Insolvency & BankruptcyFive recent judgments on the Insolvency and Bankruptcy Code, 2016

September 4, 20190

I. Jursdiction clause in a contract cannot oust the rights of NCLT/NCLAT under the I&B Code.

Excel Metal Processors Limited Vs. Benteler Trading International GMBH and Anr [Company Appeal (AT) (Insolvency) No. 782 of 2019], NCLAT;

The NCLAT, while referring to Binani Industries Limited vs. Bank of Baroda and Anr. 2018 SCC Online NCLAT 521, observed that CIRP is not a ‘suit’ or a ‘litigation’ or a ‘money claim’ for any litigation. Neither is it an auction or a recovery. The object is merely to bring about a resolution plan, so that the Company do not default on dues.

With regard to the issue of jurisdiction, the NCLAT held that in terms of Section 408 of the Companies Act, 2013, the Central Government has notified and vested the power on the NCLT having the requisite territorial jurisdiction to deal with the matter where the registered offices of the Companies are situated.


The private contract between two parties contract cannot override the statutory provisions of law to oust jurisdiction as prescribed under Section 408 of the Companies Act read with Section 60 (1) of  the I & B Code. 


II.(i). Non implementation of Resolution Plan cannot be a ground to exclude any time period for thepurpose of calculating 270 days of CIRP.

  (ii). The Adjudicating Authority has jurisdiction to pass an order referring the matter to the Central Government or the IBBI for action under Section 74(3) & 213 of the I&B Code read with Section 447 of the Companies Act, 2013.

Committee of Creditors of Amtek Auto Ltd through corporation Bank Vs. M. Dinkat T. Venkatasubramanian & Ors.,[Company Appeal (AT) (Insolvency) No. 219 of 2019], NCLAT;

Liberty House Group Pte Ltd Vs.M. Dinkat T. Venkatasubramanian & Ors.,[Company Appeal (AT) (Insolvency) No. 442 of 2019], NCLAT;Date: 16.08.2019

The NCLAT held on the first issue held the following:

“In case where the ‘Resolution Plan’ earlier approved within a reasonable period of 180 days or much before completion of 270 days, one may request the Adjudicating Authority to allow the ‘Resolution Professional’/ ‘Committee of Creditors’ to consider the pending ‘Resolution Plan (s)’ or to call for fresh ‘Resolution Plan’/ ‘Revised Resolution Plan’, in absence of any application under Section 33(3) filed by any person whose interest is prejudicially affected by contravention of the plan by the ‘Corporate Debtor’..”

NCLAT further dealt, on the second issue, as to whether it has the jurisdiction to refer the default of Liberty House Group Pte Ltd., to IBBI or Central Government for suitable action or otherwise, and held that

it is the Adjudicating Authority who is required to refer such matter to the Insolvency and Bankruptcy Board of India or the Central Government to take up the matter to the Special Court if on investigation, if any case of offence under Chapter VII, including Section 74(3) is made out.”


In the present case, the NCLAT refrained to further extend the period of 270 days and/or to exclude the period of default of the Resolution Applicant from the period of 270 days of CIRP. The Committee of Creditors (CoC) requested for certain directions but it was also denied in toto and NCLAT preferred that the adjudicating authority should rather pass an order for liquidation as 270 have already passed.

It is pertinent to note that the NCLAT has also widened the scope of its jurisdiction by taking into consideration Section 74(3) & 213 of the I&B Code read with Section 447 of the Companies Act, 2013 which empowers to refer the matter if there is a default by a Resolution Applicant.


III. The bar of Section 29A will not apply to a resolution applicant who has submitted the resolution plan before the enforcement of Section 29A.   

IDBI Bank Ltd. Vs. MBL Infrastructure Ltd. &Ors. [Company Appeal (AT) (Insolvency) No. 194 of 2018],NCLAT;

Bank of Baroda &Anr.Vs.MBL Infrastructure Ltd. &Ors. [Company Appeal (AT) (Insolvency) No. 225 of 2018],NCLAT;

Bank of India Vs. MBL Infrastructure Ltd. &Ors. [Company Appeal (AT) (Insolvency) No. 235 of 2018],NCLAT;

State Bank of India &Ors. Vs. MBL Infrastructure Ltd. &Anr. [Company Appeal (AT) (Insolvency) No. 268 of 2019],NCLAT; Date: 16.8.2019

The Appellants, in the instant case are the dissenting financial creditors who have challenged the order of NCLT, Kolkata Bench, mainly on two grounds. Firstly, that the Resolution Applicant was ineligible to submit any resolution plan under Section 29A(h) and secondly that the resolution plan lacked viability and feasibility.

The NCLAT while rejecting the contention of the Appellant observed that the resolution plan was submitted prior to the introduction of Section 29A of I&B Code, 2016.

Moreover, the contention of ineligibility of resolution applicant had already been raised once before the NCLT when the plan was first proposed, which was not accepted. An appeal against the said order was also dismissed and no permission was accorded to the appellants in raising the same question again.

With respect to the viability and feasibility of the resolution plan, the NCLAT relied upon the decision of the Apex Court in the case of Swiss Ribbons Pvt. Ltd. & Anr v. Union of India & Ors.[(2019) 4 SCC 17]. Accordingly, the NCLAT held that the resolution plan had been approved only after duly considering the techno economic report.


The bar of Section 29A is not applicable retrospectively to the Resolution Applicants the resolution plan was submitted prior to the enforcement of Section 29A.

Moreover, the NCLAT had rightly relied upon the Swiss Ribbons supra wherein it has been categorically observed that the viability and feasibility of the plan is to be assessed by the Committee of Creditors. This is in consonance of Section 30(4) of the I & B Code.

Moreover, once the plan has been approved by the Adjudicating Authority the same becomes binding upon the stakeholders.


IV. Whether the Corporate Debtor has rightly relied upon the decision of the Apex Court in the contempt petitions to ascertain existence of default?

Sh. Romi Datta Vs. S. Gurumoorthy & Anr. [Company Appeal (AT) (Insolvency) No. 94 of 2018], NCLAT; Date: 14.8.2019

The NCLT, Mumbai Bench had admitted an application filed against Sahara Q Shop Unique Products Range Limited under Section 9 of the I&B Code. The instant Appeal has been preferred primarily on the ground that there is no default on the part of the Corporate Debtor.

The NCLAT observed that the order passed by the Apex Court in the Contempt Petition No. 412-413 of 2012, wherein it prohibited the ‘Sahara Group of Companies’ from disbursing payment to any person, was specifically for the Sahara companies involved therein, namely, Sahara India Real Estate Corporation Ltd. and Sahara Housing Investment Corporation Ltd. Those orders bear no implication on the Corporate Debtor.

Therefore, given the fact that some other Sahara Group Company had settled the claim in another matter and that the Corporate Debtor has not been explicitly barred from making any payment in the said contempt petitions, it was held that the Corporate Debtor had committed default.


The NCLAT has rightly held that the contempt petitions could not have been said to apply on  the Corporate Debtor.

Further, if the Corporate debtor has paid salary, income tax and provident fund then the order passed in the contempt petitions were to squarely apply to the Corporate Debtor and also it should not have paid the above stated money in the first place.


V. NCLT has Inherent Power to impose Moratorium Before Initiation Of CIRP

NUI Pulp and Paper Industries Pvt. Ltd. v. M/s. Roxcel Trading GMBH [Company Appeal (AT) (Insolvency) No. 664 of 2019], NCLAT; Date: 17.07.2019

The NCLAT, held that as per Rule 11 of the National Company Law Tribunal Rules, 2016 the Adjudicating Authority has the power to make any such order as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal.

The NCLT accordingly held had that it has power and authority to pass an interim order to establish moratorium over the corporate debtors as there was apprehension of the selling off of the assets of the Corporate Debtor by its directors.


The NCLAT has refrained to interfere with an interim order passed by the NCLT for invocation of moratorium under Rule 11 of the NCLT Rules, 2016.

It is trite law that inherent powers are sparingly used and with caution but such an exercise of inherent power can be subjected to judicial test only where it is observed to be arbitrarily used and patently illegal.


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