IBC Laws’ Post

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Case Analysis of B.K Educational Services Pvt. Ltd. Vs. Parag Gupta & Associates – By Adv. Manikantan S Kandathil student at O.P. Jindal Global University (JGU) University The Supreme Court’s decision in case needs to be reconsidered to avoid the NCLT getting inundated with insolvency applications based on old debts that shouldn’t be legally pursued anymore and requests to overlook the lateness of these applications. With all due respect, the SC’s view that Article 137 of the Limitation Act, and therefore section 5 which allows for forgiving delays, applies to insolvency applications made by creditors might not be right. This overlooks the fact that Article 137 is meant for applications made to actual courts, which the #NCLT isn’t, and it also contradicts the point that the IBC isn’t supposed to bring old, outdated claims back to life. https://lnkd.in/gzDNxxeG

Moratorium under Insolvency and Bankruptcy Code 2016 – By Gourav Bavishi student at SVKM's Narsee Monjee Institute of Management Studies (NMIMS), Indore Moratorium generally continues till the corporate insolvency resolution process comes to an end. Section 12[10] of the Insolvency and Bankruptcy Code talks about the time limit till when the insolvency resolution process should be completed. #CIRP is to be completed within 180 days from its date of admission of application for its initiation as per #IBC. On an application by the resolution professional, the adjudicating authority can extend this limited period for completion of the insolvency resolution process, provided that the adjudicating authority is satisfied that the process cannot be completed within the time frame of 180 days, thus it may extend this period by order as it thinks fit, but not exceeding 90 days. It is also provided in the same section that this extension cannot be granted more than once. https://lnkd.in/g9QsW97E

Commercial Wisdom and The Power of the COC – By Jahanvi . student at Chanakya National Law University, Patna Since the enactment of the #Insolvency and #Bankruptcy Code, the role of the Committee of Creditors (CoC) has become central to the resolution process. Empowered with significant autonomy and entrusted with the exercise of commercial wisdom, the #CoC plays a pivotal role in deciding the fate of corporate debtors and balancing the interests of diverse financial creditors. The judiciary, through various landmark judgments, has underscored the importance of respecting the CoC’s decisions, emphasizing their expertise in navigating complex financial restructuring. However, the judicial interpretation of commercial wisdom has not been without scrutiny. While courts have generally deferred to the CoC’s judgments, recent cases like MK Rajgopalachari v Dr Periasamy Gounder[have highlighted the necessity for judicial oversight. This case clarified that while the CoC enjoys significant discretionary powers, these decisions must align with the legal framework of the IBC. Judicial review ensures that CoC decisions are not arbitrary or in violation of established laws, thereby maintaining fairness and transparency in the insolvency resolution process. The evolution of judicial interpretations has reinforced the principle that while the CoC’s decisions merit respect, they are subject to legal constraints to prevent misuse of authority. In conclusion, the judicial journey of interpreting commercial wisdom under the IBC has been transformative, recognizing the CoC as a cornerstone in effective debt resolution. https://lnkd.in/gE3X5zNZ

Initiation of Insolvency Proceedings against a Personal Guarantor of a Corporate Debtor: Navigating the Uncertainties – By Diksha Kumari & Mohak Agarwal students at National Law University, Jodhpur Under the IBC, numerous personal guarantors to firms have been dragged before tribunals this year for the recovery of thousands of crores of debt raised by companies backed by them. According to experts, the move against promoters to recover guarantee funds will put IBC to the test. Likewise, promoters will be reluctant to provide personal guarantees for loans sought by their companies out of fear of legal action under IBC. Notably, creditors benefit from the Notification because it allows for debt recovery by granting them access to the asset pool of personal guarantors. However, it also enhances the bargaining position of creditors vis-à-vis CD, resulting in a concentration of power in the hands of creditors. This is because creditors now have an additional avenue to recover loans, alongside existing mechanisms like the SARFAESI Act and debt recovery proceedings. This may increase the number of lawsuits involving the three parties involved: creditors, CD, and their personal guarantors. Even after a resolution plan is approved, the ruling in Lalit Kumar Jain remains a concern for promoters who serve as personal guarantors for heavily indebted enterprises, as these guarantors are not absolved of liability even after the approval of a resolution plan. https://lnkd.in/gmGZ-aRp

Important judgment Can CoC fix different eligibility criteria for Association of Allottees as compared to other Resolution Applicant? – NCLAT New Delhi Coram: Mr. Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) Case Citation: (2024) ibclaw.in 407 NCLAT In this important judgment, Hon’ble NCLAT held that: (i) Interference in the Resolution Plan by the Adjudicating Authority is permissible when the Resolution Plan violated the provisions of Section 30(2) and the Plan does not conform to requirements as referred to in Section 30(2). (ii) Regulation 36A (4) of the CIRP Regulations provides that CoC is empowered to specify eligibility. The expression “specify the criteria for prospective resolution applicants”, cannot be read to mean that criteria for all prospective Resolution Applicants has to be same. (iii) Criteria cannot be discriminatory but reasonable rational classification is not prohibited. Read here summary: https://lnkd.in/geDpTtvU

Adjudicating Authority has jurisdiction to proceed for computation of fee and expense of a Resolution Professional – NCLAT New Delhi Coram: Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) For Respondent(s): Mr. Amol Vyas, Advocate. Case Citation: (2024) ibclaw.in 419 NCLAT https://lnkd.in/g5ZSkYbh

NCLAT has no jurisdiction to condone the period of delay beyond the total period of 90 days under Section 421 of the Companies Act, 2013 – NCLAT New Delhi Coram: Mr. Justice Rakesh Kumar Jain (Judicial Member) and Shri Ajai Das Mehrotra (Technical Member) For Appellant(s): CS Nikita Goel. Mr. Nikhil Verma, Advocate. Case Citation: (2024) ibclaw.in 417 NCLAT https://lnkd.in/gAyzaYz7

CoC is empowered to take decision to liquidate although judicial review is permitted to said decision but there have to be adequate ground to interfere with said decision by the Court in exercise of judicial review – NCLAT New Delhi Coram: Mr. Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) For Respondent(s): Ms. Udita Singh, Advocate for R-1. Ms. Jagriti Ahuja, Mr. Vijay Dutt, Advocates for R-2. Case Citation: (2024) ibclaw.in 418 NCLAT https://lnkd.in/gNDhk2cx

Form 26AS becomes another piece of evidence to prove that it was a Financial Debt, once payment of interest had been shown from the Corporate Debtor in Form 26AS and Form No. 26AS entries correspond to the claim of Financial Debt – NCLAT New Delhi Coram: Mr. Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) For Appellant(s): Mr. Sameer Jain and Mr. Syed Fazl Askari, Advocates. For Respondent(s): Mr. Adarsh Rai, Advocate. Mr. Shivam Singh and Mr. Bharat Gupta, Advocates for R-2 Case Citation: (2024) ibclaw.in 420 NCLAT https://lnkd.in/g79np3FY