Asset Reconstruction IBC Insolvency Restructuring

Insolvency Brief Case – January 2024

A New Year means New Resolutions! And we have resolved to bring you back our updates on India’s insolvency regime with more regularity and much more content.

A New Year means New Resolutions! And we have resolved to bring you back our updates on India’s insolvency regime with more regularity and much more content.

In the News

The Finance Ministry instructed the public sector banks to actively oversee and evaluate the top 20 cases under the Insolvency and Bankruptcy Code (IBC) as part of their strategy for managing non-performing assets. Financial Services Secretary Vivek Joshi, in a meeting with managing directors and CEOs of public sector banks (PSBs), urged them to conduct monthly reviews of these top 20 cases to facilitate their resolution. Additionally, they were directed to closely monitor cases that have been pending admission and resolution under the IBC. The meeting also included a comprehensive assessment of the operations of the National Asset Reconstruction Company Limited.
NCLT approved the Resolution Plan submitted by Reliance Projects & Property Management Services for Reliance Communications Infrastructure. Although, there were four resolution applicants, one withdrew, and two others did not respond later. As a result, the plan of Reliance Projects was approved by the Committee of Creditors (“CoC”) with a majority voting share of 67.97%%. The Resolution Plan is valued at Rs. 455.9 Crores, while the total admitted claims against the Corporate Debtor amounts to Rs. 47,251 Crores. The average fair value of the Reliance Communications Infrastructure is Rs. 722.5 Crores and average Liquidation value is Rs. 428 Crores.
IBBI issued a circular on 21.12.2023, clarifying that where a creditor proposes name of an insolvency professional to act as resolution professional in proceedings under Section 95 of IBC, then such IP shall provide particulars and declaration in Part IV of Form C of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 to the creditor, for the consideration of the NCLT.

From the Docket

The Supreme Court in Hari Babu Thota while interpreting Section 29A of the IBC held that the cut-off date to determine the eligibility of a resolution applicant to submit a resolution plan, is the date of submission of resolution plan and not the CIRP commencement date. Accordingly, even if the corporate debtor was registered under the MSME Act after commencement of CIRP, the promoter shall be eligible to submit a resolution plan in terms of section 240A of the IBC.

The Supreme Court in Sanjay Pandurang v. Vistra ITCLhas held that the limitation for filing an appeal from the orders of NCLT begins from the date of order upload on the NCLT website if the order is not pronounced on the hearing date. However, if the NCLT pronounces the order on the same day as the hearing, the limitation starts from the date of pronouncement, not the upload. The court also emphasized that the date of e-filing, not the physical filing, determines whether the appeal is filed within limitation or otherwise.

The NCLAT in Puro Naturals v. Warana Sahakari has held that there is no provision under IBC which requires the successful resolution applicant to make upfront payment to financial creditors who dissented to the resolution plan. It stated that what is required under IBC is that the payment to such dissenting financial creditors must be in priority over the assenting financial creditors.

In Ashok Tiwari v. Tattva & Mittal Lifespaces NCLAT held that the rectification order of NCLT merges with the original order and the period of limitation for filing an appeal under Section 61 of IBC starts from the date of the rectification order.

Upon a consideration of various clauses of a share subscription cum shareholders’ agreement, the NCLAT in  Sanjay D. Kakade v. HDFC Ventures Trustee Company Ltd. , came to the conclusion that held the consideration provided by the respondents towards subscription to equity and preference shares was in the nature of a financial debt.

In Amit Kumar Pandey v. Pardeep Kumar Sethi held that the claim of workers employed through sub-contractor filed through sub-contractor as operational debt cannot be treated as workmen of corporate debtor.

In Rakesh Ranjan v. Fanendra Harakchand Munot NCLAT held that, even though Regulation 36-B of CIRP Regulations does not specifically require a non-refundable deposit alongwith resolution plan, if the Request For Resolution Plan (RFRP) requires the resolution applicant(s) to submit a Bank Guarantee, then such condition is not violative of Regulation 36-B of IBBI CIRP Regulations.

In Amita Saurabh Bihani v. E&G Global Estates NCLAT held that only the resolution professional, under Section 25(2)(j) of the IBC, has the authority to file avoidance applications and not homebuyers or unsuccessful resolution applicants. It was also clarified that CIRP and avoidance application proceedings are distinct set of proceedings. The pendency of an avoidance application filed by the resolution professional does not impede the approval of a resolution plan by the NCLT. Additionally, an avoidance application can continue independently of the CIRP, as they represent separate proceedings with different timelines and objectives.


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Thank you for reading! We will be back again next month with more updates on insolvency law.