Hello! Welcome back to our updates from the insolvency law landscape in India.
In the News
As per report issued by ICRA, number of resolution plans approved by NCLT in FY 2024-25 showed a marginal dip to 259 cases from 263 plans approved in previous financial year. However, Q4FY25 has seen peak realizations of approximately 70 per cent against admitted claims.
The government is planning to bring an amendment in section 31(4) of the Insolvency and Bankruptcy Code, 2016 (IBC) which requires the resolution applicant to seek CCI approval for resolution plans involving combinations before they approach the Committee of Creditors.
A recent study by Indian Institute of Management, Bangalore states that enactment of IBC has prompted borrowers to adhere to stipulated payment schedules.
IREDA has filed a petition under section 7 of the IBC to initiate corporate insolvency resolution process against Gensol Engineering Limited for default of Rs. 510 crores.
NCLT Mumbai has approved resolution plan submitted by Nazara Technologies for acquisition of Smaash Entertainment Private Limited for Rs. 126 crores.
From the Docket
The Supreme Court in VISA Coke v. Mesco Kalinga Steel, held that delivery of a demand notice under Section 8 of the IBC to the corporate debtor’s Key Managerial Personnel (KMP) amounts to substantial compliance with the statutory requirement. Setting aside the NCLAT’s contrary view, the Supreme Court ruled that such delivery constitutes valid and deemed service of notice, thereby allowing the appeal filed by the Operational Creditor.
The Himachal Pradesh High Court in Elecon Engineering v. Inox Wind , held that winding-up petitions under the Companies Act should be transferred to the NCLT for resolution under the IBC, unless the company’s liquidation is inevitable or the proceedings have reached an irreversible stage. The Court emphasised that efforts must be made to revive companies, in line with Section 434(1)(c) of the Companies Act, 1956.
In Ashwani Kumar Bhatia v. Union of India , the Madras High Court upheld the validity of the IBBI’s circular dated 21.12.2023, which permits creditors to recommend the name of a Resolution Professional in applications under Section 95 of the IBC. The Court ruled that this does not violate Section 97 of the IBC and facilitates a more efficient resolution process.
The NCLAT in Apresh Garg v. Indian Bank , held that the consideration of a debt restructuring plan by a majority of consortium lenders does not prevent an individual member from independently initiating insolvency proceedings under Section 7 of the IBC, as permitted by the facility agreement.
In State Tax Officer v. Premraj Ramratan Laddha the NCLAT held that a statutory charge created under Section 48 of the Gujarat VAT Act, following assessment prior to the initiation of CIRP, entitles the State to be treated as a secured creditor under Section 53 of the IBC.
The NCLAT in Jayshree Agnihotri v. Nirmal Kumar Jain , upheld the admission of CIRP against Pushp Ratna Realty Pvt. Ltd., and also affirmed the rejection of a settlement offer opposed unanimously by homebuyers. The Appellate Tribunal held that homebuyers who have lost faith in the developer are entitled to seek insolvency resolution.
In Asha Basantilal Surana v. SBI , the NCLAT held that a notice under Section 13(2) of the SARFAESI Act demanding payment from the guarantor amounts to invocation of the personal guarantee.
In Amier Hamsa Ali Abbas Rawther v. NLC , the NCLAT, held that the NCLT cannot adjudicate disputed contractual claims during liquidation proceedings under the IBC where the underlying contract contains an arbitration clause. The Appellate Tribunal observed that such disputes must be resolved through the agreed arbitral forum, and IBC forums are not the appropriate venue for adjudicating or recovering such claims.
In Rolta v. Varanium Cloud , the NCLAT held that liberty granted to file a fresh application under Section 7 does not allow an applicant to alter the date of default to circumvent the limitation period.
The NCLAT in Mr. Ramprasad Vishvanath v. Mr. Dinesh Kumar Deora , held that only the Resolution Professional is authorised to file applications for avoidance of preferential transactions under Section 43 of the IBC. An application filed by an individual homebuyer is not maintainable.
In Vashishth Builders and Engineers v. Trishul Dream Homes , the NCLAT held that the Adjudicating Authority cannot reject a resolution plan on valuation grounds, if no objections were raised by stakeholders during the CIRP.
The NCLAT in Indian Bank v. Anjanee Kumar Lakhotia ,held that once a fresh personal guarantee is executed post-restructuring, the lender cannot invoke the earlier guarantee to initiate proceedings under Section 95 of the IBC.
In Sashi Kanta Jha v. Devi Prasad ,the NCLAT held that a claim for gratuity along with interest qualifies as operational debt under Section 5(21) of the IBC and is maintainable under Section 9.
The NCLAT in G.V. Marry v. SEBI , held that a penalty imposed by SEBI qualifies as a “fine” and therefore constitutes an “excluded debt” under Section 79(15)(a) of the IBC and as such, despite the order of bankruptcy, the duty to pay such penalty is not discharged.
Thank you for reading! We will be back again with more updates on insolvency.
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.