IBR Newsletter - November 2021

INSOLVENCY &BANKRUPTCY RESTRUCTURED OCTOBER ‘21

LIST OF ABBREVIATIONS Insolvency and Bankruptcy Code, 2016: I&B Code Companies Act, 2013: CA Limitation Act, 1963: Limitation Act Insolvency and Bankruptcy Board of India CIRP Regulations (Insolvency Resolution Process for Corporate Persons) Regulations, 2016: NCLT National Company Law Tribunal: NCLAT National Company Law Appellate Tribunal: CIRP Corporate Insolvency Resolution Process: FC Financial Creditors: OC Operational Creditors: RP Resolution Professional: CD Corporate Debtor: AA Adjudicating Authority: RA Resolution Applicants: Plan Resolution Plan: PG Personal Guarantors: CG Corporate Guarantors:

TABLE OF CONTENTS In this edition, you can explore ❑ Supreme Court C……as…e…s……………………………………………………………..…1 ▪ V Nagarajan V. SKS Ispat and Power Ltd.…………………..……….…….…2 ❑ NCLAT Cas…e…s…………………………………………………………………………..…….3 ▪ Gail India Ltd v Ajay Joshi …………………………………………………………..4 ▪ Amanat Randhawa Hotels Pvt. Ltd. v. Shashi Kant Nemani, Resolution Professional of Aryavir Buildcon Private Limited & Ors.…………………………………………………………………5 ▪ Bijoy Prabhakaran Pulipra, Resolution Professional, PVS Memorial Hospital Private Limited v. StateTax Officer (Works Contract)…….…………………………………………………..………..…...6 ▪ Vidyasagar Prasad v. UCO Bank & Kaizen Power Ltd.…………………...7 ▪ Jumbo Paper Products v Hansraj Agrofresh Pvt Ltd.………………………8 ▪ ARCIL v Magnesh Vitthal ………………………….……………….……….……..9 ▪ Intec Capital Ltd. v. Eastern Embroidery Collections Private Ltd.………………………………………………………………………..…….10 ▪ CoC of Meenakshi Energy Ltd.Through State Bank of India v. Consortium of Prudent Arc Limited and Vizag Minerals and Logistics Pvt Ltd.……………………………………………………………....11 ❑ NCLT Cases …………………………………………………………………………..……12 ▪ Reserve Bank of India v. SREI Infrastructure Finance Limited ………………………………………………………………...………………..13 ▪ Transit Geo System Integrators Private Limited v. Stahl Tecniks Private Limited …………………………………………………………….14 ▪ Axis Bank Limited v. MaharashtraTheatres Pvt Ltd.…………………....15 ▪ Mr. Amish Jaysukhlal Sanghrajka Vs. Akshar Shanti Realtors Pvt. Ltd ………………….…………………………….……………….…..16 ▪ PNB Housing v. Mohit Arora …………………………………………….………17 ▪ South Delhi Municipal Corporation v. MEP Infrastructure Developers Limited ……………………………………………………………...….18

CSUOPURERMTE OF INDIA CASE(S) V Nagarajan V. SKS Ispat and Power Ltd.

SUPREME COURT P2 V NAGARAJAN V. SKS ISPAT AND POWER LTD. FACTS The impugned appeal arises under Section 62 of the I&B Code, 2016 from the judgment of NCLAT, Delhi dated 13 July 2020. The Appellant had filed an appeal against the NCLAT, Chennai order dated 31 December 2019, which had dismissed appellant’s miscellaneous application in a liquidation proceeding, seeking interim relief against the invocation of a bank guarantee by the Respondent. The appellant alleged that the NCLT order was uploaded on its website only on 12 March 2020, which was subsequently rectified and uploaded again on 20 March 2020. The Appellant then stated that owing to the COVID-19 pandemic, the appeal before NCLAT was filed on 8 June 2020, which was rejected because the application was barred by limitation provided under Section 61(1) of the I&B Code. ISSUES I. When does the clock for limitation period run for proceedings under I&B Code? II. Is the annexation of a certified copy mandatory for an appeal to NCLAT against an order passed under the I&B Code? RELEVANT PROVISIONS Section 61(1), (2) of the I&B Code, Rule 22(2) of the NCLAT Rules, 2016, Section 421(3) of the CA. DECISION The Hon’ble Supreme Court rejected the appeal and held that, as stated under Section 61(1), an appeal shall be filed within thirty days, to an excess of further fifteen days if there is a sufficient cause for the same. It established that the notable difference between Section 421(3) of the CA, and Section 61(2) of the I&B Code, is the absence of the words “from the date on which a copy of the order of the Tribunal is made available to the person aggrieved”. This is a conscious omission by the legislature because a) the whole process laid down under the I&B Code is confined to strict timelines, which are critical for its functionality and workability and b) once the order is available, it is expected from the aggrieved party to obtain a copy from the tribunal, rather than waiting for a certified copy. It is the intention of the legislature to nudge the parties to be proactive and facilitate timely resolution. Relying on Rule 22(2) of the NCLAT Rules, it cannot be said that the parties can automatically dispense with their obligation to apply for and obtain a certified copy for filing an appeal. IBR’S OPINION The decision has relied on purposive interpretation of the limitation provision under Section 61 of the I&B Code, which in our opinion, is a sound and tenable view. It is imperative that the provisions should not be interpreted beyond the intention of the statute, and therefore, as this case correctly held, adherence to the timelines is crucial for the process under the I&B Code to function.

NCLAT NATIONAL COMPANY LAW APPELLATE TRIBUNAL CASES ▪ Gail India Ltd v Ajay Joshi ▪ Amanat Randhawa Hotels Pvt. Ltd. v. Shashi Kant Nemani, Resolution Professional of Aryavir Buildcon Private Limited & Ors. ▪ Bijoy Prabhakaran Pulipra, Resolution Professional, PVS Memorial Hospital Private Limited v. State Tax Officer (Works Contract) ▪ Vidyasagar Prasad v. UCO Bank & Kaizen Power Ltd. ▪ Jumbo Paper Products v Hansraj Agrofresh Pvt Ltd. ▪ ARCIL v Magnesh Vitthal ▪ Intec Capital Ltd. v. Eastern Embroidery Collections Private Ltd. ▪ CoC of Meenakshi Energy Ltd. Through State Bank of India v. Consortium of Prudent Arc Limited and Vizag Minerals and Logistics Pvt Ltd.

NCLAT P4 GAIL INDIA LTD V AJAY JOSHI FACTS The appellant ‘Gail India Limited’ filed an appeal against the decision of the NCLT Ahmedabad for the approval of the resolution plan. It was alleged that the plan was discriminatory in nature and created a subclass within similarly placed creditors. The Plan provided for a full payment of OC having dues less than Rs. 3 Lakhs, whereas OC having dues over Rs. 3 Lakhs were not paid at all. ISSUE Whether the distinction created within the class of OCs is discriminatory? RELEVANT PROVISIONS ▪ Section 53 and Section 30(2)(b) of the I&B Code, ▪ Regulation 38 of the CIRP Regulations, 2016. DECISION The court in this case held that there is no embargo for classification of creditors into separate classes for deciding the way money is distributed to them. The OC are entitled to be paid only as per Section 30(2)(b), Regulation 38 of the CIRP Regulations, and Section 53 of the I&B Code, which has been adhered to. Further, the courts affirmed the supremacy of the commercial wisdom of the CoC in the amount to be paid to certain creditors, while balancing the interests of all the stakeholders. IBR’S OPINION In our view, the court has solved a long-debated issue of discrimination in treating different classes of creditors differently. While the distinction between FC and OC had been long settled, this decision refocuses on the aim of the I&B Code to maximize the value of the CD and balance the interests of the stakeholders. The I&B Code does not aim to maximize the interests of a particular stakeholder. The OCs have safeguards through the provisions of the I&B Code itself. Moreover, the affirmation of the commercial wisdom of the CoC must be viewed in light of the ‘I&B Code of Conduct’ being deliberated by the IBBI.

NCLAT P5 AMANAT RANDHAWA HOTELS PVT. LTD. V. SHASHI KANT NEMANI, RESOLUTION PROFESSIONAL OF ARYAVIR BUILDCON PRIVATE LIMITED & ORS. FACTS In the present case, the unsuccessful RA – ‘Amanat Randhawa Hotels Ltd.’ filed an appeal against the dismissal of applications on the ground that the Application had been filed for consideration after the approval of the Plan by the CoC. The IRP issued the Public Announcement under Section 15 of the I&B Code on 25.12.2020. A total of 9 EoIs were received from the prospective RAs by the last date of submissions and on account of the lockdown, the CoC decided to extend the last date for submission of Plans from 26.04.2021 to 10.05.2021. The Applicant sought to place its offer before the CoC via emails dated 15.06.2020 and 16.06.2021, when the last date for submission of EoI had expired. RELEVANT PROVISIONS Regulation 36A of the CIRP Regulations, 2016. DECISION The NCLAT held that the Plan was accepted by 100% of voting share in the CoC Meeting dated 21.06.2021 and having regard to the fact that Amanat Randhawa Hotels Ltd. had never participated in the EoI, the court ruled that any reliefs granted in contra to the timelines would be ultra vires to the scope and objective of the I&B Code. The court relied on the Supreme Court case of Ebix Singapore Pvt. Ltd. v. CoC of Educomp Solutions Ltd. & Anr. which held that the NCLT and NCLAT should not entertain late unsolicited bids and should strictly adhere to timelines. The Insolvency and Bankruptcy Board of India recently amended its 2016 Regulations through the IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2021 on 30th September 2021 Want to know more about the important highlights of the amendment? Check out our snippet on the same at https://bit.ly/ibr_s_1 DID YOU KNOW? IBR’S OPINION The instant case is another landmark decision on the adherence to the strict timelines prescribed under the I&B Code. Any delay in filing of the EoI shall not be entertained. The timelines as publicly announced by the RAs shall be relied on and the RAs shall file EoI in an expeditious manner.

NCLAT P6 BIJOY PRABHAKARAN PULIPRA, RESOLUTION PROFESSIONAL, PVS MEMORIAL HOSPITAL PRIVATE LIMITED V. STATE TAX OFFICER (WORKS CONTRACT) FACTS In the present case, a claim for ₹ 28,41,59,349.06 was submitted. During CIRP, the RP had revised the admitted claim amount to ₹ 1, 06, 09, 299 after due verification of the GST claim. The NCLT had initially directed the Appellant to file an appeal before the Joint Commissioner, State Sales Tax Department for a reassessment of the GST amount payable. The NCLT in its later order stated that there was no error in its earlier Order to be clarified by the Tribunal. This Order has been challenged. ISSUES What is the scope of revision by the Resolution Professional in the exercise of powers conferred under Regulation 14 of the CIRP regulations? RELEVANT PROVISIONS Regulation 14 of the CIRP Regulations, 2016. DECISION The court held that the GST amount is an amount of tax levied under the assessment order as per the Goods and Service Act, 2017. It cannot be edited or reduced by the Resolution Professional himself. Any revision of assessment orders also cannot be made under the pretext of Section 238. Section 238 of Insolvency and Bankruptcy I&B Code cannot be read as conferring any appellate or adjudicatory jurisdiction in respect of issues arising under other statutes. Regulation 14 of the CIRP Regulations only authorizes the IRP/RP to exercise power where the claim is not precise due to any contingency or other reasons. The court held that the RP committed an error in exercising their power and exercised the powers of GST Authorities under the pretext of Regulation 14 of the I&B Code, which is not sustainable. IBR’S OPINION The NCLAT has clearly defined the scope of power of the IRP/RP while revisiting the claim amount. It has also reflected upon the principle that the CoC is empowered to exercise its commercial wisdom in the CIRP, but under the exercise of commercial wisdom, it cannot exercise judicial power.

NCLAT P7 VIDYASAGAR PRASAD V. UCO BANK & KAIZEN POWER LTD. FACTS The appellant, the director of Kaizen Power Limited, filed an appeal on the grounds that Section 7 proceedings under the I&B Code filed by the Respondent 1, UCO Bank is barred by limitation. The default on the long-term loan had occurred on 5th November 2014, while the application was filed on 13th February 2019. ISSUES Whether an application under Section 7 of the I&B Code is maintainable? RELEVANT PROVISIONS ▪ Section 7 and 238A of the I&B Code. ▪ Section 18 of the Limitation Act. ▪ Article 137 of the Schedule under Limitation Act. DECISION The court held that if a final decree of any court for payment of money, if not satisfied, would fall within the definition of a financial debt, which along with the Certificate of Recovery gives the creditor a fresh cause to file an application under Section 7 of the I&B Code within three years from issuance. Section 7 application would not be barred by limitation if the CD has acknowledged the debt within three years, and the period of limitation would be extended by another three years. The balance sheet brought on record cannot be ignored on the premise that it is not pleaded in the application filed in Form 1 for initiation of the CIRP. Therefore, the application under Section 7 of the I&B Code is maintainable. IBR’S OPINION The issue of applicability of Section 18 of the Limitation Act, and inclusion of balance sheets as acknowledgements were recently resolved. This case is on similar lines, and the court ensures that the applicability of Section 18 is not frustrated due to procedural issues.

NCLAT P8 JUMBO PAPER PRODUCTS V HANSRAJ AGROFRESH PVT LTD. FACTS The appellant has filed an application under Section 9 of the I&B Code on 13th September 2020 for a debt in default from 27th May 2018 to 23rd June 2018. The Ministry of Corporate Affairs vide a Notification dated 24thMarch 2020 increased the threshold limit from Rs. 1 Lakh to Rs. 1 Crore. The debt in question was below Rs. 1 Crore. ISSUES Whether the notification would be applicable to a debt in default before 24th March 2020? RELEVANT PROVISIONS Section 4 of the I&B Code. Ministry of Corporate Affairs Notification dated 24.03.2020. DECISION The court held that the notification would be applicable for all applications filed under Section 7 or 9 on or after 24thMarch 2020, regardless of whether the debt occurred before the said date. At present, the application was filed after 24thMarch, making the threshold of Rs 1 Crore applicable. The Supreme Court has recently urged the NCLT and NCLAT to strictly adhere to the timelines stipulated under the Insolvency and Bankruptcy Code and clear pending resolution plans within the deadline of 330 days. A bench of Justice DY Chandrachud and Justice MR Shah opined that inordinate delays cause commercial uncertainty, degradation in the value of the corporate debtor and makes the insolvency process inefficient and expensive. SOURCE – THE ECONOMIC TIMES IN THE NEWS IBR’S OPINION The issue of applicability of Section 18 of the Limitation Act, and inclusion of balance sheets as acknowledgements were recently resolved. This case is on similar lines, and the court ensures that the applicability of Section 18 is not frustrated due to procedural issues.

NCLAT P9 ARCIL V MAGNESH VITTHAL FACTS The appellant has filed an appeal against the order passed by the AA dated 22 October 2019. This appeal was filed on 29 January 2020 with an application for condonation of delay of 52 days. The appellant has claimed that the cause of action continued till 19 December 2019 due to certain representations made by the appellant, where the order for the same was reserved. ISSUES Whether the application for condonation of delay should succeed? RELEVANT PROVISIONS Section 61(2) of the I&B Code. DECISION The court held that as per Section 61(2) of the I&B Code, the tribunal has no power to condone the delay beyond the period of 15 days from the date of completion of 30 days for filing an appeal. At present, the court held that the cause of action did not continue till 19th December, and this contention was without any basis. Hence, 98 days had passed since the order of the AA, which cannot be condoned by the court. IBR’S OPINION The court in this case has rightly affirmed the Supreme Court’s holding in V Nagarajan v SKS Ispat Powers Limited, where the limitation period under Section 61 of the I&B Code was upheld, and the importance of the substantive objective of the legislation which has an impact on the economic health of the nation was emphasized upon. As already mentioned above, adherence to the timelines is extremely critical for the I&B Code to function and achieve its objectives.

NCLAT P 10 INTEC CAPITAL LTD. V. EASTERN EMBROIDERY COLLECTIONS PRIVATE LTD. FACTS The instant application is an appeal by the Appellant, Intec Capital who filed an application under Section 7 of the I&B Code for initiating CIRP against the CG/CD - Eastern Embroidery Collections Private Limited (EECPL). EECPL stood as a CG for the loans that were availed by M/s Eastern Overseas which was engaged in a similar business as EECPL. The CD failed to repay the loan amount of ₹2,10,57,036. The AA rejected the application of the Appellant on the grounds that the application has been filed against the PG under Section 7 and not Section 95 of the I&B Code and that the Appellant failed to follow the applicable rules, The Insolvency and Bankruptcy (Application to AA for Bankruptcy Process for PGs to CDs) Rules, 2019. ISSUES Whether EECPL is a PG or a CG, and therefore a CD of Eastern Overseas in terms of Section 3(7) and 3(8) of the I&B Code and will the Insolvency and Bankruptcy (Application to AA) Rules, 2016 be applicable to EECPL? RELEVANT PROVISIONS Section 3(7) and Section 3(8)of the I&B Code. Rule 3(e) of the I&B (Application to AA for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019. DECISION The Tribunal, by analysing the loan agreement stated that the FC, in addition to the Personal Guarantee, had also taken a Corporate Guarantee from the CD. Since the intention of the FC was to go after the CD, he had filed an application under Section 7 of the I&B Code. The Appellant relied on the definitions as given under clauses (7) and (8) of the I&B Code to state that the CG is the CD and Section 7 of the I&B Code would be applicable. The Tribunal placed reliance on the SC case of Laxmi Pat Surana v. Union of India wherein it was held that if a loan is offered to a proprietary firm and in case of a default, Section 7 of the I&B Code would not apply as the firm is not a corporate person. Similarly, EECPL was the CG to Eastern Overseas and not a PG. IBR’S OPINION The Tribunal by laying precedence on the Supreme Court judgement has given a clear distinction between a PG and CG. The Tribunal has by performing a close reading of the provisions of the I&B Code and Rules, overturned the decision of the AA.

NCLAT P 11 COC OF MEENAKSHI ENERGY LTD. THROUGH STATE BANK OF INDIA V. CONSORTIUM OF PRUDENT ARC LIMITED AND VIZAG MINERALS AND LOGISTICS PVT LTD. FACTS AA on 07.11.2019 had admitted the Section 7 IBC Application filed by the State Bank of India (FC) initiating the CIRP against the Meenakshi Energy Ltd., Telangana (CD). The Resolution Professional on 21.01.2020 had issued the First Form G inviting ‘Expression of Interest’ from prospective RA. Resolution Professional had re-issued the Form G on 25.01.2021 because of the perceived increase in value of the CD. The last date for submission of ‘Plan’ was extended till 08.03.2021. The ‘Plan’ of the Consortium of Prudent ARC Limited & Vizag Minerals and Logistics Pvt. Ltd. (First Respondent) was filed on 06.03.2021. As a matter of fact, on 05.03.2021 Sindhu Trade Links Ltd. (another ‘Prospective RA’) submitted its Plan. The Vedanta submitted its Plan on 16.04.2021 i.e. after the due date of 08.03.2021 (the expiry of 330 days’ period). The CoC on 20.04.2021 had decided to consider the Vedanta ‘Plan’ ISSUES Whether the ‘Plan’ of Vedanta which was submitted after the due date 08.03.2021 should be considered by the CoC or RP? RELEVANT PROVISIONS Section 12 of the I&B Code. DECISION Tribunal stated that it is aware of the decision of the CoC to extend the time beyond 08.03.2021 yet the Tribunal relied essentially on the ground that since the Plan of the Applicant has been disclosed to the CoC and the contents of the same have been made known to all the Creditors pursuant to disclosing all the confidential details of the Appellant’s Plan and not maintaining the secrecy of ‘fidelity’ / ‘confidentiality’ comes to a resultant conclusion that the Plan of Vedanta which was submitted after the due date 08.03.2021 (expiry of 330 days period-general rule of outer limit) and as such, the same is not to be considered either by the CoC or the Resolution Professional because of the breach of the ‘confidentiality’ of the Plan. IBR’S OPINION The Plan furnished by one or the other RA is a ‘confidential’ one and it cannot be disclosed to any Competing RA nor any view can be taken or objection can be asked for from other RAs in regard to one or the other Plan. It cannot be lost sight of that the conduct of Resolution Professional is important in deciding whether he is guilty of ‘Misfeasance’ or ‘Fraud’ or any other ‘Serious Irregularity’ in the preparation of Plan. As a matter of fact, the Plan is confidential in nature.

NCLT NATIONAL COMPANY LAW TRIBUNAL CASES ▪ Reserve Bank of India v. SREI Infrastructure Finance Limited ▪ Transit Geo System Integrators Private Limited v. Stahl Tecniks Private Limited ▪ Axis Bank Limited v. Maharashtra Theatres Pvt Ltd. ▪ Mr. Amish Jaysukhlal Sanghrajka Vs. Akshar Shanti Realtors Pvt. Ltd ▪ PNB Housing v. Mohit Arora ▪ South Delhi Municipal Corporation v. MEP Infrastructure Developers Limited

NCLT P 13 RESERVE BANK OF INDIA V. SREI INFRASTRUCTURE FINANCE LIMITED FACTS An application was filed by the Reserve Bank of India (“RBI”) under Section 227 read with Section 239(2)(zk) of the I&B Code. The respondents were SREI Infrastructure Finance Limited (SIFL), a FSP entity registered under CA. FSP defaulted to a tune of more than ₹150 crores and RBI under section 45-IE of the RBI Act, 1934, superseded the Board of Directors of SIFL and appointed an administrator. ISSUES What are the procedures for initiating a CIRP against a FSP under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudication Authority) Rules, 2019 (Rules)? RELEVANT PROVISIONS Section 227, 239(2)(zk) of the I&B Code. DECISION As per rule 5(a)(i) of the Rules, no CIRP shall be initiated against a FSP that has committed a default under section 4 of the I&B Code unless the application has been made by the appropriate regulator in accordance with Rule 6. The NCLT first analyzed whether the FSP satisfies the ingredients of section 7 of the I&B Code. It was concluded that there was a default of more than ₹1 crore as prescribed under section 4(1) and also that the petition was not hit by limitation. The petition was approved by the Tribunal under section 227 of the I&B Code read with rule 5 of the Rules. The NCLT also approved the appointment of the previous Administrator as the new Administrator for the CD during the time of the CIRP. IBR’S OPINION Since the CD was a FSP, the Tribunal ruled in accordance with the Rules that have been laid down for initiation of CIRP for FSPs. The Tribunal also approved the previous Administrator who was appointed as per the RBI Act to be the new Administrator after the completion of Form 2 that is given under the I&B Code.

NCLT P 14 TRANSIT GEO SYSTEM INTEGRATORS PRIVATE LIMITED V. STAHL TECNIKS PRIVATE LIMITED FACTS The petition was filed under Section 9 of IBC by M/s Transit Geo System Integrators Private Limited (‘Applicant’) to initiate the CIRP against M/s Stahl Tecniks Private Limited (‘CD’). It has been stated that the demand raised by the Sales Tax Department of Rs.9,87,823/- was paid by the OC on behalf of the CD. The Applicant claims the reimbursement of the said amount and argues that the aforesaid debt claimed is an Operational debt since the same is arising out of the dues payable to the Sales Tax Department of the State Government. ISSUES Whether the Sales Tax Demand paid by the OC can be claimed as reimbursement from a CD as an “Operational Debt”? RELEVANT PROVISIONS ▪ Section 5(21) of the I&B Code. DECISION Although the definition of the Operational Debt includes the dues arising under any law in force and recoverable by the Central Government or State Government or any local authority, however, the dues payable to the Government can be claimed by the Government only in the capacity of the OC. The payment of Tax Demand made and discharged by the Applicant herein to the State Government will not result in automatic assignment or transfer of such payment/debt to the CD and therefore, OC cannot claim the same as reimbursement from the CD as the Operational Debt. IBR’S OPINION Herein, the tribunal clarified that the dues recoverable by the Government, in the capacity of OC, can be claimed by the Government only. If a third party pays the government dues, on behalf of the debtor, it cannot ask for reimbursement of the same assuming itself to be an OC.

NCLT P 15 AXIS BANK LIMITED V. MAHARASHTRA THEATRES PVT LTD. FACTS Axis Bank Limited (‘Petitioner’) has sought the CIRP against Maharashtra Theatres Private Limited (‘CD’) on the ground that the CD has committed a default as on 31.10.2020 in the repayment of loan to the extent of Rs. 55,75,27,571/- including interest. This Petition is filed under Section 7 of I&B Code read with Rule 4 of the Insolvency and Bankruptcy (Application to AA) Rules, 2016. ISSUES Whether the provision for Section 10A attracted an application filed u/s. 7 on 30.12.2020 claiming the default occurred on 31.10.2020? RELEVANT PROVISIONS Section 10A of the I&B Code. DECISION Court ruled that initiation of CIRP against the CD where a default has occurred after 25.03.2020 cannot be initiated in view of the provision engrafted in Section 10A which clearly barred filing of such application by the Petitioner for initiation of CIRP for the default which has occurred on 31.10.2020. While ruling this, the court referred to the judgment of Hon’ble Supreme Court in Ramesh Kymal vs. Simens Gamesa Renewal Power Private Limited wherein the Court held that the date of the initiation of the CIRP is the date on which a FC, OC or corporate applicant makes an application to the AA for initiating the process. Both the NCLT and NCLAT are getting permanent heads after more than one-and-a-half years following the retirement of their respective incumbents. The government has appointed Justice Ashok Bhushan, a former judge of the Supreme Court, as chairperson of the National Company Law Appellate Tribunal (NCLAT). Besides, it has appointed Justice Ramalingam Sudhakar, former Chief Justice of Manipur High Court, as President of the National Company Law Tribunal. SOURCE – THE HINDU IN THE NEWS IBR’S OPINION This is a settled position in law. Creditors cannot initiate CIRP during the suspension of Sections 7, 9 and 10 of the I&B Code in view of the I&B Ordinance, 2020 which added Section 10A to the Code.

NCLT P 16 MR. AMISH JAYSUKHLAL SANGHRAJKA VS. AKSHAR SHANTI REALTORS PVT. LTD FACTS The Petitioners were allotted Flats in Wing ‘E’ of the project called ‘Imperial heights’ vide two separate Allotment Letter. The said project was being developed and constructed by the CD (Akshar Shanti Realtors Private Limited). Payment was made by the petitioners, and it was duly acknowledged by the CD. However, due to the failure of the CD to register the project and to commence construction of the project, the Petitioners have acquired a residential flat at Andheri and thereafter requested the CD to repay the amounts received under the aforesaid Letters of Allotments to enable the Petitioners to make the payment for the flat purchased at Andheri. The CD initially agreed to repay the entire amount along with interest and accordingly paid some amount but subsequently denied repaying. Thereby, a Petition was filed under section 7 of the I&B Code by the petitioners. NCLT Mumbai allowed the application which later was challenged by the CD before the NCLAT. ISSUES Whether the petition filed by the petitioners meets the threshold prescribed under the IBC and hence maintainable under Section 7? RELEVANT PROVISIONS Section 7 of I&B Code. DECISION The relief as sought by the Petitioner must be presented in front of appropriate authority as it falls out of the scope of this court. In order for a homebuyer to attract the provisions of the I&B Code, it is imperative that the said homebuyer qualifies as an allottee under Section 2(d) of the RERA Act. Since, the said project is unregistered, the RERA Act does not apply to the Petitioners. The said submission is buttressed by the Bombay High Court’s decision in Macrotech Developers Ltd. v. State of Maharashtra. The Petitioners are speculative investors who are either unable to pay the balance consideration or who realized that the real estate market is failing and therefore, do not want to continue with their obligations. The petitioner has failed to provide any substantial proof of his intent to take possession of the flat. Merely, showing receipts of the transaction amount could not be considered as a surety that the person shall necessarily take possession of the Flat/Apartment, even if that person is considered as an allotee. IBR’S OPINION In a large number of cases the allottees are speculative investors and not a person who is genuinely interested in purchasing a flat/ apartment. They do not want to go ahead with its obligation to take possession of the flat/ apartment under RERA. However, for a homebuyer to initiate a CIRP under the purview of Section 7 of the Code, it is mandatory that they qualify as an allottee under RERA.

NCLT P 17 PNB HOUSING V. MOHIT ARORA FACTS An application under Section 95(1) read with rule 7(3) of the of the Insolvency and Bankruptcy (Application to AA for IRP for PGs to CD) Rules, 2019, by PNB Housing Finance Ltd. against Mr. Mohit Arora, who was the PG/Managing Director of Supertech Ltd. which is the CD. The CD had been declared as an NPA on 31.07.2019 and the Creditor invoked the Guarantee for payment of the outstanding debt of ₹358 crores. The Guarantor, while filing a written submission this petition argued that Section 95 read with section 60(1) and (2) of the I&B Code does not apply to PGs as Section 2(e) and (g) of the I&B Code has the term “individuals, other than persons referred to in clause (e)”. It was also argued that NCLT does not have jurisdiction in this case and only the DRT can entertain a plea by the Creditor against the PG. ISSUES Whether an Insolvency Resolution Process can be initiated against the PG before the NCLT if the CIRP is pending before the AA. RELEVANT PROVISIONS Section 2(e), (g), 60(1), (2) and 95(1) of the I&B Code. DECISION The NCLT while analysing Section 60(1) of the I&B Code, stated that, when there is an insolvency resolution or liquidation of corporate persons and PGs thereof, the NCLT shall have territorial jurisdiction over the place where the registered office of the corporate person is located. Similarly, in the present case, the Application that has been filed relates to the CIRP of the CD before the AA and, in such a case, the provisions of Section 60(1) would be applicable. The NCLT, while relying on the Supreme Court judgement of Lalit Kumar Jain v. UOI, stated that Section 60(2) and Section 179(1) of the I&B Code is without prejudice subject to Section 60(1) . Therefore, the NCLT ruled that in a situation where Applications in relation to initiation of CIRP of CD is pending before the NCLT, and there is an application for CIRP of a PG under Section 95 of the I&B Code, the same would be maintainable as initiation of CIRP of the CD would not be a prerequisite for filing an application under Section 95. IBR’S OPINION This decision by NCLT Delhi has been seen as a welcome move by creditors as they can now go after PGs in case the CD fails to repay the amount. In August 2021, in the case of Insta Capital Pvt. Ltd. v. Ketan Vinod Kumar Shah, NCLT Mumbai ruled that an application under Section 95 can only be entertained when the CD is under CIRP. We can see that there are two differing opinions on the same piece of legislation, and it is safe to assume that this is an unsettled piece of law and needs more clarification by the legislature or by the Higher Courts.

NCLT P 18 SOUTH DELHI MUNICIPAL CORPORATION V. MEP INFRASTRUCTURE DEVELOPERS LIMITED FACTS SDMC, a statutory body incorporated under the Delhi Municipal Act, 1957 entered into a contract with MEP infrastructure limited for collection of Toll Tax from commercial vehicles entering Delhi. The contract between MEPL and SDMC lasted for 5 years wherein MEPL failed to pay the Toll tax to SDMC wherein the dues arose to ₹788 crores. SDMC filed an application under Section 9 of the I&B Code for recovery of dues. MEPL contended that the aforementioned claim by the Petitioner would not be valid as the debt does not fall under the ambit of ‘operational debt’ and therefore SDMC cannot claim the amount from MEPL and there are already civil suits pending before the High Court on the same matter. ISSUES Whether the amount claimed by the petitioner falls under section 5(21) of the I&B Code and can it be considered as an operational debt? RELEVANT PROVISIONS Section 5(21) of the I&B Code. DECISION The NCLT bench first went on to analyze the contract between SDMC and MEP. It was argued by the Petitioner that, under Section 455 of the Delhi Municipal Corporation (DMC) Act, the petitioner has the power to recover any sum due to SDMC under the DMC act “as an arrear of tax”. To understand the distinction between (i) dues which are recoverable as arrears of tax and (ii) dues which are tax, arising under the statute, the Tribunal relied on the case of SICOM Limited v. State of Maharashtra in which it was held that arrears from land revenue is independent from arrears of land revenue. The tribunal took the view that Section 5(21) of the I&B Code covers ‘tax arising from statute’ and not ‘arrear of tax’. Further, Section 455 of the of the DMC Act allows for recovery from any person from whom such sum is due as an arrear of tax under this Act. This does not apply to contractual dues. IBR’S OPINION The Tribunal delved deep into the jurisprudence to understand the arrears of tax in a Contract which includes such transactions. The Court emphasized that the DMC Act does not have an overarching jurisdiction despite it stating, “a debt in respect of payment of dues arising under any law for the time being in force”.