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The enactment of the Insolvency and Bankruptcy Code 2016 (Code) has had signi cant
rami cations on the corporate insolvency landscape. Over time, the Code has witnessed
a manifold increase in litigation, and consequently in the number of decisions. This has
made it di cult for insolvency practitioners to stay updated with developments in the
eld. The purpose of this column is to ll this gap by providing brief summaries of latest
decisions, from the various fora dealing with Insolvency Law.
These case summaries are not an exhaustive review of the cases under the Code; only
signi cant rulings on the Code in the month of February 2021 have been summarized.
However, this does not negate the possibility of some important decisions being missed
on account of human error. Further, since the purpose of this endeavor is to keep
practitioners abreast of relevant developments, the decisions summarized have not been
comprehensively analyzed.
1 Supreme Court
In P. Mohanraj & Ors. v MS Shah Brothers Ispat Pvt Ltd, a three-judge bench of the
138/141 of the Negotiable Instruments Act 1881 ('NI Act') would be covered within the
ambit of the moratorium under S. 14 of the Insolvency and Bankruptcy Code, 2016
('Code'). The National Company Law Tribunal ('NCLT') had stayed proceedings arising of
criminal complaints against the corporate debtor for the dishonour of cheques. On
appeal, the National Company Law Appellate Tribunal, Delhi ('NCLAT, New Delhi') had set
aside the NCLT's order, while holding that a criminal law provision would not fall within
moratorium set out in the February 2020 report of the Insolvency Law Committee, the
Supreme Court held that the purpose of the moratorium was to prevent the depletion of
the corporate debtor's assets during the Corporate Insolvency Resolution Process
cheques would impact the CIRP in the same manner as a suit in a civil court for the
amount of debt or other liability. Hence, the Supreme Court held that the meaning of
'proceedings' under S.14 could not be limited to civil proceedings. The Supreme Court
also observed that S. 32A (which extinguishes criminal liability with change in
management), included the liability for all offences committed prior to initiation of the
CIRP, including S. 138 proceedings, which would cease to be an offence qua the
corporate debtor if a new management comes in. While dealing with moratorium vis-a-vis
other statutes, the Supreme Court also held that the Delhi High Court's judgment in
Power Grid Corporation of India Ltd. v Jyoti Structures Ltd., qua the inapplicability of
moratorium to Section 34 proceedings under the Arbitration and Conciliation Act, 1996
loan, even when the principal borrower is not a corporate person, and that the debt owed
in such a case would be a " nancial debt" within the meaning of S. 5(8) of the Code. The
Supreme Court also observed that the status of a guarantor, being a corporate person,
metamorphoses into that of corporate debtor, upon the principal borrower having
defaulted in the payment of its debt. The Supreme Court further held that the limitation
period for ling an application under S. 7 of the Code shall be computed afresh from the
date of acknowledgement of the debt by the principal borrower from time to time, as also
In Alok Kaushik v. Mrs. Bhuvaneshwari Ramanathan and Ors., the Supreme Court held
that the NCLT has the jurisdiction under S. 60 (5)(c) of the Code to adjudicate as an
insolvency cost the monetary claim of a professional (a valuer, in this case) appointed by
the Resolution Professional ('RP') during the CIRP, even after the CIRP is set aside. The
Supreme Court also observed that the NCLT's jurisdiction is mutually exclusive from the
jurisdiction of the Insolvency and Bankruptcy Board of India ('IBBI') to penalize errant
In Arun Kumar Jagatramka v. Jindal Steel and Power Ltd. & Another, the Supreme Court
held that a person ineligible under S. 29A read with S. 35(1)(f) of the Code is not
Companies Act of 2013, when the company is undergoing liquidation under the auspices
the Companies Act of 2013 ('Companies Act'), while the company is undergoing
liquidation under the provisions of the Code, lies in a similar continuum. The Supreme
Court further held that the proviso to Regulation 2B of the Insolvency and Bankruptcy
Board of India (Liquidation Process) Regulations, 2016 ('Liquidation Regulations'),
stipulating that a person ineligible under the Code to submit a resolution plan for
insolvency resolution of the corporate debtor shall not be a party in any manner to the
and that the IBBI did not transgress its authority by inserting the proviso to Regulation 2B
In Gujarat Urja Vikas Nigam Limited v. Mr. Amit Gupta and Others, the Supreme Court
held that as the dispute, in the present case, pertaining to the termination of a power
purchase agreement, had arisen solely on the grounds of the insolvency of the corporate
debtor, the NCLT was empowered to adjudicate the dispute under S. 60(5)(c) of the Code.
The Supreme Court further held that, given that the terms used in S. 60(5)(c) of the Code
are of wide import, the NCLT was empowered to restrain the appellant from terminating
the power purchase agreement in the factual matrix of the present case, since it was the
sole contract for the sale of electricity entered into by the corporate debtor and allowing
the termination of the power purchase agreement would have certainly resulted in the
corporate death of the corporate debtor. Furthermore, the Supreme Court left open the
broader question of the validity/invalidity of ipso facto clauses in contracts, which allow
a party to terminate the contract if the counterparty enters into some form of insolvency
In Indus Biotech Private Limited v. Kotak India Venture (Offshore) Fund & Ors, the
Supreme Court held that, when an application under S. 8 of the Arbitration Act is made
while an application under S. 7 of the IBC is pending before the NCLT for admission, the
NCLT should rst decide whether the S. 7 application is to be admitted, while keeping the
application under S. 8 of the Arbitration Act in abeyance. In case the application under S.
7 of the IBC is admitted by the NCLT, the proceedings under the Code become a
"proceeding in rem" and the matter henceforth will not be arbitrable because of the
moratorium under S. 14 of the Code. The Supreme Court further reiterated that mere
ling of an application under S. 7 of the Code will not trigger the CIRP, and it is only when
the NCLT admits the application upon a nding of a debt due and a default in payment
In A. Navinchandra Steels Private Limited Vs. SREI Equipment Finance Limited & Ors., the
Supreme Court held that proceedings under Ss. 7 or 9 of the Code are independent
proceedings, and hence will not be affected by any existing winding up proceeding
against the corporate debtor. The Supreme Court further held that it was only in an
instance where the corporate death of the company is inevitable that there could be no
transfer of a winding up proceeding to the NCLT to be tried under the Code. The
provisions of the Code shall prevail over the provisions of the Companies Act in the event
of a con ict, since the Code is a special statute vis-a-vis the Companies Act, and also on
account of the non-obstante clause in Section 238 of the Code. The Supreme Court
further held that under the Companies Act, only winding up can be ordered, while under
the Code a compromise can be entered into under Section 230 of the Companies Act,
even when liquidation is ordered. The Supreme Court also held that the primary purpose
of the Code is the revival of the corporate debtor, and that every effort should be made
In the matter of Sesh Nath Singh and Another v. Baidyabati Sheoraphuli Co-operative
Bank Ltd. and Another, the Supreme Court held that, as S. 238A of the Code makes the
provisions of the Limitation Act, 1963 ('Limitation Act'), as far as may be, applicable to
proceedings before the NCLT and the NCLAT, Ss. 6, 14, 18 and any other provision of the
Limitation Act are applicable to proceedings under the Code in the NCLT or the NCLAT, to
the extent feasible. Here, the proceedings initiated by the nancial creditor against the
corporate debtor under the Securitisation and Reconstruction of Financial Assets and
Enforcement of Securities Interest Act, 2002 ('SARFAESI Act') were stayed by the
Calcutta High Court by an interim order, on the prima facie satisfaction that the
jurisdiction. In this regard, the Supreme Court stated that the expression 'court' in S.
14(2) would be deemed to mean any forum for a civil proceeding, including any tribunal
or any forum under the SARFAESI Act, and consequently, the period from the date of
institution of the proceedings under the SARFAESI Act till the date of ling of the
application under S. 7 of the Code could be excluded as per S. 14 of the Limitation Act.
The Supreme Court further noted that the exclusion of time under S. 14 of the Limitation
Act shall be available, even if the proceedings before the wrong forum have not been
terminated.
In Kridhan Infrastructure Pvt Ltd ((Now known as Krish Steel and Trading Pvt Ltd) v.
Venkatesan Sankaranarayan and Others, the Supreme Court, while rejecting the appeal of
the resolution applicant and holding that the management of the corporate debtor will
revert to the liquidator from the resolution applicant due to the failure of the resolution
applicant to comply with the terms of the resolution plan for a period of over eight
months, noted that time is a crucial facet of the scheme under the Code, and to allow
proceedings to lapse into an inde nite delay will plainly defeat the object of the Code.
(India) Ltd. and Others, the Supreme Court held that in the adjudicatory process
concerning a resolution plan under the Code, there is no scope for interference with the
commercial aspects of the decision of the Committee of Creditors ('CoC'), and that there
is no scope for substituting any commercial term of the resolution plan approved by the
CoC. The Supreme Court also noted that, only if the NCLT or the NCLAT, as the case may
be, within their limited jurisdiction, found any shortcoming in the resolution plan vis-à-vis
the speci ed parameters, would the resolution plan be sent back to the CoC, for re-
submission after satisfying the parameters delineated by Code, and exposited by the
court. The Supreme Court also noted that for a proper and meaningful implementation of
the approved resolution plan, the payment to dissenting nancial creditors as envisaged
by the second part of S. 30(2)(b) of the Code could only be payment in terms of money,
as the dissenting nancial creditor cannot be forced to remain attached to the corporate
In Kalpraj Dharamshi & Anr v Kotak Investment Advisors Limited & Anr., the Hon'ble
Supreme Court held that, where a party invokes the writ jurisdiction of the High Court to
make a bona de challenge to NCLT proceedings for the breach of principles of natural
justice, S. 14 of the Limitation Act can be invoked to extend the period of limitation to le
an appeal under the Code. In the context of the process of nalisation and approval of a
resolution plan, the Supreme Court also held that if the CoC approves a resolution plan
accepted by RP after the due date mentioned under the Notice inviting Expression of
Interest under the Code, there can be no interference with such exercise of commercial
wisdom of the CoC. However, the Supreme Court also held that if a resolution applicant
objects to the submission and consideration of a resolution plan beyond the speci ed
In Kuldeep Verma v. State Bank of India and Ors., the NCLAT, New Delhi held that time is
of the essence under the Code, and that the NCLT must keep the same in mind, and not
delay the initiation of Liquidation proceedings, despite the lapse of 981 days since the
initiation of the CIRP and the rejections of multiple proposed Resolution Plans by the
CoC. The NCLAT, New Delhi further observed that it is settled law that it can exercise the
same powers that are available to the NCLT, and consequently directed the initiation of
In Kolla Koteswara Rao Vs. Dr. S.K. Srihari Raju and Anr., the NCLAT, New Delhi held that
the amount owed by a seller to a purchaser under an agreement of sale, wherein the
purchaser as consideration had agreed to pay off the loan owed by the seller to a
nancial creditor, will be considered as a nancial debt under S. 5(8)(f) of the Code,
provided that the debt ful lls the three-fold criteria of: i) Disbursal, ii) Time value of
money, and iii) Commercial effect of borrowing, as laid down by the Supreme Court in
Pioneer Urban Land and Infrastructure Ltd. and Anr. v. Union of India and Ors. The NCLAT,
New Delhi further held that there is no requirement that the corporate debtor must utilize
the money that has been disbursed. In the instant case, the money was paid by the
purchaser to the lender pursuant to a one-time settlement entered into between the
lender and the seller. In addition to this, the agreement of sale required the seller to
refund the money to the purchaser with interest in case of failure to execute or register
the sale deed. These factors were considered by the NCLAT as having satis ed the three-
fold criteria required for a debt to be classi ed as a nancial debt under S. 5(8)(f) of the
Code.
In Radico Khaitan Ltd. v. BT & FC Pvt. Ltd. & Ors., the NCLAT, New Delhi, following the
judgment of the NCLT, Mumbai in SBI Vs Videocon Industries Ltd. allowed the
consolidation of two CIRPs, since there existed i) Common control, ii) Common directors,
iii) Common assets, iv) Common liabilities, v) Interdependence on each other, vi) Pooling
of resources, vii) Intricate links between the companies, and viii) Common nancial
creditors. In the instant case, the application for consolidation of the CIRPs was made by
the operational creditor of one of the corporate debtors, and was opposed on the ground
that an operational creditor has no locus standi to make such an application, since the
operational creditor is not a part of the CoC. However, the NCLAT refused to entertain the
said objection, and on the facts of the case, found it to be a t case for consolidation of
the CIRPs.
In Gabs Megacorp Limited v Sutanu Sinha & Anr., the NCLAT, Chennai held that where the
In Himachal Pradesh State Electricity Board v CA Jalesh Kumar Grover, the NCLAT, New
Delhi held that its paramount consideration was to maintain the corporate debtor as a
going concern, and that straddling the corporate debtor with heavy instalments towards
clearing liabilities, even if they were incurred during the CIRP, would not bene t anyone,
and could have the effect of ceasing the operations of the corporate debtor.. The
Appellant was the State Electricity Board (State Board), which had assailed a direction by
the NCLT ordering it to not disconnect electricity supply of the corporate debtor, as long
as the monthly electricity bills were paid, along with an instalment of INR 10,00,000 (Ten
Lakhs) towards payment of outstanding electricity dues during the CIRP period. The
State Board challenged the said direction on the ground that the quantum of INR
10,00,000 (Ten Lakhs) per month would not be adequate towards clearing electricity
dues, as the NCLT had overlooked late payment surcharge mandated by the applicable
tariff order. The NCLAT, New Delhi enhanced the monthly instalment to INR 12,00,000
(Twelve Lakhs).
In Indian Overseas Bank v M/S RCM Infrastructure Limited & Ors., while holding that the
assets of the corporate debtor cannot be proceeded against under the SARFAESI Act
after imposition of the moratorium under S. 14 of the Code, the NCLAT, New Delhi upheld
the setting aside of the sale of corporate debtor's assets under the said Act, which had
been conducted before the initiation of the CIRP. The Appellant took over possession of
the corporate debtor's assets, and conducted an auction sale. The issuance of sale
certi cate under the SARFAESI Act, and transfer of 25% consideration towards sale of the
corporate debtor's assets, had taken place before the initiation of the CIRP. However,
upon initiation of the CIRP, the Appellant had led its claim for the entire outstanding
amount, and thereafter received the balance 75% consideration towards sale of the
corporate debtor's assets. The NCLAT, New Delhi held that the sale was not complete, as
the total sale price was not paid before the CIRP was initiated, and therefore the
continuation of the sale process during the moratorium was illegal and liable to be set
aside.
In DMI Finance Private Limited v. M/s Abloom Infotech Pvt. Ltd., the NCLT, Delhi relied
upon the judgment of the NCLAT, New Delhi in State Bank of India v. Athena Energy Pvt.
Ltd., whereby the NCLAT, New Delhi departed from its previous judgment in Dr. Vishnu
Kumar Agarwal v. M/s Piramal Enterprises Ltd., to hold that the CIRP could be
commenced against both the guarantor and borrower simultaneously. Further, the NCLT,
Delhi, relied upon the Supreme Court's judgment in Innoventive Industries Ltd. v ICICI
Bank and Anr. to reiterate that it had a limited scope of inquiry while considering
applications seeking the initiation of the CIRP by nancial creditors, and that it only
needed to be satis ed that a) There was a nancial debt; b) A default had occurred; and
In Yuvraj Agarwal and Anr. v. M/s Aspek Media Pvt. Ltd., the NCLT, Delhi, while following
the NCLAT's judgment in Uttam Galva Steels Limited v. DF Deutsche Forfait AG and Anr.,
held that the issuance of a Demand Notice and ling of an application under Ss. 8 and 9
of the Code, respectively, can be done by operational creditors only in their individual
capacities, and not jointly. Consequently, the NCLT, Delhi dismissed an application that
had been preferred under S. 9 of the Code, jointly by a individual and a company.
In Sarita Jain Proprietor of Pratham Traders v. Silvertoan Papers Ltd., the NCLT, Delhi
relied on the judgment of the NCLAT, New Delhi In Ishrat Ali v. Cosmos Cooperative Bank
Ltd. and Anr. to hold that the limitation period of three years applies to applications led
under the Code, by virtue of Article 137 of the Limitation Act. Further, the NCLT, Delhi
relied upon the Supreme Court's judgment in Babulal Vardharji Gurjar v. Veer Gurjar
Aluminum Industries Pvt. Ltd. to hold that a fresh computation of limitation upon an
acknowledgement of liability in terms of S. 18 of the Limitation Act, is inapplicable to
In Amluckie Investment Co. Ltd. v. Skil Infrastructure Ltd., the NCLT, Mumbai held that S.
18 of the Limitation Act, which permits the calculation of a fresh limitation period upon
acknowledgement of liability prior to the expiry of the limitation period, and S. 19 of the
Limitation Act, which permits the calculation of a fresh limitation period upon payment
on account of a debt or of interest on a legacy prior to the expiry of the limitation period,
are applicable to proceedings under the Code. In the instant case, since the corporate
debtor made interest payments within three years of the limitation period commencing
from January 01, 2015, and continued to make such payments intermittently till March
31, 2019, the NCLT, Mumbai held that a fresh period of limitation would be computed
from March 31, 2019 on account of Ss. 18 and 19 of the Limitation Act.
In Gangamai Industries & Construction Limited v. Mr. Pankaj Joshi, the NCLT, Mumbai,
held that the actions of the RP and the CoC of accepting the resolution plan of a
resolution applicant after the expiry of the deadline for the submission of the resolution
plan, which plan had earlier been rejected by the CoC, were prejudicial and beyond the
scope of the Code. The NCLT, Mumbai observed that, after the expiry of the deadline for
submission of the resolution plan, the RP with the approval of CoC, could have extended
the timeline for submission of bids by issuing a fresh invitation for the expression of
process.
Limited) and Others, the NCLT, Mumbai held that, when a nancial debt is due,
irrespective of whether the payment of the same has been defaulted or not, a claim can
be made to the interim resolution professional ('IRP')/RP during the CIRP. The NCLT,
Mumbai noted that if the proposition of the applicant, viz. that no claim can be made
before the IRP/RP until the payment of the debt has been defaulted, is accepted, it would
lead to a situation where only the defaulted debts of the creditors can be claimed, and
the other creditors will end up remediless. The NCLT, Mumbai also rejected the
contention of the applicant that the individual lenders, who had a bene cial interest in but
not a legal title to the security (which vested with the security trustee) under the deed of
hypothecation, were not entitled to le claims with the IRP/RP, holding that ling a claim
interest.
Reliance Infratel Limited) and Others, the NCLT, Mumbai reiterated that the Code is a self-
contained legislation providing for a speci c procedure for the collation of claims, and
that neither the RP nor any authority under the Code can deviate from the procedure
prescribed thereunder. Consequently, the NCLT, Mumbai noted that without proper
submission of documents before the IRP, and without proper veri cation by the IRP, the
respondents could not be deemed as the nancial creditors of the corporate debtor. The
court further noted that the transactions covered under the corporate guarantees in
question would not come within the purview of preferential transactions within the
meaning of S. 43 of the Code, since the execution of the corporate guarantees was not a
transfer of property or an interest of the corporate debtor for the bene t of one of its
(India) Limited, the NCLT, Mumbai held that the eligibility of a person for taking part in
any process or activity under the Code has to be taken into consideration as per the
timeline provided in the Code for such activity or participation. In the instant case, the
NCLT, Mumbai allowed the application of the suspended director and promoter of the
corporate debtor, to submit a resolution plan for the corporate debtor, as the applicant
was freed from the ineligibility prescribed under S. 29A(c) of the Code, as on the
stipulated timeline of the date of the submission of the resolution plan, i.e., 01.07.2020
the corporate debtor had been categorized as a micro, small and medium enterprise
In M/S Ranasaria Poly Pack Pvt. Ltd v. M/S Uniworld Sugars Private Limited, the NCLT,
Allahabad held that it is a settled position of law that the commercial wisdom of a
resolution plan is not open to judicial review; and that, as long as the resolution plan
(Siddharth and Akshata are advocates based out of Delhi. Karan is an advocate based
out of Mumbai. Rahul is a law clerk at the Supreme Court of India. The present
compilation represents the exclusive work of the authors in their personal capacities,
and is not linked to any of the institutions/ rms that they may be associated with)
TAGS INSOLVENCY AND BANKRUPTCY CODE 2016 (CODE) NEGOTIABLE INSTRUMENTS ACT 1881 (‘NI ACT’)
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