In this Editorial the author shall deliberate on the decided case laws of
Insolvency and Bankruptcy Code, 2016. Author shall endeavor to prepare the
analysis of important case laws of IBC, 2016 decide in 2018 in FAQ’s basis.
Faq’s - IBC - Decided Cases
Whether Pendency of Proceedings or initiation of action under SARFAESI Act is a
ground for rejection of application u/s 7 of IBC?
||New Delhi Bench
||Basic India Limited
||Bank of India
The corporate debtor approached the applicant (Bank of India) for sanction of
various credit facilities to the corporate debtor. Consequently, applicant bank
sanctioned financial facilities to the corporate debtor, which had been renewed
/ enhanced from time to time. The corporate debtor acknowledged sanction of the
facilities and the same was continued to be enjoyed by the corporate debtor
against hypothecation and mortgage of properties and creation of charge on the
entire fixed and current assets of the company.
As the corporate debtor failed to pay the debt, the petitioner bank issued a
demand notice under section 13(2) of SARFAESI Act, 2002.
The corporate debtor raised objections challenging maintainability of the
instant application filed under section 7 of the Code that action had already
been initiated by applicant under the provision of SARFAESI Act; hence, instant
application was not maintainable.
It is well settled that pendency of proceedings and initiation of action under SARFAESI Act cannot be an impediment or bar to initiate the Corporate Insolvency
Resolution Process under Section 7 of the Code.
Therefore, one can opine that pendency or initiation of action under SARFAESI
ACT is not an ground for rejection of application under IBC.
Whether non-cooperation of suspended management and non –availability of assets
in Company can be an ground for initiation of Liquidation process?
||NCLT, Ahmedabad Bench
||J.R. Diamonds (P.) Ltd.
||Vinod Tarachand Agarwal
||1st October, 2018
The Counsel for the applicant submitted that there remained no possibility to
bring a revival plan for the Corporate Debtor Company, because RP didnot
receive adequate cooperation/necessaryassistance from the member of suspended
management/board because of their non-availability. Moreover, the company at
present does not possess immovable/tangible assetsand there are some assets
only in form of stock, shares, etc. and it is expecting some refund of income
tax paid from the Income Tax Department.
Therefore, as per the applicant there is no scope for waiting further for a
viable Resolution Plan or to explore for potential Resolution applicants despite
sincere efforts were already made by the RP and the Committee of Creditors by
inviting expression of interest dated 21.06.2018 in Form G, but no one came
forward for submitting such Resolution Plan.
Having heard arguments of the Ld. Counsel for the applicant and by going through
the material available on record in respect of the present IA, this Adjudicating
Authority is of a considered view that a liquidation order may be passed in
respect of Corporate Debtor J.R. Diamonds Pvt. Ltd. Since there is 100% voting
of the members of the CoC favouring liquidation process, the present IA No. 309
of 2018 deserves to be allowed.
Whether pendency of proceedings before DRT can be bar to initiate CRP?
|NCLT, New Delhi Bench
||Pixion Media (P.) Ltd
||Indian Overseas Bank
The respondent corporate debtor approached the applicant bank for sanction of
term loan. By that time the corporate debtor was already availing credit
facilities from a number of financial institutions. The applicant financial
creditor after perusing the documents and information as submitted by the
corporate debtor, sanctioned a term loan, which was subsequently brought under
the consortium of bank
However, soon after the Joint documentation the corporate debtor started
committing default in servicing of the interest and committed default in
repayment of loan. Consequently the account of the corporate debtor was declared
as a Non Performing Asset on 2-3-2012 in terms of RBI guidelines
The respondent corporate debtor failed to clear the outstanding dues and did not
adhere to the terms and conditions of the loan agreements. Consequently,
applicant bank had initiated action against the corporate debtor underDRT.
Pendency of proceedings before Debt Recovery Tribunal an cannot be an impediment
or bar to initiate Corporate insolvency resolution process.
In case where winding up proceedings are pending with High Court, then whether a
Creditor not being part of such petition can approach to Tribunal under IBC?
||NCLT, Kolkata Bench
Jai Balaji Industries Ltd
The State Bank of India filed application under section 7 for initiating
Corporate Insolvency Resolution Process (CIRP) against the corporate debtor
alleging existence of default in repayment of loan advanced to the corporate
The applicants being operational creditor of corporate debtor were opposing
petition on ground that petition wending against same corporate debtor had
already been admitted and is already in progress before the High Court and
unless the said petition pending before High Court was finally decided, there
could not be a parallel proceeding continuing before Tribunal.
The financial creditor submitted that winding up proceedings filed before the
High Court had two stages namely: First stage, wherein application for winding
up was filed and the High Court may admit such application on reasonable
grounds, directing issue of advertisement inviting all creditors to participate
in the winding up process. And the Second stage, wherein the High Court, after
hearing all creditors who participated in the winding up process, on being
reasonably satisfied, pased final orders of winding up/liquidation. According to
the SBI the winding up proceeding in the present case was in the first stage
whereby the creditors were invited to participate in the said proceeding post
advertisement. And so, the Tribunal was not barred in any manner from hearing
the application filed under section 7.
The winding up proceeding as against the corporate debtor has been initiated
long before the date of filing of the Application by the financial creditor in
this case in hand. It is significant note here that in pursuance of the
advertisement, the financial creditor did not join in the winding up proceedings
and approached Tribunal for invoking section 7 as against the corporate debtor
pending winding up proceedings initiated by the High Court.
The corporate debtor was undergoing winding up proceedings and winding up
petitions being already admitted and the High Court has not transferred the
winding up proceeding before the NCLT, all the creditors are bound to join in
the winding up proceedings so as to make their claims in the said proceedings.
Secured and unsecured creditors have already joined in the said proceedings.
Where a winding up proceedings is initiated in an application under section
433(e) of the Companies Act, 1956 by the High Court, an application filed under
section 9 was held not maintainable in the above cited order.
(Author – CS Divesh Goyal, Goyal Divesh & Associates Company Secretary in
Practice from Delhi and can be contacted [email protected]).
Disclaimer:The entire contents of this document have been prepared on the basis
of relevant provisions and as per the information existing at the time of the
preparation. Although care has been taken to ensure the accuracy, completeness
and reliability of the information provided, I assume no responsibility
therefore. Users of this information are expected to refer to the relevant
existing provisions of applicable Laws. The user of the information agrees that
the information is not a professional advice and is subject to change without
notice. I assume no responsibility for the consequences of use of such
information. In No Event Shall I Shall Be Liable For Any Direct, Indirect,
Special Or Incidental Damage Resulting From, Arising Out of Or In Connection
With The Use of The Information.