July 8, 2021
The decision of the Liquidator to conduct an e-auction on the advice of the Stakeholder’s Consultation Committee cannot be appealed, before any decision is made by the Adjudicating Authority: D.R. Corporation (Proprietorship Firm) v. Ravi Kapoor Liquidator of City Tiles Ltd. & Anr.
The Liquidator had initiated an e-auction on the recommendation of the Stakeholder’s Consultation Committee. The Appellant, also the highest bidder, challenged the Liquidator’s application before the Adjudicating Authority and sought permission for re-auction; and an issue of a fresh public announcement at the behest of the request made by Respondent No. 2. The decision of the Liquidator to go ahead with an e-auction had not been approved or disapproved by the Adjudicating Authority at the time of the appeal. The Appellate Tribunal clarified that the matter was not fit for review as it was filed under Section 61(1) of the Code without any order, favourable or otherwise, by the Adjudicating Authority.
The RP cannot call for documents relating to foreign subsidiaries of the Corporate Debtor: Venugopal Dhoot v. Pravin Navandar
The Resolution Professional called for the information of the Corporate Debtor and for the documents about its subsidiary. The Appellants contended that the Corporate Debtor was only an SPV without any staff and was completely managed by its holding company; and requested the RP to obtain information from the RP of the holding company. They also submitted that the documents relating to its subsidiary could not be asked for as per the Explanation to Section 18(1) of the Code. The Appellate Tribunal deprecated the actions of the RP, including the non-reconstruction of books to ascertain any avoidable transactions, even after the lapse of one year. It agreed with the Appellants that the documents relating to the subsidiary were excluded by Explanation to Section 18(1), and expressed displeasure over the lack of provisions for group insolvency and common RP. The Appellate Tribunal remanded the matter to the Adjudicating Authority for fresh consideration.
Rejection of the OTS proposal by the CoC is a commercial decision: Manoj Kunwar v. Punjab National Bank
The Appellant filed an application before the Adjudicating Authority to direct the Liquidator to consider the One Time Settlement cum Compromise proposal under Section 230 of the Companies Act, 2013, which was rejected by the Financial Creditors. The Adjudicating Authority, on account of the rejection of the OTS proposal, concluded there was no chance of settlement and dismissed the application under appeal. The Liquidator had placed the proposals before the CoC, and the CoC rejected it on the ground of non-viability of such a low offer. The Appellate Tribunal held that the rejection of the OTS proposals is a commercial decision and there is no authority with the NCLT or NCLAT to review it.
Operational Creditor can be treated ‘Secured’ on the basis of pledge documents: Concast Steel and Power Limited v. MSTC Limited
The Appeal was against the order of the Adjudicating Authority in permitting Respondent No. 2 (the Operational Creditor) to be treated as a Secured Creditor on account of the pledge agreement with the Corporate Debtor. The rationale of the Adjudicating Authority was that the existence of a security interest is clear from a clause providing creation of a pledge in favour of the Applicant, till the payment of goods supplied is made.
Respondent No. 1 procured goods for the consumption of the Corporate Debtor, and stored them at the premises of the Corporate Debtor, which were to be issued to it on a cash and carry basis as per the Memorandum of Pledge. Since the initiation of CIRP, the goods in the premises had got used up without any payment being made to Respondent No. 1, and claims of it were not entertained by the IRP/RP. The Appellate Tribunal noted that as per Explanation to Section 18(1)(f) and 25(2)(a) of the Code, it is the duty of the IRP/RP to take immediate custody and control of all the assets of the Corporate Debtor, and not include the assets owned by the third party, and to physically take, segregate, account it and return the goods. The IRP/RP failed in this duty. The Tribunal did not find any fault with Respondent No. 1 being treated as a Secured Operational Creditor.
The same IRP/RP for both the Principal Borrower and the Corporate Guarantor: State Bank of India v. M/s Athena Energy Ventures Private Limited
The Principal Borrower was under liquidation and the CIRP had also been initiated against the Corporate Guarantor. The Appellate Tribunal directed the Adjudicating Authority to appoint the RP who was working as the Liquidator of the Principal Borrower as the RP for the Corporate Guarantor too, to ensure the convenience of making corresponding revisions when a particular claim amount was recovered.
The Appellant submitted that the CIRP of the holding company and the subsidiary company should be consolidated and to that extent, an application was pending before the Adjudicating Authority. The Appellate Tribunal observed that only because a notice had been issued, and interim orders had not been passed by the Adjudicating Authority, the right to maintain an appeal would not arise.
~ By Manikanda Prabhu J
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ABBREVIATIONS & ACRONYMS USED Committee of Creditors CoC Corporate Debtor CD Corporate Insolvency Resolution Process CIRP Financial Creditor FC The Insolvency and Bankruptcy Board of India IBBI The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 CIRP Regulations Insolvency and Bankruptcy Code, 2016 the Code National Company Law Appellate […]August 10, 2021
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Delhi Bench The decision of the Liquidator to conduct an e-auction on the advice of the Stakeholder’s Consultation Committee cannot be appealed, before any decision is made by the Adjudicating Authority: D.R. Corporation (Proprietorship Firm) v. Ravi Kapoor Liquidator of City Tiles Ltd. & Anr. The Liquidator had initiated an e-auction on the recommendation of […]July 8, 2021
Abbreviations Used Code – Insolvency and Bankruptcy Code, 2016 CIRP – Corporate Insolvency Resolution Process AA – Adjudicating Authority (NCLT) CD – Corporate Debtor FC – Financial Creditor OC – Operational Creditor CoC – Committee of Creditors IRP – Interim Resolution Professional RP – Resolution Professional RA – Resolution Applicant Allahabad Bench Extension of Liquidation […]August 11, 2021