IBC Digest by AVM Resolution Professionals LLP.

IBC Digest by AVM Resolution Professionals LLP.

NCLT JUDGEMENTS

1.No Appeal can be filed by the Revenue Department during the Moratorium period

The Income Tax Appellate Tribunal- Mumbai Bench, in the matter of Dy. Commissioner of Income Tax Vs. Global Softech Ltd. held that under Section 14 of IBC, the Revenue cannot institute suit against the Corporate Debtor after the imposition of the moratorium. Also, it was held that Section 31 of IBC prevents State Authorities from questioning the resolution plan.

In the present case, the cross-appeals were filed by both the parties challenging the order of the Commissioner of Income Tax- Mumbai dated 27.04.2015.

The application for initiation of CIRP was filed by the financial creditors under Section 7 of IBC before NCLT- Ahmedabad Bench and subsequently the Interim Resolution Professional (IRP). The matter is pending before the Insolvency Professional (IP) and a moratorium has been imposed under Section 14 of IBC. The proceedings were conducted ex-parte as the assessee did not appear for the hearing and no adjournment was sought.

The Tribunal held that appeal filed by the Revenue is prohibited under section 14 of IBC as the institution of suits or continuation of pending suits or proceedings against them corporate debtor including execution of any judgment, decree, or order in any court of law, tribunal, arbitration panel or other authority shall be prohibited during the moratorium period. Reliance was placed on Alchemist Asset Reconstruction Co. Ltd. v. Hotel Gaudavan (P.) Ltd wherein it was held that even an arbitration clause cannot be invoked during the moratorium period.

Further, it was held that as per Section 31 of the Code, the resolution plan as approved by the Adjudicating Authority shall be binding on the corporate debtor and its employees, members, creditors, guarantors, and other stakeholders involved in the resolution plan. Thus, this will prevent State authorities, Regulatory bodies including Direct & Indirect Tax Departments from questioning the resolution plan. Thus, the appeal filed by Revenue was dismissed.

The Tribunal furthermore dismissed the appeal filed by the assessee on the ground that neither there was any permission obtained by the NCLT nor there was any letter of authority issued by IRP in favor of the assessee.

Hence, both the appeals were dismissed by the Tribunal.

2.Once an Application under Section 95 is filed, the tribunal has to proceed further with the compliance.

The National Law Company Tribunal – Chennai Bench in the matter of Tata Capital Financial Services Pvt. Ltd. Vs. Mr. Boothalingam ordered for appointment of Mrs. Balasubramanian Mekala as the Interim Resolution Professional (IRP) in respect of the Personal Guarantor.

CIRP was initiated against the Corporate Debtor (CD) via order dated 04.03.2020 by the Tribunal. The present application was filed by the Financial Creditor to the CD under Section 95(1) of IBC to initiate proceedings against the Respondent. The agreement of guarantee was executed by the personal guarantor. A demand notice was issued to the personal guarantor under Rule 7 of IBC (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rule, 2019on 28.06.2021.

The Tribunal in the present case referred to the case of Mr. Ravi Ajit Kulkarni v SBI, wherein, the NCLAT held that once an application under section 95 of IBC is filed, the Tribunal has to act on it, and limited notice is to be served upon the personal guarantor to appear referring to the Interim Moratorium which has been imposed under Section 96 of the IBC and subsequently proceeds with the next step under section 97 of IBC of appointing Resolution Professional.

Hence, referring to the same, the Tribunal ordered for appointment of Mrs. Balasubramanian Mekala as the Interim Resolution Professional (IRP) in respect of the Personal Guarantor. The applicant was further directed to serve the copy of the order to IRP for preparing a report under section 99 of IBC. furthermore, the RP was also directed to review the application and recommend the acceptance or rejection in the report within 10 days as envisaged under Section 99(1) of IBC.

3.CIRP cannot be initiated against Financial Service Providers.

The National Company Law Tribunal-Delhi Bench, in the matter of Parveen Chawla Vs. MCF Finlease Pvt. Ltd. held that Financial Service Providers falls out of the purview of the Corporate Debtor/Corporate Person.

In this present case the applicant (Operational Creditor)) was an employee of the respondent (Corporate Debtor-CD). An application under Section 9 of IBC was filed by the applicant against the respondent for the alleged default of Rs. 16,44,231/-.

The applicant contended that she was an employee of the respondent for approximately 12 years. The respondent which is a Non-Banking Financial Company did not pay her salary for a period starting from 01.05.2018 to 31.07.2019, which was a cumulative amount of 11,25,000. It was further contended that the respondent withheld the Gratuity amount of Rs. 5,19,231/- for 12 years of services. Demand notice stating the dispute was served to the respondent under section 8 of IBC on 24.09.2019. The reply denying the alleged amount was served on the applicant on 5.10.2019 by the respondent which was beyond the expiration of 10 days and was received by the applicant on 09.10.2019.

The respondent contended that CIRP cannot be initiated as they do fall under the definition of Corporate Person as defined under section 3(7) of the IBC. Reliance was also placed on the case of Randhiraj Thakur v M/s Jindal Saxena Pvt. Ltd., wherein it has been held that financial service providers are being kept outside the purview of IBC.

It was also contended that the disputed amount raised in the Demand Notice was different from what was claimed in the application and hence the present application was not maintainable based on wrong facts. Furthermore, it was submitted that the applicant did not disclose that she was a shareholder of the company of the respondent and the application was thus not maintainable as was held by the NCLAT in the case of Lalit Mishra v Sharon Bio Medicine.

It was further contended that another company petition about the matter of oppression and mismanagement was filed by the applicant which is pending before the Tribunal and thus it constitutes a dispute under Section 5(6) of IBC. Furthermore, it was submitted that the reply to

the Demand Notice was duly given within the time frame of 10 days. It was also contended that the applicant worked only till 22.03.2018 and the salary for the same was paid by the respondent after that a criminal complaint was filed against the applicant on 31.05.2018 after which the payment of gratuity was forfeited.

The court in this case observed that the respondent company is a Non-Banking Financial Company (NBFC) falls out of the purview of the definition of Corporate Person as defined under Section 3(7) of the IBC as it states that financial service providers will not be included under the sad definition.

Section 3(17) which defines Financial Service Providers envisages that any person engaged in the business of providing financial services falls under its ambit.

Thus, the respondent being an NBFC does not come within the ambit of Corporate Person/Corporate Debtor. The application was thus dismissed by the Tribunal.

4.Treatment of property purchased in the name of Promoters under the Liquidation Estate.

In the matter of CMA. Suresh Kumar vs Indian Bank, an application is preferred under Section 60(5) and Section 35 (1) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11,13 & 14 of the NCLT Rules, 2016 by the Liquidator before the NCLT Chennai.

The major relief sought in this application by is to declare the property purchased (“Property”) in the name of the promoters from the funds of the corporate debtor to be added as part of the liquidation estate and to allow the property to be sold as a whole in one go to maximize the value of the assets.

Previously, CIRP was initiated against the Corporate Debtor and admitted. However, no resolution plan was received for the company hence the order of liquidation was passed by the Adjudicating Authority.

In this case, Respondent no.1 holds exclusive charge over the Property on over 150 Acres of the land out of 170 Acres. Over the rest 20 Acres of the land the Respondent No.1 holds pari passu charge along with other respondents.

Respondent no.1 has relinquished the security over the exclusive charge on the property as per the provision of Section 52 of the Code with the condition that such relinquishment will only be made if the whole property of the Corporate Debtor is sold in one go.

Further, the Liquidator sent the correspondences to the other Respondents to relinquish their right of the property of their part.

The other respondents did not raise any objection to the above-mentioned condition put forth by the Respondent No.1. Liquidator further submitted that the property purchased in the names of individual promoters but from the funds of the corporate debtor shall be added to the liquidation estate and further the whole assets of the corporate debtor to be sold in one go.

The Adjudicating Authority after hearing the arguments stated that the pertinent pointed out to be noted is that there is no objection from the other respondents over the condition placed by the Respondent No.1 for relinquishment of security interest. Further, the maximization of the value of the assets can be done with the single sale of the property as against piecemeal sale in this case. Hence, the AA allowed the property in the names of individual promoters to be placed under the Liquidation estate and allowed the Liquidator to sell the company in one go.

Supertech Limited goes under insolvency process

On an application filed by the Union Bank of India, the NCLT admitted the Corporate Insolvency Resolution Process against the real estate giant. Supertech Limited have several real estate projects ongoing in DelhI-NCR region.

As per the application the amount of default was INR 420 Crores was due to the financial creditor. It is estimated that more than 25000 home buyers are effected by this decision.

As of now homebuyers are required to submit their claims as per the last date mentioned in the Public Announcement released by the IRP.

About AVM- Insolvency Professionals LLP

AVM- Insolvency Professionals LLP is a registered Insolvency Professional Entity (IPE) by The Insolvency and Bankruptcy Board of India (IBBI).(Registration number: IBBI/IPE/0099) ( The partners of IPE are Registered Insolvency Professionals (IP) under Insolvency and Bankruptcy Code, 2016 (IBC) having expertise and rich experience to advise on / carry out all aspects of Insolvency Resolution, Restructuring, Bankruptcy & Liquidation.

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