpose. There are few interesting decisions pronounced some years ago which explained the contours of IBC, 2016. Innoventive Industries Ltd v. ICICI Bank [2017] GCtR 1171 (SC), Pioneer Urban Land and Infrastructure Limited & Anr v Union of India [2019] GCtR 628 (SC) and Swiss Ribbons Pvt Ltd v. Union of India[2019] GCtR 1313 (SC) are some of those older but interesting decisions dealing with aspects of IBC, 2016.
IBC, 2016 claims to be "an Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto."
S.238 of IBC, 2016 states that "the provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law".
In the month of May 2024, few interesting decisions dealing with IBC, 2016 have been pronounced.
In this Part 1, a list of some important decisions dealing with issues of IBC pronounced in the month of May 2024 are given below : -
Sanjay Sharma v. Super Iron Foundry Pvt. Ltd. [2024] GCtR 1246 (NCLAT)
Optinova AB v. Bio-Med Health Care Products Private Ltd [2024] GCtR 1247 (NCLAT)
Rajesh Lallubhai Chitalia v. Brijendra Kumar Mishra & Anr [2024] GCtR 1248 (NCLAT)
Sumer Radius Realty Pvt. Ltd. v. Avenue 54 Welfare Association & Ors. [2024] GCtR 1249 (NCLAT)
Jagdish Prasad Chokhani v. IDBI Bank Ltd. [2024] GCtR 1250 (NCLAT)
Written by
Vishal
Delhi
Notice : Copyright of above blog and its content including headline vests with Vishal. Above should Not be reproduced in any form in newspapers/websites/Ph.D. thesis/College projects/ law firms' newsletters/law journals/books/book chapters/blogs without prior written permission. Fair use should be in terms of Copyright Act, 1957. Any violation will make violator liable for Pecuniary compensation with interest towards the author irrespective of the profit made by the violator. All disputes shall be subject to Delhi Jurisdiction. Reproduction of judgment or publication of judgment unless expressly prohibited by Court according is not an infringement of copyright according to S. 52 (1)(q)(iv) of Copyright Act, 1957. This is not to be considered as any professional legal advice and does not constitute client-attorney relationship.
5 Important Cases of Jan 2024 on Insolvency and Bankruptcy Code (IBC, 2016) :
Developments have taken place in the first 10 days of Jan 2024 as far as interpretation of IBC, 2016 is concerned.
From 2016 to 2024, many decisions on IBC, 2016 have been pronounced.
Here are the 5 (five) important decisions on IBC, 2016 pronounced in January 2024 : -
◼ "Provisions of the Limitation Act in certain regard is equally applicable to both Section 7 and 9 of IBC". It was reiterated that "Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. “The right to sue”, therefore, accrues when a default occurs." - In Style Fashion v Aditya Birla Fashion and Retail Limited [2024] GCtR 143 (NCLAT)
◼ The submission that the secured creditor’s entitlement to distribution under Section 53(1)(b)(ii) of IBC, 2016 is applicable where the secured creditor relinquishes its security interest under Section 52 of the Code, and, therefore, is not applicable to dissenting financial creditors is erroneous and unacceptable. - DBS Bank Ltd v Ruchi Soya Industries Ltd [2024] GCtR 26 (SC)
◼ "Under the ambit of Section 7 of IBC, 2016, the Adjudicating Authority is to only determine whether a ‘default’ has occurred and whether the ‘debt’, which may still be disputed, was due and remained unpaid. A debt may not be due if it is not payable in law or in fact. The moment the Adjudicating Authority is satisfied that a default has occurred, the Application must be admitted unless it is incomplete." - Narendrabhai v PNB Housing Finance Ltd. [2024] GCtR 144 (NCLAT)
◼ Scope of initiating proceedings under S.9 of IBC, 2016 has been explained and clarified in Alpa Rajeev Shah v Kevin Ventures LLP [2024] GCtR 145 (NCLAT).
◼ "The claims of incentives and subsidies at the best, can be treated as contingent future probable receipts which may or may not happen". - Ajay Kumar Baheti v Axis Bank Ltd [2024] GCtR 146 (NCLAT)
Written by
Vishal
Delhi
Notice : Copyright of above blog and its content including headline vests with Vishal. Above should Not be reproduced in any form in newspapers/websites/Ph.D. thesis/College projects/ law firms' newsletters/law journals/books/book chapters/blogs without prior written permission. Fair use should be in terms of Copyright Act, 1957. Any violation will make violator liable for Pecuniary compensation with interest towards the author irrespective of the profit made by the violator. All disputes shall be subject to Delhi Jurisdiction. Reproduction of judgment or publication of judgment unless expressly prohibited by Court according is not an infringement of copyright according to S. 52 (1)(q)(iv) of Copyright Act, 1957. This is not to be considered as any professional legal advice and does not constitute client-attorney relationship.
Whether the Insolvency Professionals (IP) are Public Servants ? HC Answers the Issue
There are many decisions which deal with insolvency professionals.
In Dr. Arun Mohan v CBI [2023] GCtR 2169 (Delhi), it was held that an Insolvency Professional does not fall within the meaning of “public servant” as ascribed in any of the clauses of sub-section (c ) of section 2 of the Prevention of Corruption Act, 1988.
Complete judgment can be downloaded free of cost from https://delhihighcourt.nic.in/judgment - Date of Judgment is 18 December 2023.
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Vishal
Delhi
Notice : Copyright of above blog and its content including headline vests with Vishal. Above should Not be reproduced in any form in newspapers/websites/Ph.D. thesis/College projects/ law firms' newsletters/law journals/books/book chapters/blogs without prior written permission. Fair use should be in terms of Copyright Act, 1957. Any violation will make violator liable for Pecuniary compensation with interest towards the author irrespective of the profit made. All disputes shall be subject to Delhi Jurisdiction. Reproduction of judgment or publication of judgment unless expressly prohibited by Court according is not an infringement of copyright according to S. 52 (1)(q)(iv) of Copyright Act, 1957. This is not to be considered as any professional legal advice and does not constitute client-attorney relationship.
What Falls Beyond IBC, 2016 : Answered in a Recent Judgment
Sec. 17 of IBC, 2016 refers to situation where the management of the affairs of the corporate debtor shall vest in the interim resolution professional.
More than 6 years have passed since IBC, 2016 was enacted with a specific goal. Several decisions on IBC, 2016 have been passed. It is to be noted that notice under S.24 (3) of IBC, 2016 is to be given to members of suspended Board of Directors as well. But, S.24(4) of IBC, 2016 affects the right of suspended Board of Directors to vote in meetings of CoC.
In a recent case [citation : Tamilnadu Mercantile Bank Ltd v Recovery Officer [2023] GCtR 2131 (Madras)], the scope of Sec. 53 of IBC, 2016 was explained.
It was held that "as far as the dues of the workmen/employees on account of Provident Fund, gratuity or pension are concerned, they shall be governed by Section 36(4) of IBC 2016. Section 36(4) (iii) specifically excludes “all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund” from the ambit of "liquidation estate assets". Therefore, it is clear that Section 53(1) of the IBC, 2016 shall not be applicable to such dues, which are to be treated outside the liquidation process and liquidation estate assets under the IB Code."
One can download entire judgment free of cost from the following link : -
https://www.mhc.tn.gov.in/judis/index.php/casestatus/caseno
Written by
Vishal
Delhi
Notice : Copyright of above blog and its content including headline vests with Vishal. Above should Not be reproduced in any form in newspapers/websites/Ph.D. thesis/College projects/ law firms' newsletters/law journals/books/book chapters/blogs without prior written permission. Fair use should be in terms of Copyright Act, 1957. Any violation will make violator liable for Pecuniary compensation with interest towards the author irrespective of the profit made. All disputes shall be subject to Delhi Jurisdiction. Reproduction of judgment or publication of judgment unless expressly prohibited by Court according is not an infringement of copyright according to S. 52 (1)(q)(iv) of Copyright Act, 1957. This is not to be considered as any professional legal advice and does not constitute client-attorney relationship.
NCLT's Order Unsustainable : Appeal Filed by Resolution Applicant Allowed
According to S.31 (2) of IBC, 2016, NCLT has the power to reject the resolution plan. The process of fast track CIRP can be seen from the provisions of S.56 (1) where a time period of 90 days has been mentioned.
Sec. 60 (1) of IBC, 2016 for territorial jurisdiction is linked with the place where the registered office of the corporate person is located.
In a recent case of December 2023 arising out of litigation under IBC, 2016, the appeal was filed by resolution applicant challenging the Order of the NCLT.
In Express Resorts and Hotels Ltd v Amit Jain [2023] GCtR 2127 (NCLAT), the approach of NCLT in dealing with applications filed by resolution applicants was exposed. Finally, the appeal filed by Resolution applicant was allowed and NCLT's Order was termed as "unsustainable" at page 13.
Surprisingly, the entire discussion makes absolutely no mention about the ratio of Innoventive Industries Ltd v ICICI Bank [2017] GCtR 1171 (SC).
One can download full copy of the decision free of cost from the following link : -
https://nclat.nic.in/display-board/judge
Written by
Vishal
Delhi
Notice : Copyright of above blog and its content including headline vests with Vishal. Above should Not be reproduced in any form in newspapers/websites/Ph.D. thesis/College projects/ law firms' newsletters/law journals/books/book chapters/blogs without prior written permission. Fair use should be in terms of Copyright Act, 1957. Any violation will make violator liable for Pecuniary compensation with interest towards the author irrespective of the profit made. All disputes shall be subject to Delhi Jurisdiction. Reproduction of judgment or publication of judgment unless expressly prohibited by Court according is not an infringement of copyright according to S. 52 (1)(q)(iv) of Copyright Act, 1957. This is not to be considered as any professional legal advice and does not constitute client-attorney relationship.
IBC, 2016 : Suspended Director's Appeal Challenging Order of NCLT Dismissed
Litigations under Insolvency and Bankruptcy Code, 2016 ("IBC, 2016") occurs at various levels.
According to S.5(7) of IBC, 2016, “financial creditor” means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. It is important to note that under S.14 (2) of IBC, 2016 "the supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period". S.16 (1) of IBC, 2016 permits NCLT to appoint an IRP.
In a recent case [Citation : Mehulkumar Arvindbhai Patel and Anr. v Vinod Tarachand Agarwal [2023] GCtR 2126 (NCLAT)], the suspended Director had filed the appeal.
The appeal was filed challenging the Order of NCLT. After untangling one of the most controversial issues related to IBC, 2016, the appeal filed by suspended director was dismissed in December 2023.
One can download full copy of the decision free of cost from the following link : -
https://nclat.nic.in/display-board/judge
Written by
Vishal
Delhi
Notice : Copyright of above blog and its content including headline vests with Vishal. Above should Not be reproduced in any form in newspapers/websites/Ph.D. thesis/College projects/ law firms' newsletters/law journals/books/book chapters/blogs without prior written permission. Fair use should be in terms of Copyright Act, 1957. Any violation will make violator liable for Pecuniary compensation with interest towards the author irrespective of the profit made. All disputes shall be subject to Delhi Jurisdiction. Reproduction of judgment or publication of judgment unless expressly prohibited by Court according is not an infringement of copyright according to S. 52 (1)(q)(iv) of Copyright Act, 1957. This is not to be considered as any professional legal advice and does not constitute client-attorney relationship.
IBC, 2016 : NCLT's Order passed in Contravention of Rules Set Aside
Section 3 (11) of Insolvency and Bankruptcy Code, 2016 ("IBC, 2016") defines debt and says that “debt” means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt." Sec. 6 of IBC, 2016 permits even a corporate debtor initiate CIRP.
In a recent case related to IBC, 2016 in Jasti Samba Siva Rao v SREI Equipment Finance Ltd [2023] GCtR 2125 (NCLAT, Chennai), the Order of National Company Law Tribunal ("NCLT") was challenged.
Explaining the effect of applicable Rules, the Order passed by NCLT was set aside.
One can download full copy of decision free of cost from the following link : -
https://nclat.nic.in/display-board/judge
Written by
Vishal
Delhi
Notice : Copyright of above blog and its content including headline vests with Vishal. Above should Not be reproduced in any form in newspapers/websites/Ph.D. thesis/College projects/ law firms' newsletters/law journals/books/book chapters/blogs without prior written permission. Fair use should be in terms of Copyright Act, 1957. Any violation will make violator liable for Pecuniary compensation with interest towards the author irrespective of the profit made. All disputes shall be subject to Delhi Jurisdiction. Reproduction of judgment or publication of judgment unless expressly prohibited by Court according is not an infringement of copyright according to S. 52 (1)(q)(iv) of Copyright Act, 1957. This is not to be considered as any professional legal advice and does not constitute client-attorney relationship.
IBC, 2016 : Replacement of Resolution Professional Is Permissible
An important Decision was given by Chennai Bench of NCLAT on 15 December 2022 in Company Appeal (AT) (CH) (INS.) No. 319 / 2022. [Available free of cost at https://nclat.nic.in/display-board/judge]
One can gather from Dr. K.V. Srinivas [2022] GCtR 1802 (NCLAT, Chennai) that replacement of Resolution Professional under IBC, 2016 is permissible.
Written by
Vishal
Delhi
Notice : Copyright of above blog and its content including headline vests with Vishal. Above should Not be reproduced in any form in newspapers/websites/Ph.D. thesis/College projects/ law firms' newsletters/law journals/books/book chapters without prior written permission. Fair use should be in terms of Copyright Act, 1957. Any violation will make violator liable for Pecuniary compensation with interest towards the author irrespective of the profit made. All disputes shall be subject to Delhi Jurisdiction. Reproduction of judgment or publication of judgment unless expressly prohibited by Court according is not an infringement of copyright according to S. 52 (1)(q)(iv) of Copyright Act, 1957.
IBC, 2016 : Resolution Professional Is a Public Servant
A recent Judgment has been passed on 5 April 2023 by Hon'ble Jharkhand High Court in Cr.M.P. 1048 of 2021.
In Sanjay Kumar Agarwal v CBI [2023] GCtR 837 (Jharkhand), it has been held that the resolution professional will come within the meaning of a public servant under Section 2(c) the PC Act.
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Vishal
Delhi
Notice : Copyright of above blog and its content including headline vests with Vishal. Above should Not be reproduced in any form in newspapers/websites/Ph.D. thesis/College projects/ law firms' newsletters/law journals/books/book chapters without prior written permission. Fair use should be in terms of Copyright Act, 1957. Any violation will make violator liable for Pecuniary compensation with interest towards the author irrespective of the profit made. All disputes shall be subject to Delhi Jurisdiction. Reproduction of judgment or publication of judgment unless expressly prohibited by Court according is not an infringement of copyright according to S. 52 (1)(q)(iv) of Copyright Act, 1957.
IRP has to form a Committee of Creditors under IBC, 2016
Insolvency and Bankruptcy Code, 2016 is interesting.
Section 18 (c) of IBC, 2016 indicates that Interim Resolution Professional has to constitute a committee of creditors.
One can go through Innoventive Industries Ltd v ICICI Bank Ltd [2017] GCtR 1171 (SC) for more details about IBC, 2016.
Written by
Vishal
Delhi
Notice : Copyright of above blog and its content including headline vests with Vishal. Above should Not be reproduced in any form in newspapers/websites/Ph.D. thesis/College projects/ law firms' newsletters/law journals/books/book chapters without prior written permission. Fair use should be in terms of Copyright Act, 1957. Any violation will make violator liable for Pecuniary compensation with interest towards the author irrespective of the profit made. All disputes shall be subject to Delhi Jurisdiction.
Sec. 20 of IBC, 2016 : An Important View of Supreme Court
There have been many decisions of Hon'ble Supreme Court on 31 August 2017.
In context of IBC, 2016, it has been noted at page 30 of Innoventive Industries Ltd v ICICI Bank [2017] GCtR 1171 (SC) thus : -
"Under Section 20 of the Act, the interim resolution professional shall manage the operations of the corporate debtor as a going concern."
Kindly note that full text Judgments of Hon'ble Supreme Court can be downloaded absolutely free of cost from the official website at the link https://main.sci.gov.in/judgments - Then entering the date of Judgment.
Written by
Vishal
Delhi
Notice : Copyright of above blog and its content including headline vests with Vishal. Above should Not be reproduced in any form in newspapers/websites/Ph.D. thesis/College projects/ law firms' newsletters/law journals/books/book chapters without prior written permission. Fair use should be in terms of Copyright Act, 1957. Any violation will make violator liable for Pecuniary compensation with interest towards the author irrespective of the profit made. All disputes shall be subject to Delhi Jurisdiction.
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