Welcome back to our updates on the Insolvency and Bankruptcy Code, featuring developments in the month of May 2022.
The Supreme Court has admitted a review petition filed by Axis Bank against the Vidarbha judgment (covered in our previous issue here).
The Supreme Court has rejected a writ petition against a 2019-notification by which the tenure of members of NCLT was reduced from five years to three years. The court also observed that considering the notification, the selection process for fresh appointments of Members of the NCLT has already begun and is partially at an advanced stage.
Earlier this month, our IBC team’s overview of the code was published in the Global Restructuring Review’s Asia-Pacific Restructuring Review 2023. The whole publication is available at https://globalrestructuringreview.com/review/asia-pacific-restructuring-review/2023.
From the Docket
In ARCIL v. Tulip Star Hotels, the SC has held that there is no reason to suppose that Sections 14 or 18 of the Limitation Act, 1963 do not apply to proceedings initiated under Section 7 or Section 9 of the Code. In this case, there was an acknowledgment of the debt by the Corporate Debtor (“CD”) before the expiry of the period of limitation of three years. Accordingly, the period of limitation would get extended by a further period of three years.
In Kotak Mahindra Bank v. Kew Precision Parts, the Supreme Court while relying upon section 5 of the Limitation Act, 1963 and its precedent set in B.K. Educational Services (P) Ltd. Associates v. Parag Gupta held that NCLT/ NCLAT has the discretion to entertain an application/appeal after the prescribed period of limitation and that the condition precedent for exercise of such discretion is the existence of sufficient cause for not preferring the appeal and/or the application within the period prescribed by limitation. It further reiterated the principle laid down in its earlier judgments that section 18 of the Limitation Act, 1963 would be applicable to applications filed under the IBC and therefore, an acknowledgement made in writing within the period of limitation extends the period of limitation.
The IBC would prevail over the Customs Act, ruled the SC in Sundaresh Bhatt v. CBIC. On imposition of the moratorium under Sections 14 or 33(5) of the IBC, the Department of Customs only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies against the CD; it cannot initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act. The department is entitled to file its claim in accordance with the provisions of the Code before the Resolution Professional/ Liquidator, as the case may be.
Holding that liquidation would be the only remedy in case a successful resolution applicant fails to comply with its assurances in terms of the approved resolution plan, the Delhi High Court refused to carve a new remedy for the petitioner in Sanjay Sarin v. Canara Bank.
In Quippo Infrastructure v. M.R. Nirman, the NCLAT held that a Banker’s Certificate is not mandatorily required to trigger CIRP under Section 9 of the Code.
The NCLAT held that Section 14 of IBC is a bar against institution and prosecution of any suits or proceedings or execution of orders and decrees in other courts or Tribunals but not a bar to pass appropriate order in the pending proceedings against the resolution professional or suspended directors and related parties, before the Adjudicating Authority. Any interpretation of Section 14, which prohibits the Adjudicating Authority from passing orders under Section 66 of IBC against the suspended directors or insolvency professional of the Corporate Debtor for fraudulent trading or business during the resolution process would render Section 66 otiose.
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– Mani Gupta & Saumya Upadhyay