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National Company Law Appellate Tribunal (NCLAT): Justice S.J. Mukhopadhaya, Chairperson dismissed an appeal against the order of National Company Law Tribunal, Mumbai filed by Navneet Kumar Gupta, Resolution Professional of Monnet Power Co. Ltd.

In the Corporate Insolvency Resolution Process against Monnet Power (corporate debtor), the respondent Bharat Heavy Electricals Ltd. (operational creditor) filed an application before the Resolution Professional to admit its entire claim of Rs 977,49,97,545 along with interest. On considering the same, the Resolution Professional did not accept part of the claim. NCLT, by the impugned order, held that the Resolution Professional wrongly disallowed the substantial claim in its entirety and directed him to re-examine the claim on basis of the accounts and evidence of BHEL. Aggrieved thereby, the Resolution Professional preferred the present appeal.

The only question which arose for consideration in this appeal was “whether the Resolution Professional had jurisdiction to reject the claim of BHEL in its entirety, without going into evidence?”

The Appellate Tribunal relied heavily on Swiss Ribbons (P) Ltd. v. Union of India, 2019 SCC OnLine SC 73 wherein this issue fell for consideration before the Supreme Court. It was held in that case that a Resolution Professional had no adjudicatory powers. Holding the present case being covered by Swiss Ribbons, the High Court declined to interfere with the impugned order. The Resolution Professional was directed to act in accordance with the directions NCLT. [Navneet Kumar Gupta v. BHEL, 2019 SCC OnLine NCLAT 114, decided on 26-02-2019]

Amendments to existing lawsLegislation Updates

The government notified amendments to the Companies Act 2013, aimed at making the insolvency process more effective. The Companies (Amendments) Act 2017, which received Parliament’s nod in the just-concluded winter session, have put restrictions on managerial remuneration when a company has defaulted in its dues. Companies, which have defaulted on their dues to financial institutions, will now require the prior approval of these creditors, besides approval in a general meeting in case the payment of managerial remuneration exceeds 11% of the net profits.

Earlier, only the company’s prior approval in a general meeting was required. The amendments have also allowed issuance of shares at a discount to the creditors in cases where debt is converted into shares in pursuance of a resolution plan under the Insolvency or Bankruptcy Code or a debt restructuring scheme. The changes to the Act also bar a registered valuer from undertaking valuation of any asset in which he has direct or indirect interest for a period of three years before or after his appointment. These changes are a part of the government’s efforts to remove or change laws that are impeding the effective resolution of bankrupt companies.

The income tax department said that the rules around levy of minimum alternate tax (MAT) will be eased for insolvent companies and also that the companies against whom insolvency proceedings have been initiated will be allowed to reduce the entire amount of loss brought forward, including unabsorbed depreciation from the book profit for calculation of MAT. It was also added that legislative changes will be made to make this more effective.

Source: Livemint