Hello! Welcome back to our updates from the insolvency law landscape in India.
In the news
For the first time, National Company Law Tribunal (“NCLT”) has formed a 5-member bench to decide upon the repayment plan of Subhash Chandra who is facing personal insolvency proceedings. This bench was formed after a 2-member bench held that no majority opinion had emerged on his repayment plan.
Ministry of Corporate Affairs is examining the possibility of litigation funding for preferential, undervalued, fraudulent, and extortionate (“PUFE”) transactions under the Insolvency and Bankruptcy Code, 2016 (“IBC”) as PUFE claims are often not pursued due to lack of funds which diminishes the worth of corporate debtor. Third party funding for PUFE litigation may lead to more recoveries for corporate debtors undergoing insolvency proceedings.
Directorate of Enforcement has arrested Jitesh Gupta, Insolvency Professional, who acted as Resolution Professional in the Corporate Insolvency Resolution Process (“CIRP”) of Homestead Infrastructure Development Pvt. Ltd. and Golden Peacock Residence Pvt. Ltd. in connection with alleged money laundering investigation against a company named Best Foods Ltd., one of the largest processors of premium basmati rice in the country. Directorate of Enforcement has alleged that Jitesh Gupta suo motu re-admitted claims earlier rejected by him as spurious and fraudulent.
From the docket
Litigant cannot be made to suffer due to technical glitch in filing portal – The Supreme Court in Regional Provident Fund Commissioner – II v. Ms. Mamta Binani & Ors has held that the National Company Law Appellate Tribunal (“NCLAT”) ought to have invoked the principle of “actus curiae neminem gravabit” (an act of the court shall prejudice no one) when there was delay of one day beyond the maximum period prescribed under section 61 of IBC in filing the appeal before NCLAT because of technical glitch in the e-filing portal.
Uncrystallized damages cannot be treated as operational debt – In Srinivasa Reddy Velagala. Sravanthi Infratech Pvt. Ltd., the Supreme Court held that damages, whether liquidated or unliquidated, cannot be treated as operational debts unless and until they are assessed and crystallized by way of adjudication by a court of competent jurisdiction.
Homebuyer invoking arbitration for refund are not financial creditor – NCLAT in Sumit Bansal v. Rajeev Lochan has held that if a homebuyer has exercised his right to seek refund of amount from builder and has invoked arbitration clause in the agreement then such homebuyer cannot be considered as financial creditor under section 5(8) of the IBC.
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.