Insolvency and Bankruptcy Code 2016

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

Subhkam Returns SAT Ruling in NDTV Case

The challenge in interpreting ‘control’ under the SEBI takeover regime is hardly a new one. The current definition of ‘control’ under the Takeover Regulations, 2011, similar to the one under the Takeover Code, 1997, consists of two parts. Firstly, the right to appoint a majority of the directors on the board of a company, which is fairly straightforward to determine; and secondly, the right to control the management and policy decisions of a company, which is where things tend to become slightly murky specially in the context of a minority shareholder exercising veto or affirmative vote rights.Continue Reading Subhkam Returns: SAT Ruling in NDTV Case

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

NOIDA stands in the shoes of an operational creditor

Introduction

The resolution process for real estate companies is anything but simple, given the complexities involved and the plethora of parties with varied and conflicting interests. One such issue was whether local industrial development authorities, in particular the New Okhla Industrial Development Authority (“NOIDA”), should be classified as financial creditors or operational creditors, by virtue of the lease deeds they enter into with various corporate debtors.

The question has now finally been answered. The Hon’ble Supreme Court of India vide its judgment dated May 17, 2022, in the case of New Okhla Industrial Development Authority v. Anand Sonbhadra[1], has now declared that NOIDA is not a financial creditor and would be classified as an operational creditor under the Insolvency and Bankruptcy Code, 2016 (the “Code”). The issue involved in the Anand Sonbhadra (supra.) judgment was whether 90 year leases entered into between NOIDA and real estate companies give rise to a financial or operational debt in the event that corporate insolvency resolution proceedings are initiated against such real estate companies.Continue Reading NOIDA stands in the shoes of an operational creditor

Interpreting Limitation Provisions

Introduction

The Supreme Court of India, in a recent judgment, reiterated that the limitation period for filing of an appeal against the order of the National Company Law Tribunal (“NCLT”) as laid down under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) has to be interpreted strictly.Continue Reading Interpreting Limitation Provisions – Supreme Court Rejects the ‘Date of Knowledge’ Argument

Appropriate forum for Insolvency of Personal Guarantors

Introduction

The provisions of the Insolvency and Bankruptcy Code, 2016 (the “Code”) in relation to personal guarantors (“PG”) to corporate debtor (“Corporate Debtor”) have been effective since December 1, 2019. However, whether a corporate insolvency resolution process (“CIRP”) (or even a pending application to initiate such a process) against the Corporate Debtor is a pre-requisite for initiation of insolvency resolution process or bankruptcy process against the PG under the Code (“PG Proceedings”) before the National Company Law Tribunal (“NCLT”) has been a question that continued to vex the judicial for some time, until recently the Honourable Supreme Court, in Mahendra Kumar Jajodia v. SBI Stressed Assets Management Branch (“Mahendra Kumar Case”),[1] upheld the National Company Law Appellate Tribunal (“NCLAT”) order holding that the NCLT has jurisdiction over PG Proceedings, regardless of any CIRP or liquidation proceedings pending against the Corporate Debtor before it.

This blog analyses the background, the developments so far and the position after the Apex Court’s order.Continue Reading Appropriate forum for Insolvency of Personal Guarantors – Is the last word out?

Karnataka High Court’s Judgment in Dreamz Infra India Limited v. Competent Authority - Yet another manifestation of primacy of the IBC

Since the introduction of the Insolvency and Bankruptcy Code, 2016 (“Code/IBC”), the courts and tribunals in India have had to constantly assess the application of the Code vis-à-vis other central and state legislations in light of the non-obstante clause under Section 238 of the Code.  The courts have time and again reiterated that the Code would have an overriding effect over other legislations to the extent of being repugnant  to the matters exhaustively dealt with under the Code. The courts have re-affirmed the primacy of the Code based on the premise that the IBC is a ‘complete and consolidated code in itself.’ For example, in Innoventive Industries Ltd. vs. ICICI Bank and Ors. (“Innoventive”), the Hon’ble Supreme Court upheld the primacy of the Code over the Maharashtra Relief Undertakings (Special Provisions) Act, 1958 and in Directorate of Enforcement vs. Manoj Kumar Agarwal & Ors (“Manoj Kumar Agarwal case”), the Hon’ble National Company Law Appellate Tribunal  (“NCLAT”) noted that the  provisions of the Code shall override the attachment of the properties of the Corporate Debtor under Sections 5 and 8 of the Prevention of Money Laundering Act, 2002.[1]
Continue Reading Karnataka High Court’s Judgment in Dreamz Infra India Limited v. Competent Authority: Yet another manifestation of primacy of the IBC

Jaypee Judgement – Assessing it’s impact on the Indian financing landscape

Background

On February 26, 2020, the Hon’ble Supreme Court delivered its judgment in the Jaypee matter, bringing to a close the long drawn litigation between two sets of competing creditor claims i.e. those advanced by certain creditors of Jaypee Infratech Limited (JIL) and those of its holding company, Jaiprakash Associates Limited (JAL).

In its ruling, the Supreme Court addressed two key issues:
Continue Reading The `Jaypee Judgement’ – Assessing it’s impact on the Indian financing landscape