Dispute Resolution Insolvency Legal Alerts Real Estate Sector

IBC Brief – November, 2022

Hello! Welcome back to our updates on the Insolvency and Bankruptcy Code, featuring developments during the month of November 2022.

Hello! Welcome back to our updates on the Insolvency and Bankruptcy Code, featuring developments during the month of November 2022.

The Union Government has made some appointment of judicial and technical members to the National Company Law Tribunal (“NCLT”) for the period of five years or till the members attain the age of sixty-five years whichever is earlier.

Some of the notable insolvency proceedings initiated by various NCLTs of the country in the month of November are Ansal Properties and Infrastructure , Gayatri Projects, Valecha Engineering, Reform Ferro etc.

The National Company Law Appellate Tribunal (“NCLAT”)  has stayed the insolvency proceedings of BPTP Ltd., a renowned real estate company, having several residential and commercial projects at NOIDA, Gurugram and Faridabad after the parties enter a settlement.

The NCLAT imposed a penalty of Rs.25 lakhs observing that the CIRP of the real estate company was initiated by the operational creditor fraudulently and only to vitiate the effect of Real Estate Regulatory Authority’s order.

From the Docket

In Axis Trustee Services v. Brij Bhushan Singhal, the Delhi High Court held that merely because an interim moratorium was applicable in respect of one of the co-guarantors, the interim moratorium cannot be stretched to imagine that all the co-guarantors would be covered under the scope of interim moratorium prescribed under Section 96 of the Insolvency and Bankruptcy Code (“IBC”). This observation runs counter to the Supreme Court’s observation in SBI v. V. Ramkrishnan  wherein while contrasting the provisions of Section 14 and Section 96 of the IBC, the Supreme Court opined that the scope of the latter is much wider.

The Delhi High Court in Rajiv Chakraborty Resolution Professional of EEIL v. Directorate of Enforcement has held that there is no power to attach the property and assets would not fall under Section 14 of the IBC which prescribes a moratorium when the corporate debtor is undergoing Corporate Insolvency Resolution Process. This was held giving the reasoning that the proceeding under the Prevention of Money Laundering Act, 2002 is to deprive the entity of the assets and properties which comprise proceeds of a crime and cannot be compared to an attachment for debt.

The NCLAT in Assam Tea Employees Provident Fund Organization v. Mr. Madhur Agarwal RP of Hail Tea Ltd. held that the corporate debtor’s assets cannot include provident fund dues of its employees. Therefore, the NCLAT ruled that the workmen of the tea estate are entitled to all such payments in full.

The NCLAT in Bank of Maharashtra v. Manjeet Cotton . held that the successful resolution applicant is not entitled to the benefit arising out of any surprise claim which is not part of the resolution plan. Although in the present case the invocation of bank guarantee was prior to the date when the resolution plan was passed, the NCLAT relied on clean slate theory.

The NCLAT in Excel Engineering v. Mr. Vivek Murlidhar Dabhade RP of New Phaltan Sugar Works  observed that the Government and the Insolvency and Bankruptcy Board of India should consider giving some minimum entitlement to the operational creditors based on the amount realised in the Resolution Plan above the liquidation value.

Thank you for reading.

– Sarthak Advocates & Solicitors