Insolvency and Bankruptcy

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Jet, Set and Grounded – Supreme Court orders liquidation of Jet Airways

Introduction

The saga of the insolvency resolution of Jet Airways India Limited (“Jet”), once India’s leading airline, has disappointingly culminated, after several twists and turns, in a liquidation order by the Hon’ble Supreme Court of India, in its judgment dated November 7, 2024[1] (“SC Judgment”). The SC came to this conclusion upon having found that the Jalan-Kalrock Consortium[2], the successful resolution applicant (“SRA”), had failed to implement the resolution plan as was approved by the Adjudicating Authority in 2021 (“Plan”).Continue Reading Jet, Set and Grounded – Supreme Court orders liquidation of Jet Airways

The “Ordinary Course of Business” exception in preferential transactions – Deciphering the interpretation methodology

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The concept of avoidance of preferential transactions under Section 43 of the Insolvency & Bankruptcy Code, 2016 (“Code”), is based on the principle that insolvency is a collective scheme process and that the assets of a corporate debtor (“CD”) are distributed equitably in a liquidation scenario. During the twilight period of insolvency, paying off one creditor selectively can be disadvantageous to the interests of other stakeholders/creditors as transferring certain assets/monies diminishes the CD’s value. To reverse/avoid such preferential transactions, Section 43(1) of the Code empowers the resolution professional (“RP”) or the liquidator to approach the jurisdictional National Company Law Tribunal (“NCLT”). As per Section 43(2), a CD shall be deemed to have been given “preference” if the CD’s transfer of property benefits any creditor on account of any pre-existing debt owed by the CD and such a transfer puts the creditor into a beneficial position than it would have had the assets been distributed in a liquidation scenario. One of the two exclusions Section 43(3) lays down two exceptions from the trappings of the deeming fiction of preferential transactions one of them being “transfers made in the ordinary course of business or financial affairs of the corporate debtor or the transferee” (the “OCOB Exception”)[1].Continue Reading The “Ordinary Course of Business” exception in preferential transactions – Deciphering the interpretation methodology

The Ministry of Corporate Affairs (“MCA”) issued a notification on October 03, 2023 under Section 14(3)(a) of the Insolvency and Bankruptcy Code, 2016 (“IBC”), exempting the applicability of moratorium under Section 14(1) of the IBC to transactions, arrangements or agreements under the Cape Town Convention on International Interests in Mobile Equipment (“Convention”) and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (“Protocol”) (the “Notification”).Continue Reading Sky is the Actual Limit for IBC? – Exemption from Moratorium over Aircraft Objects during Insolvency

Employee Provident Fund EPF

In its recent judgment in State Bank of India vs Moser Baer Karamchari Union[1], the Apex court has reiterated the settled legal position of law pertaining to treatment of Employees’ provident fund, pension fund and gratuity Fund (“EPF Dues”) under the Insolvency and Bankruptcy Code, 2016 (“Code”). The primary reason for various interpretations of how PF dues are treated under the Code ensues from the overlapping nature of certain provisions within the Code itself, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”) and the Companies Act, 2013. The article traces the judicial trend in treatment of EPF dues under the code and analyses the reasoning put forth by various adjudicating authorities in deciding on the rights of the employees of the corporate debtor.Continue Reading Treatment of Employees Provident Fund Dues under the IBC

Insolvency and Bankruptcy Code

Recently, the Supreme Court, in the case of Gaurav Agarwal vs CA Devang P. Sampat, has issued notice to the parties for adjudicating the crucial question of law pertaining to the ‘Period of Limitation’ for preferring an appeal under Section 61 of Insolvency and Bankruptcy Code, 2016 (“the Code”).Continue Reading Limitation under Section 61 of Insolvency and Bankruptcy Code: Too Strict Interpretation of the Law?

Introduction

Ease of doing business also includes the ease with which companies can shut operations and exit the marketplace in a country. Under Indian law, companies (or limited liability partnerships (“LLP”) have various options to wind down operations voluntarily, either under the Companies Act, 2013 (“Companies Act”), (or the Limited Liability Act, 2008, for an LLP) or the Insolvency and Bankruptcy Code, 2016 (“IBC”).Continue Reading Ease of closing a Business in India

On July 12, 2022, the Supreme Court of India (“Supreme Court”) passed a judgment in Vidarbha Industries Power Limited v. Axis Bank Limited[1] (“Vidarbha”), which considered the question whether Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016 (“Code”), is mandatory or discretionary in nature. Section 7(5)(a) of the Code states that the National Company Law Tribunal (“NCLT”) “may” admit an Application filed under Section 7 of the Code (“Application”), if (a) a default has occurred; (b) the Application is complete; and (c) there is no disciplinary proceeding pending against the proposed resolution professional. The Supreme Court held that Section 7(5)(a) of the Code allows the NCLT to reject an Application even if the financial creditor establishes ‘debt’ and ‘default’ on the part of the corporate debtor.Continue Reading The Vidarbha Aftermath

Insolvency & Bankruptcy Code

Over the last few years, several cases of defaulting real estate companies, including major players like, Amrapali, Jaypee Infratech and Supertech, have been stuck at various stages of insolvency proceedings under the provisions of the Insolvency and Bankruptcy Code, 2016, as amended (“Code”). As per the data provided by Insolvency and Bankruptcy Board of India (“IBBI”), a total of 344 corporate debtors engaged in construction and real estate activities have been admitted into corporate insolvency resolution process (“CIRP”) as of September 2022.[i]Continue Reading Proposed Amendments to the Insolvency and Bankruptcy Code- A Real Solution For Real Estate Insolvencies?

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