Insolvency Law Bulletin: January 2023

A digest of insolvency and company law developments in January 2023: the Supreme Court’s decision to revisit Vidarbha Industries, NCLAT rulings on withdrawal, limitation and bank guarantees, the Reliance Capital auction, and the Government’s proposed overhaul of the IBC.

Supreme Court and High Courts

Vidarbha Industries to be reconsidered. On 16 January, a three-judge Bench of the Supreme Court issued notice in Maganlal Daga HUF v. Jag Mohan Daga, a plea questioning the correctness of Vidarbha Industries Power Ltd. v. Axis Bank Ltd., which had held that the NCLT has discretion to admit or reject a financial creditor’s application under Section 7(5)(a) of the IBC. Bar & Bench
Avoidance applications survive the CIRP. In Tata Steel BSL Ltd. v. Venus Recruiter Pvt. Ltd., the Delhi High Court held that avoidance applications under the IBC can be heard even after a resolution plan is approved, where the plan does not account for them. LiveLaw
Claims outside an approved plan stand frozen. In Aircel v. Union of India, the Madras High Court allowed Aircel’s challenge to demand notices issued by the Department of Telecommunications, holding that claims not forming part of an approved resolution plan cannot be pursued after approval. Bar & Bench

NCLAT

No withdrawal under Section 12A after the CoC approves a plan. Hem Singh Bharana v. Pawan Doot Estate Pvt. Ltd.: once the Committee of Creditors has approved a resolution plan, a withdrawal application cannot be entertained; the CoC is as bound by its approval as the resolution applicant. LiveLaw
Bank guarantees fall outside the moratorium. The NCLAT upheld the NCLT’s refusal to stay encashment of bank guarantees issued in favour of Indian Oil Corporation in the insolvency of Punj Lloyd, holding that Section 14 does not extend to them. LiveLaw
No condonation beyond 45 days. Platinum Rent A Car (India) Pvt. Ltd. v. Quest Offices Ltd.: Section 238 of the IBC overrides Section 12 of the Limitation Act, 1963; a 55-day delay attributed to obtaining a certified copy was not condoned. LiveLaw
A landowner under a development agreement is not a financial creditor. Ashoka Hi-Tech Builders Pvt. Ltd. v. Sanjay Kundra: such a landowner does not fall within Section 5(8) and cannot sit on the CoC. LiveLaw
Liquidation only where the CoC’s decision accords with the Code. Hero Fincorp Ltd. v. Hema Automotive Pvt. Ltd.: the Adjudicating Authority is bound to order liquidation only if the CoC’s decision complies with the IBC; a resolution to liquidate passed before the period for expressions of interest expired was rightly rejected. LiveLaw
A reconstituted Bench must rehear the parties. Rajesh Narang v. Durha Vitrak Pvt. Ltd.: no order should be passed after reconstitution of the Bench without rehearing the matter. LiveLaw
Premature reliefs against a company not in CIRP. Jagadish v. Oyo Hotels & Homes Pvt. Ltd.: the NCLAT upheld the rejection of an operational creditor’s applications seeking to restrain a proposed IPO and for production of financial statements, as no CIRP had been initiated. LiveLaw
Mittal Corp. Allowing Jindal Stainless’ appeal, the NCLAT set aside an NCLT order that had permitted a rival applicant to submit a revised plan after CoC voting had begun. Mint
Removal of a resolution professional upheld. In the insolvency of Shree Ram Urban Infrastructure, the NCLAT upheld the removal of the resolution professional for failing to convene the CoC and directed the IBBI to conduct an inquiry. Outlook
Coastal Energen. The NCLAT vacated its interim stay on CoC proceedings, allowing the creditors to resume meetings. BusinessLine
Wave Group. The NCLAT dismissed the Wave Group’s appeal seeking insolvency. Moneycontrol
Supertech. The interim resolution professional reported to the NCLAT that 9,705 flats across 18 projects had been offered for possession without occupancy certificates. The Hindu

NCLT

Reliance Capital. Torrent Investments challenged the lenders’ consideration of a revised offer made by the Hinduja group after the e-auction closed. The Mumbai Bench first restrained the lenders from considering the revised offer, later declined to stay voting on a second round of auctions, and then directed the parties to maintain the status quo on the auction pending its order. Economic Times · Financial Express · Mint · Economic Times
Rolta India admitted. The Mumbai Bench admitted Union Bank of India’s petition against Rolta India over a default of more than ₹1,413 crore. Economic Times
Future Retail. The CIRP period was extended by 90 days, to 16 April 2023, under Section 12. BusinessLine
Future Supply Chain Solutions admitted. The Mumbai Bench admitted an operational creditor’s petition filed by DHL E-commerce (India). Outlook
Unibera Developers admitted. The Delhi Bench initiated CIRP against the real estate developer in Mahi Buildhome Pvt. Ltd. v. Unibera Developers Pvt. Ltd. LiveLaw
“Not a dispute redressal forum.” In JHS Svendgaard Ltd. v. HT Media Ltd., the Delhi Bench declined to initiate CIRP against HT Media. LiveLaw
Promoter’s plan approved for an MSME. In Swastik Coal Corporation Pvt. Ltd. v. Srithik Ispat Pvt. Ltd., the Mumbai Bench approved a resolution plan submitted by the promoter of the MSME corporate debtor. LiveLaw
Pratibha Industries. The Mumbai Bench cancelled the sale to the successful bidder, which had failed to deposit the agreed amount, and directed a fresh valuation and auction as a going concern. Economic Times
Jaypee Infratech. All consortium lenders other than ICICI Bank assigned their debt to the National Asset Reconstruction Company Ltd. Deccan Herald
Zee–Sony merger. Zee Entertainment told the NCLT that its liabilities would be absorbed by the merged entity under the scheme. Economic Times
Music Broadcast. The NCLT approved the company’s scheme for issuing bonus non-convertible redeemable preference shares to non-promoter shareholders. Economic Times

Policy and Data

Proposed overhaul of the IBC. The Ministry of Corporate Affairs invited comments on wide-ranging amendments, including a wider pre-packaged regime, a project-wise framework for real estate insolvency, faster admission and a challenge mechanism for bidders. Mint
Real estate. Under the proposal, insolvency would apply only to the defaulting project rather than to all of a developer’s projects. BusinessLine
Personal guarantors. The draft amendments propose removing the interim moratorium for personal guarantors, to address misuse of individual insolvency filings. Business Standard
Decriminalisation. The Ministry proposed replacing criminal proceedings for several IBC violations with monetary penalties imposed by the NCLT and DRTs. Economic Times
Restructuring outside the tribunal. The Insolvency Law Committee is to examine a proposal allowing shareholders of large defaulters to retain control while restructuring with lenders outside the tribunal. Mint
Operational creditors. The Chairperson of the NCLAT called for amendments to secure a fair share for operational creditors and stressed the need to train resolution professionals. LiveLaw
Recoveries. RBI data show that financial creditors realised about 33% of their admitted claims as of 30 September 2022, and operational creditors about 16.5%. Financial Express
Commentary. Editorial views on the proposed amendments and on recoveries under the Code: Financial Express · Economic Times · The New Indian Express

Competition Appeals Before the NCLAT

Google. The NCLAT took up Google’s appeal against the Competition Commission of India’s order imposing a penalty of ₹1,337 crore in the Android matter, and permitted two domestic handset makers to file affidavits in support of Google. Mint · Economic Times
MakeMyTrip. The company deposited 10% of the ₹223.48 crore penalty imposed by the CCI and sought an early hearing of its appeal. BusinessLine
Penalty guidelines. The NCLAT remanded several matters to the CCI for reconsideration of penalties, highlighting the absence of penalty guidelines. BusinessLine

This bulletin is an initiative for knowledge sharing. It summarises reported judgments and developments and does not contain personal views or opinions on them.