In some ways, 2022 is a throwback to the summer of 2021, but we remain optimistic and wish our readers a very Happy and Healthy New Year! Here are our updates on insolvency and bankruptcy covering developments during the last month of 2021!
IBC continues to remain a work-in-progress and the Ministry of Corporate Affairs (“MCA”) has invited comments from the public on certain proposed changes in the CIRP and Liquidation framework under the IBC. Among the proposed changes which are being considered are, speeding up of the CIRP admission process when initiated by financial creditors by mandating submission of only records authenticated by an information utility to establish default; and providing a fixed period of 30 days for approval or rejection of a resolution plan by the adjudicating authorities. In addition, the government also proposes to clarify that the proceedings for avoidance of transactions and wrongful trading can continue after the approval of a resolution plan by the Adjudicating Authority in CIRP. This is perhaps in response to the judgment of the Delhi High Court in Venus Recruiters.
The MCA is also likely to finalise a comprehensive framework for cross-border insolvency based largely on the UNCITRAL mode.
The NCLAT has set aside the order of the NCLT, Mumbai Bench approving the resolution plan of Twin Star in the case of Videocon on the ground that the resolution plan was not in compliance with the provisions of the Code.
Should the IBC framework be applied “as is” to DISCOMs? Read this interesting analysis that throws into focus some of the issues that are likely to crop up, especially because of the monopolies created in favour of DISCOMs and their function in the power sector.
From the Docket
The Supreme Court in Ngaitlang Dhar v. Panna Pragati Infrastructure held that the dominant purpose of IBC is revival of Corporate Debtor and make it an ongoing concern. The decision of the CoC is non-justiciable and it cannot be deliberated upon by the courts except on conditions specified under Sections 30(2) and 61(3) of IBC.
The Supreme Court in E S Krishnamurthy v. Bharath Hi Tech Builders held that NCLT and/or NCLAT cannot compel a party to the proceedings before it to settle a dispute.
The Supreme Court in CoC of Amtek Auto Limited v. Dinkar Venkatsubramanian held that the approved resolution plan has to be implemented at the earliest. The entire resolution plan has to be completed within the period stipulated under Section 12 of IBC and any deviation would defeat the object and purpose of providing such time limit.
The NCLAT in Krish Realtech Appeal dealt with a limited issue as to whether the Adjudicating Authority while considering application of pre-packaged insolvency under Section 54C of IBC can, before admission of the Application, hear Objectors/ Interveners. The NCLAT answered in affirmative and held that no prejudice would be caused in allowing objections as opportunity would be provided to file reply/rejoinder to such objections.
The NCLAT in BSE v. Asahi Infrastructure & Projects held that the listing fee claimed by BSE cannot be considered as an operational debt and is in the nature of a regulatory fee. In event if insolvency resolution process can be triggered for all kinds of dues including regulatory dues, the entire purpose and object will be lost, and insolvency proceedings will turn into recovery proceedings for the dues of the creditors. This was also held in BSE v. KCCL Plastic where the NCLAT held that listing fees comes under the ambit of ‘regulatory dues’ which SEBI is entitled to recover.
In Axis Bank v. Value Infracon India the NCLAT has held that Banks/Financial Institutions which have advanced loans to Home Buyers cannot be considered as Financial Creditors and included in the CoC of the Corporate Debtor (realty-company developing the project), specifically in light of the fact the liability to repay the Home Loan is on the individual Home Buyers.
The NCLAT in Apya Capital Services v. Guardian Homes held that the power to recall judgement is not permitted in IBC. That neither Section 242 (1) of the Companies Act, 2013 nor Rule 11 of the NCLAT Rules, 2016 gives power to the Appellate Tribunal to recall the judgment passed by itself, after the judgment was questioned before the Hon’ble Supreme Court in Appeal and the Appeal was dismissed.
The NCLAT in ‘Prakash Chandra Kapoor v. Vijay Kumar Iyer Liquidator’ held that the timelines under Regulation 47 for Liquidation Process are directory. Extension of time may be allowed only on satisfaction that there exist exceptional circumstances. The Adjudicating Authority may exercise inherent power under Rule 11 of NCLT Rules, 2016 to extend the time period to enable the Liquidator to attempt the sale as a going concern. What is mandated in Section 35(1)(e) of IBC is to ‘carry on business’ for its ‘beneficial Liquidation’ and the Regulation therefore cannot override the objective of beneficial liquidation.
Thank you for reading! We will be back with more updates next month in your inbox.
– Abhishek Tripathi, Dhruvee Patel & Shivansh Sharma