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National Company Law Appellate Tribunal (NCLAT), New Delhi: The Bench comprising of S.J. Mukhopadhaya (Chairperson) and A.I.S Cheema, Member (Technical) and Kanthi Narahari, Member (Technical) declared an appeal filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 not maintainable in view of the pre-existing dispute.

In the present case, an appeal filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by Respondent 1 against ‘Axiss Dental Private Limited’ (Corporate Debtor) was admitted by National Company Law Tribunal, New Delhi by the impugned order.

Counsel appearing for appellant Ruchin Middha and Iggu Chittiappa, stated that there was pre-existing dispute due to which application under Section 9 of I&B Code was not maintainable. Further, they placed reliance on Company Petition no. 96/241-242/ (PB) of 2018 preferred by Respondent 1 under Sections 241, 242 and 244 of Companies Act, 2013 alleging certain acts of ‘oppression and mis-management’.

Counsel appearing on behalf of Respondent 1 submitted that Respondent 1 is a shareholder, CEO and Director of the Company. It was stated that he was not paid salary for certain months and in spite of demand notice under Section 8(1), ‘Corporate Debtor’ defaulted to pay.

Tribunal found that the company petition under Sections 241 and 242 of Companies Act 2013 was still pending before NCLT, New Delhi.

Respondent 1 issued a demand notice under Section 8(1) of I&B Code when the above-stated application was still pending in respect to the payment of salary and the decision of NCLT was awaited in that regard.

Therefore, NCLAT on perusal of the facts as stated above found that there is a pre-existence of dispute with regard to salary payable to Respondent 1 and the decision for the same was awaited prior to issuance of ‘demand notice’ under Section 8(1) and held that the application under Section 9 of I&B Code was not maintainable.

Further, the orders passed by adjudicating authority in regard to the appointment of ‘Interim Resolution Professional’, declaring a moratorium, etc. pursuant to the impugned order of admission and action taken by ‘Resolution Professional’ were all declared illegal and set aside. ‘Corporate Debtor’ was released from all the rigour of law and allowed to function independently through its board of directors with immediate effect.

Thus, the appeal was allowed in the above terms and application under Section 9 of the I&B Code declared not maintainable in view of the pre-existing dispute. [Vivek Pasricha v. Amit Sachdeva, 2019 SCC OnLine NCLAT 467, decided on 02-09-2019]

Case BriefsHigh Courts

National Company Law Appellate Tribunal (NCLAT), New Delhi: The 3-Judge Member Bench comprising of Justice S.J. Mukhopadhaya (Chairperson) and Justice A.I.S Cheema (Judicial Member) and Kanthi Narahari (Technical Member), while pronouncing an order in regard to the “Jet Airways” setback addressed the following question:

“Whether separate proceeding(s) in ‘Corporate Insolvency Resolution Process’ against common ‘Corporate Debtor’ can proceed in two different countries, one having no territorial jurisdiction over the other?”

Further, noting the fact that separate ‘Corporate Insolvency Resolution Process’/ liquidation proceedings have been initiated against Jet Airways (India) Limited — ‘Corporate Debtor’, the one in India and another in Netherland, the point of determination as framed was,

“Whether by a Joint Agreement between the ‘Resolution Professional’ of ‘Corporate Debtor’ in India and Administrator in Netherland, as may be approved  by Appellate Tribunal, one proceeding in India can proceed for maximization of the asset of ‘Corporate Debtor’ and balancing all stakeholders, including Indian/Offshore/Creditors/Lenders”?

State Bank of India-Respondent 1, was represented by Ramji Srinivasan, Senior Advocate along with Counsel Karan Khanna.

It was directed to Respondent 1 that it may file a reply suggesting a procedure that may be followed in the facts and circumstances of the case, without any conflicting interest of stakeholders of both the countries.

Tribunal directed case for admission on 21-08-2019.

NCLAT also stated that during the pendency of the appeal, appellant administrator and Respondent 2 – ‘Interim Resolution Professional’ will cooperate with each other. It will be open to the appellant administrator to collate the claims of offshore creditors including ‘Financial Creditors’, ‘Operational Creditors’ and other stakeholders and forward their details to Respondent 2-‘Resolution Professional’ for purpose of preparing the Information memorandum with approval of ‘Committee of Creditors’.

Counsel, Sumant Batra who appeared on behalf of appellant administrator assured that-

  • Appellant Administrator will cooperate in the proceedings in India;
  • Will not sell, alienate, transfer, lease or create any 3rd party interest on the offshore movable and immovable assets of ‘Corporate Debtor’.

In respect to the above undertaking by an appellant administrator, the impugned order dated 20-06-2019 passed by NCLT, so far as it relates to the declaration that offshore proceeding is not maintainable, shall remain stayed.

  • Interim Resolution Professional of this country will ensure that ‘Corporate Debtor’ remains a going concern and will take the assistance of the (suspended) Board of Directors, paid directors and employees.
  • Person authorised to sign bank cheques may issue cheques only after Interim Resolution Professional’s authorisation.
  • Bank accounts of Corporate Debtor be allowed to be operated for the day-to-day functioning of the company such as for payment of current bills of suppliers, salaries and wages of paid director, employees’/workmen electricity bills, etc., subject to availability of fund.[Jet Airways (India) Ltd. v. SBI, 2019 SCC OnLine NCLAT 385, decided on 12-07-2019]
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Bench of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial) allowed an appeal filed against the order of National Company Law Tribunal (New Delhi) whereby it had admitted respondent’s application under Section 7 of the Insolvency and Bankruptcy Code, 2016 and appointed an Interim Resolution Professional.

Senior Advocate K. Venugopal assisted by Pawan Sharma, Anuj Shah and Rishabh Sharma, Advocates representing the appellant–Shareholder of the Corporate Debtor, submitted that NCLT failed to notice inter alia that the parties had already settled the claim. The factum of the settlement was accepted by Ashish Agarwal, Advocate appearing for the respondent.

It was informed by the Interim Resolution Professional that advertisement was issued asking for claims but Committee of Creditors was not yet constituted.

The Appellate Tribunal relied on Swiss Ribbons (P) Ltd. v. Union of India, 2019 SCC OnLine SC 73 wherein the Supreme Court held, “at any stage where the committee of creditors is not yet constituted, a party can approach the NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement.”

In such view of the matter, the impugned order of NCLT was set aside as the parties had settled the claim before the constitution of Committee of Creditors and the respondent did not want to proceed with the matter. The appeal was thus allowed. [Arjun Puri v. Kunal Prasad, 2019 SCC OnLine NCLAT 5, dated 31-01-2019]

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National Company Law Appellate Tribunal (NCLAT): A two-member bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice Bansi Lal Bhat, Member (Judicial) allowed an appeal filed against an order of National Company Law Tribunal (Mumbai).

The respondent preferred an application under Sections 433 and 434 of the Companies Act, 1956 before the Bombay High Court for winding up of the Corporate Debtor pertaining to a debt of Rs 21,63,359. The case was transferred pursuant to Rule 5 of the Companies (Transfer of Pending Proceedings) Rule, 2016 before National Company Law Tribunal (Mumbai). The respondent therein filed Form 5 to treat the same as an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. By the order impugned, NCLT admitted the application, passed an order of moratorium and appointed Interim Resolution Professional. The appellant – Director of the Corporate Debtor, challenged the order on the ground that notice under Section 8(1) was issued on the same date when Form 5 was filed.

The Appellate Tribunal perused Section 9 of the I&B Code and observed that an application under Section 9 preferred before the completion of 10 days from the giving of notice under Section 8(1) cannot be entertained and admitted by the Adjudicating Authority. Holding the application under Section  9 as not maintainable on the date on which it was filed, the High Court set aside the order impugned. Resultantly, the order passed by NCLT appointing Interim Resolution Professional, declaring moratorium, freezing of account, etc. were declared illegal. The appeal was, thus, allowed. [Jaya Patel v. Gas Jeans (P) Ltd., 2018 SCC OnLine NCLAT 783, dated 08-10-2018]

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National Company Law Tribunal, Principal Bench: Bank of Baroda, the Financial Creditor filed an application to trigger the Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Amrapali Silicon City Pvt. Ltd., the Corporate Debtor. The financial debt was set out in the form of a loan agreement between the debtor and the financial creditor wherein an amount of Rs. 100 crores was sanctioned to the corporate debtor. Amrapali Silicon City Pvt. Ltd. defaulted in paying an outstanding amount of Rs. 56 crore in March, 2016. The question which arose for consideration for the Principal Bench, NCLT was whether the Financial Creditor was able to satisfy the requirement of Section 7 of the Insolvency and Bankruptcy Code (IBC) to initiate a Corporate Insolvency Resolution Process lawfully showing the presence of a default.

Amrapali Silicon City told the Bench said that Bank of Baroda, which is the lead bank of the consortium of lenders, could not individually enforce any right or obligation of the term loan agreement. It contended that the insolvency application even otherwise was incomplete and the same was liable to be rejected. But the Bench dismissed the opposition arguing that the “Explanation to Section 7 (1) clarifies that for the purposes of Section 7, a default includes a default in respect of financial debt, owed not only to the applicant-financial creditor but to any other financial creditor of the Corporate Debt. Moreover, no other financial creditor has come to the forefront to oppose the application”.

The Principal Bench of NCLT, headed by Chief Justice M.M. Kumar, admitted the plea by Bank of Baroda against Amrapali Silicon City Pvt. Ltd. and stated that it would appoint an Interim Resolution Professional who will invite claims from creditors to the company and prepare a resolution plan within the time-frame stipulated under the IBC, 2016. [Bank of Baroda v. Amrapali Silicon City Pvt. Ltd., 2017 SCC OnLine NCLT 814, decided on 4.9.2017]