Photo of Gyanendra Kumar

Partner at the Delhi office of Cyril Amarchand Mangaldas. Gyanendra has wide experience in advising and representing clients, both Indian and foreign, across various courts and tribunals in India, with specific focus on commercial disputes, white collar crime, insolvency and bankruptcy, shareholders disputes, mergers and amalgamation, and arbitration and pre-arbitration litigation. He can be reached at gyanendra.kumar@cyrilshroff.com

 

Admission of application Section 7(5)(a) not mandatory even when default established: Supreme Court clarifies

Introduction

The Supreme Court, in a recent judgment passed in Vidarbha Industries Power Limited v. Axis Bank Limited1, adjudicated upon whether Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016 (“IBC“) is a mandatory or discretionary provision i.e. on an application for initiating Corporate Insolvency Resolution Process (“CIRP“) by a financial creditor.Continue Reading Admission of application Section 7(5)(a) not mandatory even when default established: Supreme Court clarifies

The provisions of the Companies Act, 2013 (the Act), and the rules framed thereunder, mandate companies to file requisite documents, including annual returns and financial statements, with the concerned Registrar of Companies (RoC) of their jurisdiction. Non-adherence to such provisions and non-filing of the requisite documents is an offence, exposing non-complaint companies and its directors to severe penal consequences, including fines and prosecution.

However, the records of the Ministry of Corporate Affairs (MCA) and the National Company Law Tribunals (NCLT) would clearly reveal that a lot of companies have been non-compliant with their filings. This non-compliance has been a menace to all the stakeholders involved, including, inter alia, (i) the companies and directors who have to face penal consequences for such non-compliances; (ii) the MCA and its administration who are engaged in the process of updating the records; (iii) the public/ shareholders who do not get access to the records of the companies; and (iv) the NCLT and the office of Regional Directors, which are burdened with compounding cases.Continue Reading A Fresh Start for Companies

Constitutionality of the IBC Upheld

The Insolvency and Bankruptcy Code, 2016 (IBC), since its enactment, has been a subject of great discussion and debate, both in the Industry as well as in the legal fraternity. This strong divide continues between those who consider it a necessary step (based on the abysmal rates of recovery of defaulted loans) and those who classify it as a ‘draconian legislation’. Given the division of views, it was expected that the IBC would be subject to legal and constitutional challenges.

This piece relates to one such challenge, and the first such judgement, on the constitutionality of provisions of the IBC.

The Supreme Court says: Do not examine constitutional validity

Interestingly, the Supreme Court, apprehending the largescale consequences of such challenges, advised the High Court of Gujarat in its order dated January 25, 2018 passed in Shivam Water Treaters Private Limited Vs Union of India & Ors[1], not to enter into the debate around the constitutional validity of the IBC. The Supreme Court observed that, “The High Court is requested not to enter into the debate pertaining to the validity of the Insolvency and Bankruptcy Code, 2016 or the constitutional validity of the National Company Law Tribunal.

Challenge of Constitutional Validity before the High Court at Calcutta

In November 2017, a challenge to constitutionality of provisions of the IBC was initiated before the High Court at Calcutta[2]. After hearing arguments, the High Court reserved its judgement on the issues on December 15, 2017, which was well before the order of the Supreme Court in the Shivam Water Treaters case. The challenge arose consequent to an order of the Kolkata bench of the National Company Law Tribunal, which admitted an insolvency resolution petition filed by a financial creditor (Sberbank of Russia) against a corporate debtor (Varrsana Ispat Limited).Continue Reading Constitutionality of the IBC Upheld

On December 7, 2016, the Ministry of Corporate Affairs (MCA) notified and brought into operation a significant chunk of sections under the Companies Act, 2013, including provisions relating to compromises, arrangements, reconstructions, mergers and amalgamations, with effect from December 15, 2016 (the Notification). This marks a paradigm shift in the corporate restructuring process, which is all set to undergo a transition from the earlier restructuring processes under the aegis of the High Courts, to National Company Law Tribunals (NCLTs), constituted with effect from June 1, 2016.

The MCA notified the Companies (Removal of Difficulties) Fourth Order, 2016, and the Companies (Transfer of Proceedings), Rules, 2016, on the same date as the Notification, clarifying that proceedings relating to schemes will stand transferred, forthwith, except where orders have been reserved. While applicants with final hearings on or before December 14, 2016, who were expecting orders to be reserved, heaved a sigh of relief, other applicants were caught in a limbo, while prospective applicants were left to surmise, and gear up for implementation of the new provisions, yet to be tested by NCLTs. The Notification was soon followed, on December 14, 2016, by the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, on sanction of schemes by NCLTs.
Continue Reading National Company Law Tribunal: In the Scheme of Things