The lack of a fixed time limit for adjudication of applications for proper stamp duty under the provisions of the Indian Stamp Act, 1899 (“Act”) often results in inordinate delays in stamping of instruments. In a judgment that will exponentially expedite the process of adjudication, the Delhi High Court (“Delhi HC”) has now opined that the Collector of Stamps shall communicate to the parties the proper stamp duty within 30 days of the date of the application.
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”).
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.
Key Managerial Personnel (“KMP”) play an integral role in the management and functioning of a company. Earlier, the Companies Act, 1956 under Section 269, provided for the appointment of managing or whole-time director or manager in certain cases. However, the Dr. J.J. Irani Report[1], recognized that the board of directors (“Board”) typically look towards KMP for formulation and execution of policies and recognized their role in conducting the affairs of the company. The Committee highlighted the need to recognise the concept of KMP, govern such appointments and identify them as officers responsible for certain functions of the company, along with making them liable for any related non-compliances. Further, the Parliamentary Standing Committees on the Companies Bill in 2009 and 2011[2] also discussed the necessity for the concept of KMP to be included in the Companies Act, 2013 (“Companies Act”). Accordingly, the Companies Act, re-envisioned the importance of KMP and for the first time provided for a detailed definition of KMP along with the provisions governing their appointment.
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
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.
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?
In part 2 of this series of blogs (Key Features IFSC Lisiting Regulations in Relation to Listing of SPACs), we touched upon the newly-introduced framework for the issuance and listing of special purpose acquisition companies (“SPACs”) at the International Financial Services Centres (“IFSC”) under the International Financial Services Centres Authority (Issuance and Listing of Securities) Regulations, 2021 (“IFSC Listing Regulations”). In this part of the blog we are going to look at the IFSC Listing Regulations with a critical eye to detect the gaps that continue to exist despite the framework being put in place and identify areas that can be improved upon to leverage the unique status of entities in IFSC.
Continue Reading Role of IFSC in the Indian SPAC Dream: An Overview – Part 3
The fiduciary relationship between a director and the company is among the foremost principles of company law, which was first enshrined by common law courts of equity. The Supreme Court of India (“SC”) first recognised this common law principle in its celebrated judgment in the Nanalal Zaver case[1], which noted that directors can be considered as “trustees” of the company, and “must exercise their powers for the benefit of the company and for that alone”.[2]
The Insolvency and Bankruptcy Code, 2016 (“IBC”), an umbrella legislation, has successfully envisaged the process of speedy resolution or liquidation of a corporate entity and has proved to be a milestone in the Indian legal framework. By bringing IBC in force, the legislature has sought to maximise the value of the assets of the debtor, and to adopt a fair and transparent procedure for the disposition of the assets while balancing the interests of all stakeholders.