Hello! Welcome back to our updates from the insolvency law landscape in India.
In the news
Mr. Jayanti Prasad has taken additional charge as the Chairperson of Insolvency and Bankruptcy Board of India (“IBBI”) succeeding Mr. Ravi Mital. Mr. Prasad, an Indian Audit and Accounts Service Officer of the 1986 batch, will remain Chairperson till the completion of his tenure in IBBI on November 20, 2026 or till a new person is appointed and assumes office, whichever is earlier.
IBBI has issued a circular directing Insolvency Professionals to remain vigilant to circumstances which indicate that the insolvency process under the Insolvency and Bankruptcy Code, 2016 (“IBC”) is being misused for purposes other than resolution or liquidation of a company under financial stress. It has been noted that such instances of such misuse may include, inter alia, mitigating tax liabilities, closure or merger of companies without regulatory scrutiny, and mitigating investigations, prosecution and penalties under various statutes.
IBBI has notified the fifth amendment to the CIRP Regulations, 2016, introducing project-wise measures for corporate debtors having real estate projects. The Committee of Creditors may now, with at least 66% voting share, recommend exclusion of an individual real estate project from CIRP, and the Resolution Professional is required to maintain separate bank accounts for each project and obtain an independent assessment of each project’s construction status, cost to complete and delivery timelines before inviting resolution applicants. The amendment also mandates representation of homebuyers on the Monitoring Committee and requires resolution plans to specify how homebuyers’ claims will be met, whether by possession, refund or transfer of ownership, along with project-wise timelines for completion.
From the docket
The Supreme Court in The Authorised Representative for Granite Gate Properties Private Limited, Ms. Rakesh Verma v. NOIDA has held that where the defaulting corporate debtor/developer is out of the picture and the homebuyers pooled funds under a ‘Pool and Build’ mechanism and approved a resolution plan to complete the half baked project, it is unjust to penalize the homebuyers and the successful resolution applicant by imposing time extension charges on them for the underdeveloped project.
The Supreme Court in EPFO v. COC of VAS Data Services has heldthat the limitation period for an appeal against an order of the National Company Law Appellate Tribunal (“NCLAT”) runs from the date on which the order is provided under the NCLAT Rules, 2016; and not from the date on which a certified copy of the order is obtained. Supreme Court observed that Rule 95(3) of the NCLAT Rules 2016 provide that the Deputy Registrar shall cause to transmit the case file and the order to the Registry for taking steps to prepare copies and their communication to the parties.
The Supreme Court in Greenopolis Welfare Confederation v. Rakesh Kumar Gupta held that the National Company Law Tribunal (“NCLT”) can recall an order admitting insolvency proceedings if the jurisdictional facts on which the proceedings were based are later found to have been affected by fraud or collusion. The court, however, clarified that such a finding does not by itself bring the entire CIRP to an end. Once insolvency proceedings are admitted, they become a collective process involving all creditors and other stakeholders and the NCLT must therefore separately decide whether the CIRP should continue or not.
The Supreme Court in Bank of India v. S.M. Kamal Pasha has held that once a resolution plan has been approved by committee of creditors (“CoC”), it cannot be withdrawn either at the instance of CoC or successful resolution applicant. In this case, CoC had sought withdrawal of the plan on the ground that corporate debtor’s financial position having improved in the ensuing years, when the RP was in management, the SRA would have a windfall gain in having to bring in a lot less than that stipulated in the resolution plan.
The Supreme Court in ECL Finance and v. Abhinav Mukherjee has held that a financial creditor need not have the proactive control required under section 29A of the IBC to be a related party under section 5(24)(m)(i). Section 29A requires a person to be in the “driving seat”, but under section 5(24)(m)(i) a role of navigation in determining the corporate debtor’s policy and channelising its business interests is enough. ECL Finance was the sole debenture holder of, and a lender to, Saha Infratech Pvt. Ltd., and both debts were guaranteed by the corporate debtor. It held that ECL, as debenture holder, was barred from CoC, and that this disability extended to its status as lender. The Court further clarified that a corporate guarantee is a financial debt even if it was not invoked before commencement of the CIRP.
The Bombay High Court in Aarem Insights v. Joint Commissioner of State Tax (Appeals)- VII has held that tax authorities cannot continue recovery proceedings for pre-CIRP dues which stand extinguished under a Resolution Plan approved by the NCLT.
The NCLAT, New Delhi in SBI v. Garden Court Distilleries has held that Liquidation Regulations as on date of passing liquidation order would be applicable on the auction process of the corporate debtor and not the regulations as amended four days after the liquidation order. It was held that subsequent amendment cannot retrospectively alter the legal character or foundation of a liquidation process which had already commenced and had received the imprimatur of the NCLT.
In Phoenix ARC v. Rajesh Jhunjhunwala, NCLAT set aside the order of liquidation passed by NCLT, on ground that NCLT should have considered the recovery prospects of an arbitral claim before ordering liquidation. It further observed that NCLT had not given cogent reasons for rejecting the creditors’ unanimous decision to revive CIRP.
Disclaimer
The content provided in this newsletter is intended for general awareness and should not be considered as legal advice. Readers are advised to consult with a qualified legal professional regarding any specific issues mentioned herein. If you have any questions about any of these developments or would like to see something different next month, reach out to us at knowledge@sarthaklaw.com.