Important Judgments on IBC by the NCLAT (30 August – 3 Sept 2021)

  September 6, 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

FY – Financial Year

NEW DELHI BENCH

Ramkrishna Electricals Limited v. Atul Rajwadkar (02 September 2021)

The Appellant had supplied goods to the CD in F.Y.s 2016-17 and 2017-18. However, an amount of Rs. 2,66,75,764/- remained outstanding at end of 2017-18. The AA vide order dated 17.09.2019 initiated CIRP of the CD. The suspended directors of the CD made a series of payments to the Appellant between 23.07.2019 and 15.10.2019 from the CD’s cooperative bank account to settle the outstanding dues. Upon an application by the Respondent No. 1/Liquidator, the AA ordered the Appellant to reverse and refund all the payments made in view of Section 14 and 66(1) of the Code.

The Appellant in appeal contented that it was unaware of the CIRP of the CD, and that there was no intention to defraud the creditors of the CD or any other fraudulent purpose. The Appellate Tribunal found that the order of the AA to refund all the payments made during CIRP to be valid in law. The Appellants were provided with the liberty to file a claim before the Liquidator.

CHENNAI BENCH

The definition of “Person” under Section 3(23) is inclusive, and includes a sole proprietorship: Fipola Retail India Pvt. Ltd. v. M2N Interiors (01 September 2021)

The Respondent, a sole proprietorship firm, had filed an application u/s. 9 of the Code before the AA. The AA ordered the Respondent to amend the cause title in view of the definition of ‘person’ under Section 3(23) of the Code. However, the Respondent sought before the AA to dispense with the compliance with the amendment by relying on Neeta Saha v. Mr. Ram Niwas Gupta, where the Appellate Tribunal held that the definition of ‘person’ under Section 3(23) is inclusive of sole proprietorship firms. The AA considered the decision of the Neeta Saha and dispensed the Respondent from amending the cause title.

The Appellant in appeal assailed the maintainability of the application. The Appellate Tribunal reiterated the ratio in the Neeta Saha case and dismissed the appeal.

The Legal notice shows that there existed a dispute prior to the issuance of a demand notice: Precision Hydraulics Private Limited v. Bhairavi Cargo and Logistics Private Limited (01 September 2021)

The appeal was against the order of the AA dismissing an application u/s. 9 of the Code, filed by the Appellant/OC against the Respondent/CD. The AA dismissed the application on the ground that there existed a ‘prior dispute’ between the parties. The Appellant/OC had sold the Merchandise Exports from India Scheme Licence (MEIS) to the Respondent/CD and raised periodical invoices for the same. It was alleged that instead of making payments to the Appellant/OC’s bank a/c in terms of the invoices, the Respondent /CD remitted the amount to ex-employees of the OC. The Appellant relied on the email communication by the Respondent/CD attaching copies of transfer letters and seeking bank details to argue that the Respondent/CD had acknowledged the liability.

However, a legal notice was served by the Respondent/CD to the Appellant/OC which had called upon it to make a payment to the tune of Rs. 12,02,995/-. The demand notice by the Appellant/OC demanding a payment of Rs. 1,29,70,574/- was made after the receipt of the legal notice by the Respondent/CD. The Appellate Tribunal agreed with the reasoning of the AA that the legal notice proved the existence of a prior dispute between the parties.

~ By Manikanda Prabhu J

 

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