1. Analysis of NCLT & NCLAT order
On
IBC, 2016
{Half Day seminar by ICSI – Hyderabad Chapter}
by
CS R.Ramakrishna Gupta
Senior Partner,
R & A Associates
June 2, 2017
1

2. 1) Operating Provisions of IBC 2016 - Recap
2) Case Study
3) Grounds for Rejection
4) Q & A
Agenda
2

3. Key Definitions
3
Sections Definition Issues
3(7) Corporate Person –
-A Company
- LLP
- Any other person as Limited Liability under any previous law
- But doesn't include Financial Service Providers
Whether NBFC doing non
financial services would
cover under this?
3(17) Financial Service Provider means a person engaged in the business of
providing financial services in terms of authorisation issued or registration
granted by a financial sector regulator;
3(13) “Financial Information", in relation to a person, means one or more of the
following categories of information, namely:—
a) records of the debt of the person;
b) records of liabilities when the person is solvent;
c) records of assets of person over which security interest has been
created;
d) records, if any, of instances of default by the person against any
debt;
e) records of the balance sheet and cash-flow statements of the

4. Key Definitions
4
Sections Definition Issues
5(5)
3 (11)
“Corporate Applicant" means—
a) corporate debtor; or
b) a member or partner of the corporate debtor who is
authorised to make an application for the corporate
insolvency resolution process under the constitutional
document of the corporate debtor; or
c) an individual who is in-charge of managing the
operations and resources of the corporate debtor; or
d) a person who has the control and supervision over the
financial affairs of the corporate debtor;
"debt" means a liability or obligation in respect of a claim
which is due from any person and includes a financial debt and
Whether Occupier of
the Factory would be
treated as Corporate
Debtor?

5. Key Definitions
5
Sections Definition Issues
3(6) "claim" means—
(a) a right to payment, whether or not such right is
reduced to judgment, fixed, disputed, undisputed,
legal, equitable, secured or unsecured;
(b) right to remedy for breach of contract under any
law for the time being in force, if such breach gives
rise to a right to payment, whether or not such right is
reduced to judgment, fixed, matured, unmatured,
disputed, undisputed, secured
or unsecured;
Whether Occupier
of the Factory
would be treated
as Corporate
Debtor?

6. Key Definitions
6
Sections Definition Issues
5(6) “Dispute" includes a suit or arbitration proceedings relating to—
(a) the existence of the amount of debt;
(b) the quality of goods or service; or
(c) the breach of a representation or warranty
Whether for being dispute
the same need to be
litigated?
“Disputes definition pronounced in Lanco Infratech Limited"—
“The definition of dispute in the Code in an inclusive (and not an exhaustive)
definition and cannot be limited to existence of the Suit or Arbitration
proceeding. This is evident from reading of the definition of "dispute" in the
code, which states that "Dispute includes a suit or arbitration proceedings".
All cases of dispute do not and need not necessarily result in a suit or an
arbitration proceeding prior to the notice. If the intent of the legislature was
to limit dispute to a suit or arbitration proceeding, it would have used the
term "means" instead of "includes" in the definition of "dispute". The
language in one of the forms under Insolvency and Bankruptcy (Application
to Adjudicating Authority) Rules, 2016 (as relied by the Petitioner) cannot
supersede or override the definition of dispute in the Code.”

7. Key Definitions
7
Sections Definition
5(8) “Financial Debt" means a debt alongwith interest, if any, which is disbursed against the consideration
for the time value of money and includes—
a) money borrowed against the payment of interest;
b) any amount raised by acceptance under any acceptance credit facility or its de-materialised
equivalent;
c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes,
debentures, loan stock or any similar instrument;
d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as
a finance or capital lease under the Indian Accounting Standards or such other accounting
standards as may be prescribed;
e) receivables sold or discounted other than any receivables sold on nonrecourse basis;
f) any amount raised under any other transaction, including any forward sale or purchase
agreement, having the commercial effect of a borrowing;
Note: Whether interest fee note would be covered?

8. Key Definitions
8
Sections Definition Issues
5(8) g) any derivative transaction entered into in connection with protection against or
benefit from fluctuation in any rate or price and for calculating the value of any
derivative transaction, only the market value of such transaction shall be taken
into account;
h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond,
documentary letter of credit or any other instrument issued by a bank or
financial institution;
i) the amount of any liability in respect of any of the guarantee or indemnity for
any of the items referred to in sub-clauses (a) to (h) of this clause;
5(13) “Insolvency Resolution Process Costs" means—
a) the amount of any interim finance and the costs incurred in raising such
finance;
b) the fees payable to any person acting as a resolution professional;
c) any costs incurred by the resolution professional in running the business of the
corporate debtor as a going concern;
d) any costs incurred at the expense of the Government to facilitate the insolvency
resolution process; and
e) any other costs as may be specified by the Board;

9. Key Definitions
9
Sections Definition
5(7) “Financial Creditor" means any person to whom a financial debt is owed and includes a person to whom such debt
has been legally assigned or transferred to;
5(20) “Operational Creditor" means a person to whom an operational debt is owed
and includes any person to whom such debt has been legally assigned or transferred;
5(21) “Operational Debt" means a claim in respect of the provision of goods or
services including employment or a debt in respect of the repayment of dues arising under any law for the time
being in force and payable to the Central Government, any State Government or any local authority;
5(28) “Voting Share" means the share of the voting rights of a single financial
creditor in the committee of creditors which is based on the proportion of the financial debt owed to such financial
creditor in relation to the financial debt owed by the corporate debtor.

10. CIRP by Financial Creditors –
Relevant Provisions
10

11. Section 7: Initiation of corporate insolvency resolution process by financial creditor.
1) Filing application: A financial creditor either by itself or jointly with other financial creditors may file an application for
initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a
default has occurred.
Explanation.—For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to
the applicant financial creditor but to any other financial creditor of the corporate debtor.
2) Form of application: The financial creditor shall make an application under sub-section (1) in such form and manner and
accompanied with such fee as may be prescribed.
3) Info / Docs to furnish along with Application: The financial creditor shall, along with the application furnish— (a) record
of the default recorded with the information utility or such other record or evidence of default as may be specified; (b)
the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other
information as may be specified by the Board.
4) AA to ascertain the default: The Adjudicating Authority shall, within fourteen days of the receipt of the application under
sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other
evidence furnished by the financial creditor under sub-section (3).
CIRP by Financial Creditor
11

12. (5) Where the Adjudicating Authority is satisfied that—
(a) a default has occurred and the application under sub-section (2) is complete, and there is no
disciplinary proceedings pending against the proposed resolution professional, it may, by order,
admit such application; or { Admit the application}
(b) (b) default has not occurred or the application under sub-section (2) is incomplete or any
disciplinary proceeding is pending against the proposed resolution professional, it may, by order,
reject such application: Provided that the Adjudicating Authority shall, before rejecting the
application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect
in his application within 7 days of receipt of such notice from the Adjudicating Authority. {Reject
the application}
(6) Commencement of CIRP: The corporate insolvency resolution process shall commence from the
date of admission of the application under sub-section (5).
(7) The Adjudicating Authority shall communicate— (a) the order under clause (a) of sub-section (5)
to the financial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) to
the financial creditor, within seven days of admission or rejection of such application, as the case may
CIRP by Financial Creditor
12

13. Rule 4 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016
Application by financial creditor.—
1) A financial creditor, either by itself or jointly, shall make an application for initiating the corporate insolvency
resolution process against a corporate debtor under section 7 of the Code in Form 1, accompanied with
documents and records required therein and as specified in the Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
2) Where the applicant under sub-rule (1) is an assignee or transferee of a financial contract, the application
shall be accompanied with a copy of the assignment or transfer agreement and other relevant
documentation to demonstrate the assignment or transfer.
3) The applicant shall dispatch forthwith, a copy of the application filed with the Adjudicating Authority, by
registered post or speed post to the registered office of the corporate debtor.
4) In case the application is made jointly by financial creditors, they may nominate one amongst them to act on
their behalf.
CIRP by Financial Creditor
13

14. Rule 8 of IBBI (IRP For Corporate Persons) Regulations, 2016
8. Claims by financial creditors.
1) A person claiming to be a financial creditor of the corporate debtor shall submit proof of claim to the IRP
in electronic form in Form C of the Schedule:
Provided that such person may submit supplementary documents or clarifications in support of the claim
before the constitution of the committee.
2) The existence of debt due to the financial creditor may be proved on the basis of -
a) the records available with an information utility, if any; or
b) other relevant documents, including -
i. a financial contract supported by financial statements as evidence of the debt;
ii. a record evidencing that the amounts committed by the financial creditor to the corporate
debtor under a facility has been drawn by the corporate debtor;
iii. financial statements showing that the debt has not been repaid; or
iv. an order of a court or tribunal that has adjudicated upon the non-payment of a debt, if any.
CIRP by Financial Creditor
14

15. CIRP by Operational Creditors
– Relevant Provisions
15

16. Section 8: Insolvency resolution by operational creditor.
1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational
debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in
such form and manner as may be prescribed.
2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the
invoice mentioned in sub-section (1) bring to the notice of the operational creditor—
a) existence of a dispute, if any, and record of the pendency of the suit or arbitration proceedings filed before
the receipt of such notice or invoice in relation to such dispute;
b) the repayment of unpaid operational debt—
i. by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank
account of the corporate debtor; or
ii. by sending an attested copy of record that the operational creditor has encashed a cheque issued by
the corporate debtor.
Explanation.—For the purposes of this section, a "demand notice" means a notice served by an operational
creditor to the corporate debtor demanding repayment of the operational debt in respect of which the default has
occurred
CIRP by Operational Creditors
16

17. Section 9: Application for initiation of corporate insolvency resolution process by
operational creditor.
(1) After the expiry of the period of 10 days from the date of delivery of the notice or invoice demanding payment under sub-
section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the
dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority
for initiating a corporate insolvency resolution process.
(2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be
prescribed.
(3) The operational creditor shall, along with the application furnish—
a) a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate
debtor;
b) an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid
operational debt;
c) a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that
there is no payment of an unpaid operational debt by the corporate debtor; and
d) (d) such other information as may be specified.
CIRP by Operational Creditors
17

18. (4) An operational creditor initiating a corporate insolvency resolution process under this
section, may propose a resolution professional to act as an interim resolution professional.
(5) The Adjudicating Authority shall, within 14 days of the receipt of the application under sub-
section (2), by an order—
i. admit the application and communicate such decision to the operational creditor and
the corporate debtor if,—
a) the application made under sub-section (2) is complete;
b) there is no repayment of the unpaid operational debt;
c) the invoice or notice for payment to the corporate debtor has been delivered by the
operational creditor;
d) no notice of dispute has been received by the operational creditor or there is no
record of dispute in the information utility; and
e) there is no disciplinary proceeding pending against any resolution professional
proposed under sub-section (4), if any..
CIRP by Operational Creditors
18

19. (ii) reject the application and communicate such decision to the operational creditor and the
corporate debtor, if—
a) the application made under sub-section (2) is incomplete;
b) there has been repayment of the unpaid operational debt;
c) the creditor has not delivered the invoice or notice for payment to the corporate debtor;
d) notice of dispute has been received by the operational creditor or there is a record of
dispute in the information utility; or
e) any disciplinary proceeding is pending against any proposed resolution professional:
Provided that Adjudicating Authority, shall before rejecting an application under sub-clause (a)
of clause (ii) give a notice to the applicant to rectify the defect in his application within seven
days of the date of receipt of such notice from the adjudicating Authority.
(6) The corporate insolvency resolution process shall commence from the date of admission of
the application under sub-section (5) of this section.
CIRP by Operational Creditors
19

20. Rule 5 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016:
5. Demand notice by operational creditor.—
1) An operational creditor shall deliver to the corporate debtor, the following documents, namely.-
a) a demand notice in Form 3; or
b) a copy of an invoice attached with a notice in Form 4.
2) The demand notice or the copy of the invoice demanding payment referred to in sub-section (2) of section 8 of
the Code, may be delivered to the corporate debtor,
a) at the registered office by hand, registered post or speed post with acknowledgement due; or
b) by electronic mail service to a whole time director or designated partner or key managerial personnel, if
any, of the corporate debtor.
3) A copy of demand notice or invoice demanding payment served under this rule by an operational creditor shall
also be filed with an information utility, if any.
CIRP by Operational Creditors
20

21. Rule 6 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016
6. Application by operational creditor.—
1) An operational creditor, shall make an application for initiating the corporate insolvency
resolution process against a corporate debtor under section 9 of the Code in Form 5,
accompanied with documents and records required therein and as specified in the
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016.
2) The applicant under sub-rule (1) shall dispatch forthwith, a copy of the application filed with
the Adjudicating Authority, by registered post or speed post to the registered office of the
corporate debtor.
CIRP by Operational Creditors
21

22. Rule 7 of IBBI (IRP for Corporate Persons) Regulations, 2016
7. Claims by operational creditors.
(1) A person claiming to be an operational creditor, other than workman or employee of the
corporate debtor, shall submit proof of claim to the interim resolution professional in person, by
post or by electronic means in Form B of the Schedule:
Provided that such person may submit supplementary documents or clarifications in support of
the claim before the constitution of the committee
CIRP by Operational Creditors
22

23. Rule 7 of IBBI (IRP for Corporate Persons) Regulations, 2016
9. Claims by workmen and employees.
(1) A person claiming to be a workman or an employee of the corporate debtor shall submit proof of claim to the interim
resolution professional in person, by post or by electronic means in Form D of the Schedule:
Provided that such person may submit supplementary documents or clarifications in support of the claim, on his own or if
required by the interim resolution professional, before the constitution of the committee.
(2) Where there are dues to numerous workmen or employees of the corporate debtor, an authorised representative may
submit one proof of claim for all such dues on their behalf in Form E of the Schedule.
(3) The existence of dues to workmen or employees may be proved by them, individually or collectively on the basis of -
(a) records available with an information utility, if any; or
(b) other relevant documents, including -
i. a proof of employment such as contract of employment for the period for which such workman or employee is
claiming dues;
ii. evidence of notice demanding payment of unpaid dues and any documentary or other proof that payment has
not been made; or
iii. (iii) an order of a court or tribunal that has adjudicated upon the non-payment of a dues, if any.
CIRP by Operational Creditors
23

24. CIRP by Corporate Debtor–
Relevant Provisions
24

25. Section 10: Initiation of corporate insolvency resolution process by corporate
applicant.
1) Where a corporate debtor has committed a default, a corporate applicant thereof may file an application for
initiating corporate insolvency resolution process with the Adjudicating Authority.
2) The application under sub-section (1) shall be filed in such form, containing such particulars and in such
manner and accompanied with such fee as may be prescribed.
3) The corporate applicant shall, along with the application furnish the information relating to—
a) its books of account and such other documents relating to such period as may be specified; and
b) the resolution professional proposed to be appointed as an interim resolution professional.
CIRP by Corporate Debtor
25

26. (4) The Adjudicating Authority shall, within a period of fourteen days of the receipt of the
application, by an order—
(a) admit the application, if it is complete; or
(b) reject the application, if it is incomplete:
Provided that Adjudicating Authority shall, before rejecting an application, give a notice to the
applicant to rectify the defects in his application within seven days from the date of receipt of
such notice from the Adjudicating Authority.
(5) The corporate insolvency resolution process shall commence from the date of admission of
the application under sub-section (4) of this section.
CIRP by Corporate Debtor
26

27. Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016
7. Application by corporate applicant.—
1) A corporate applicant, shall make an application for initiating the corporate insolvency resolution process
against a corporate debtor under section 10 of the Code in Form 6, accompanied with documents and records
required therein and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016.
2) The applicant under sub-rule(1) shall dispatch forthwith, a copy of the application filed with the Adjudicating
Authority, by registered post or speed post to the registered office of the corporate debtor.
8. Withdrawal of application.—
The Adjudicating Authority may permit withdrawal of the application made under rules 4, 6 or 7, as the case may
be, on a request made by the applicant before its admission.
CIRP by Corporate Debtor
27

28. Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016
7. Application by corporate applicant.—
1) A corporate applicant, shall make an application for initiating the corporate insolvency resolution process
against a corporate debtor under section 10 of the Code in Form 6, accompanied with documents and records
required therein and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016.
2) The applicant under sub-rule(1) shall dispatch forthwith, a copy of the application filed with the Adjudicating
Authority, by registered post or speed post to the registered office of the corporate debtor.
8. Withdrawal of application.—
The Adjudicating Authority may permit withdrawal of the application made under rules 4, 6 or 7, as the case may
be, on a request made by the applicant before its admission.
CIRP by Corporate Debtor
28

29. Case Analysis – Financial Creditor
matters
29

30. Case Study 1
Innoventive Industries Ltd Vs ICICI Bank Anr.
30

31.  Facts of the Case in brief:
 Innoventive (CD) defaulted in in repayment of facilities availed from ICICI Bank to the tune of
Rs. 101.92 Crores
 ICICI Bank (FC) filed application u/s. 7 with NCLT Mumbai for initiation of CIRP
 Financial Creditor
Defense by Innoventive:
 Tribunal not served any notice to CD – CD joined in the application
 As on date of filing Debts of Innoventive was suspended under Maharashtra Relief Undertaking
(Special Provisions) Act, 1958 for a period of one year
 Maharashtra Govt has given subsidy to the tune of Rs. 115.36 Crores
 This suspense was as a measure of preventing unemployment
 Innoventive argued that since Industry, Energy and Labour Dept. of Maharashtra has passed
above relief suspending its liabilities for One year, ICICI Bank should not have invoked this
provisions and filed a petition under IBC
 To substantiate their case, Counsel of Innoventive submitted that
 Sec 4 of above act provides for Non-obstante Clause with overriding effect.
 Non-obstante clause in Section 238 of IBC, 2016 and in above Act operates in different fields.
Case Study 1: Innoventive Industries Ltd Vs ICICI Bank Anr.
31

32.  NCLT order – Grounds of admission and the Case in brief:
 Bench observed that both IBC and Relief act has non-obstante Clauses
 Code being a later legislation would prevail over Relief Act
 Object of Relief Act is to prevent unemployment, - passing of order U/s. 7 of Code will not
cause any obstruction to their employment until 180 days even if the Company goes in
liquidation
 Liability suspect in Relief Act is being inconsistent with the default occurred to the debt payable
to the Creditor
 Bench noted that the Innoventive defaulted the debt and hence admitted the application
 Appointed IRP and Moratorium was announced.
Case Study 1: Contd..
32

33.  Innoventive appealed to NCLAT, Delhi on the following grounds:
 Tribunal Passed order without notice to appellant against the Principles Natural justice as
stipulated u/s. 424 of CA, 2013
 Serious civil consequences ensue due to public announcement of the initiation of CIRP and
appointment of IRP to manage affairs
 Tribunal being a creation of CA, 2013 is bound by Section 420 which stipulates ‘reasonable
opportunity of being heard’ to be given to all parties before passing order.
 Section 424 of CA, 2013 grants liberty to Tribunal to regulate its own procedure so these section
cast a duty on Tribunal to serve a notice
 Maharashtra Relief Undertaking Act being beneficial piece of legislation will prevail over IBC,
2016
 Maharashtra Relief Undertaking Act being a legislation referable under Entry 24 of List II to
Schedule & of the Constitution operates in different field
 Non-application of mind by Tribunal as Section 7 cast a duty on tribunal to ascertain the default,
which is not possible without verifying the documents with CD
Case Study 1: Contd..
33

34.  NCLAT Findings:
 Appellate Tribunal reviewed various Supreme Courts judgements submitted by ICICI Bank
Counsel and found that as the initiation of CIRP will adverse consequences, Tribunal should
adopt cautious approach and ensure adherence to Principals of Natural Justice.
 In this as the Innoventive intervened before the admission of case and the Tribunal heard the
objections, mere absence of notice may not make the Tribunal order illegal.
 Maharashtra Relief undertaking Act is a state legislation. IBC 2013 is union Act and legislated
later so the non-obstante clause in 238 will prevail over Maharashtra Relief Undertaking Act
 Adjudicating Authority is required to satisfy the following conditions before admitted the
petition:
 Whether a default has occurred?
 Whether an application is complete? And
 Whether any disciplinary proceedings against IRP?
 Appeal dismissed as it finds no merits in it.
Case Study 1: Contd..
34

35. Conclusions:
 Proceedings before NCLT are not adversarial in nature
 NCLT is bound to adopt cautious approach and ensure adherence to Principals of Natural
Justice.
 If both the parties are heard, mere absence of notice may not make the Tribunal order illegal.
 Adjudicating Authority is required to satisfy the following conditions before admitting the
petition:
 Whether a default has occurred?
 Whether an application is complete? And
 Whether any disciplinary proceedings against IRP?
Case Study 1: Contd..
35

36. Case Study 2
Urban Infrastructure Trustee Ltd (FC)
vs
Neelakanth Township and Construction Pvt Ltd. (CD)
36

37.  Facts of the Case in brief:
 Neelakanth issued Optionally Fully Convertible Debentures (OFCDs) of Rs. 100/- each to FC
 Neelakanth defaulted in repayment on maturity
 FC has filed the petition u/s. 7 for initiation of CIRP
Objections by Neelakanth:
 No evidence of proof that they have committed default
 No Stamp duty is paid on Debentures and hence they are admissible as an evidence as provided
in Section 35 of the Indian Stamp Act
 Basing on the Debenture Certificate 3 Years limitation period has expired and hence this
petition is liable to be dismissed
 Default showing in the Balance Sheet does not amount to acknowledgement of debt
 Claim for repayment was already been disputed under Section 21 of Arbitration and
Conciliation Act, 1996 and arbitration proceedings have commenced.
Case Study 2: Urban Infrastructure Trustee Ltd (FC) vs
Neelakanth Township and Construction Pvt Ltd. (CD)
37

38.  NCLT Findings:
NCLT heard both the parties and decided to examine and answer the following questions:
 Whether enough evidence u/s. 7 is submitted?
 Whether deficiency of Stamp Duty will invalidate the debenture certificates or not?
 Whether debt is time barred or not?
 Whether pendency of Arbitration Proceedings will have bearing on this proceedings?
 Whether applicant herein can file the application as FC while he is continuing as one of the
Shareholder?
Case Study 2: Urban Infrastructure Trustee Ltd (FC) vs
Neelakanth Township and Construction Pvt Ltd. (CD)
38

39.  NCLT Findings:
 Whether enough evidence u/s. 7 is submitted?
 CD consistently showing the default of repayment of OFCDs in their Annual Reports and
notes of the Financial Statements despite debentures matured in the past
 The CD counsels’ contension that ‘record or evidence of default’ appearing in Section 7 (3)
(a) cannot in any manner be read to mean ‘any other document or any other evidence’ as
contemplated under Section 240 (2) (f) of code was deied
 As CD consistently showing the default of repayment of OFCDs in their Annual Reports
and notes of the Financial Statements , it cant say that ‘record or evidence of default’ as
specified under the regulations or rules has not been procuded
 Reg 8 of IRP for CP regulation provides that financial statements is one of the basis for
evidence of debt.
Case Study 2: Urban Infrastructure Trustee Ltd (FC) vs
Neelakanth Township and Construction Pvt Ltd. (CD)
39

40.  NCLT Findings:
 Whether deficiency of Stamp Duty will invalidate the debenture certificates or not?
 As the OFCDs are unlisted and hence not a marketable security and requires no Stamp Duty
 More over OFCDs are already matured so, stamp duty not paid contention would not arise
 Whether debt is time barred or not?
 As the debt is shown due in FS for 2015-16 which are rem in nature it is to be construed as
an acknowledgment of debt
 Whether pendency of Arbitration Proceedings will have bearing on this proceedings?
 Combined reading of Section 63, 231 and 238 of the Code provides that no Civil Court has
jurisdiction in respect of matters in IBC
 Pendency of any proceedings before any court will not have any beaing
 Whether applicant herein can file the application as FC while he is continuing as one of the
Shareholder?
 There is no legal bar against this applicant even though 90% of the fund risen is though this
claim
Case Study 2:
40

41. Case Analysis – Operational Creditor
Matters
41

42. Case Study 1
Uttam Galva Steel Ltd.
Vs
DF Deutsche Forfait AG and Anr.
42

43.  Facts of the Case in brief:
 DF Deutsche Fortait AG (Deutsche) and Misr Bank Europe GmBH (Misr Bank) are Operational
Creditors
 Op Cs filed application u/s. 9 for initiation of CIRP for default of USD 1,65,42,886.33 (principle
plus interest) towards supply of 20,000 tons of prime steel billet supplied by a German
Company AIC Handels GmbH
 AIC Handels GmbH entered into forfeiting Agreement with Deutsche, which Uttam
Acknowledged
 Later Deutsche assigned part of receivable to Misr Bank by entering into forfeiting agreement
with, which Uttam has not acknowledged.
 Both Deutsche and Misr Bank filed application u/s. 8 with NCLT Mumbai for initiation of CIRP
Case Study 1: Uttam Galva Steel Ltd Vs DF Deutsche Forfait AG and Anr.
43

44.  Defense by Innoventive:
 Goods delivered are to 3rd Party namely M/s. Aartee Commodities Ltd and not to Uttam
 Subsequent assignment to Misr Bank is not valid as Uttam has not acknowledged by it
 Uttam has timely raised notice of dispute within 10 days after receipt of demand notice u/s. 8
 Petition is incomplete as no affidavit stating no notice of demand has not been filed by OCs
 Deutch and Misr Bank are not Operational Creditors of Uttam
 Deutch and Misr Bank never initiated recovery proceedings until this petition filed
 Since Deutch further assigning is dispute in fact not to be tried u/s. 9
 Sale contract is governed by English Law
 Interest on principle was not admitted by Uttam
 Power of Attorney given to OCs does not specifically provided for approaching NCLT under
IBC
 Uttam is listed Company providing employment 1,4000 people and has impeccable trach record
Case Study 1: Uttam Galva Steel Ltd Vs DF Deutsche Forfait AG and Anr.
44

45.  NCLT Mumabi Bench Analysis of IBC, 2016:
 There can’t be any pleading part in FORMS filed u/s 7, 9 & 10
 No pleading or defending party, the terminology like Petitioner / Respondent or plaintiff /
defendant is note present in the CODE
 IBC does not provides that proceeding under IBC are adversarial proceedings and no law in
India provides that Court proceedings are adversarial proceedings
 We can’t hang on to the conventional approach which has been inherent in us that a legal
proceedings shall be adversarial only, we are governed by democratic system, henceforth we
have to go by the mandate given by legislature
 The definition of “dispute” includes a suit or arbitration proceedings, now point for
determination is as to whether the word ‘includes” is extensive as generally understood or in
any other way?
 On perusal of Section 7,8,9 & 10 the word “Dispute” no where appears except in Section 8 & 9
and hence the definition has to be understood in a meaningful way.
Case Study 1: Uttam Galva Steel Ltd Vs DF Deutsche Forfait AG and Anr.
45

46.  NCLT Mumabi Bench Analysis of IBC, 2016:
 Tribunal disagrees with the view that the word “and” should be read as “or” so as to harmonise
with the inclusive definition to the word “dispute”
 NCLT finds that “definition section will not govern the substantive law”
 Definition has to be understood in the context of substantive law
 “Dispute is a genesis, pendency of suit or arbitration proceedings are species.
 If CD reply is given denying the dispute despite default occurrence is clear, does it mean that no
application can be filed by any Op C even though the Op C makes a case of default occurrence?
 It this is so, it will be virtually ousting Op C filing any case u/s. 9. If this scenario emerges,
then it will be nothing but throwing this law into dust bin.
 Though there are may decisions of Supreme Court holding that the word ‘includes’ is extensive
in nature, there are equally many number of cases saying that this word has to be understood
in the context it is applied.
 Section 8 is cause of action to Section 9. So if any provision in Sec 9 appears inconsistent that
provision has to be read in harmony with Section 8
 A miss out in one case can’t become a ratio to repeat the same mistake again and defeat the
Case Study 1: Uttam Galva Steel Ltd Vs DF Deutsche Forfait AG and Anr.
46

47. Case Study 2
Mr. Sanjay Kumar Rui
Chartered Accountant
Vs
M/s. Magna Opus Hospitality Private Ltd.
47

48.  Facts of the Case in brief:
 Mr. Sanjay Kumar Ruia is a Charted Accountant and Op Creditor
 Op C has provided Professional Services and Advisory Services to C D
 OC defaulted in payment to Op C
 NCLT directed Op C to serve notice to C D
 Amount involved is Professional Fee of Rs. 2,29,345 and Rs. 38,44, 389/- toward Advisory
Services
 Op C claim that amount outstanding against CD is in the nature of Professional Fees
 “Operation Debt” means a claim in respect to provision of goods or services including
employment…
 The definition of “Service” includes the professional services rendered by Chartered Accountant
Case Study 2: Mr. Sankay Kumar Ruia vs Magna Opus Hospitality Pvt Ltd.
48

49.  NCLT Mumbai Bench Findings:
 Professional services provided by a Chartered Accountant definitely fall under the expression
“Services” as incorporated in “Operational Debt” defined under Section 5 (21)
 Once it is held that the impugned debt falls within the ambit of “Operational Debt” it is to be
adjudicated under Section 8 and 9 of IBC, 2016
 After the expiry of 10 days period, Op C has not received any payment nor notice of existence of
dispute
 Application admitted and declared CIRP commenced
 IRP appointed
Case Study 2: Mr. Sankay Kumar Ruia vs Magna Opus Hospitality Pvt Ltd.
49

50. Case Analysis – Corporate Debtor
Matters
50

51. Case Study 1
Unigreen Global Private Limited
51

52.  Facts of the Case in brief:
 Corporate Applicant filed petition u/s. 10 of IBC, 2016 for initiation of CIRP
 Application in Form 6 prescribed under IBBI (Adjudication Authority) Rules, 2016 was filed
with NCLT, Principal Bench, New Delhi
 NCLT Findings:
 IBC is to provide, inter alia, for CIRP by FC, Op C and CD
 CD should disclose the facts like, details of CD, date of incorporation, details of financial
creditor and operational creditor, Amount of debt, amount in default, details of security
provided, documents in support of existence of Financial Debt and Operational Debt and the
amount in default
 All the above information is required to NCLT to provide for sufficient ground for initiating
CIRP
 Since the process is self initiated all the disclosures must be trust and correct and must note be
made solely to scour for any concession it may get in the process including moratorium with a
view to deny the recovery of bona fide and lawful debt owed to its creditors, including
Case Study 1: Unigreen Global Private Ltd.
52

53.  NCLT Findings:
 In view of large amount due to Financial Creditors, NCLT directed to give notice to Financial
Creditors (4 Banks)
 NCLT has received objections from the Banks
 Banks demonstrated before the NCLT that CD has not disclosed the full facts in the petition
 Banks demonstrated that CD has instituted civil suits deliberately engineered and instigated
with a view to remove the properties mortgage from the accountability of the creditors
 Petitioners Directors have deliberately kept properties mortgaged in a legal entanglement in the
form of civil suit
 NCLT finds that the petitioners have not come with clean hands before this Tribunal in bring
out the necessary facts
 Petition is dismissed
 As provided in Section 65 a penalty of Rs. 10,00,000/- was imposed on the Corporate Debtor
and Directors
Case Study 1: Unigreen Global Private Ltd.
53

54. Case Analysis – Miscellaneous
54

55. 1. Whether High Court can exercise writ jurisdiction to stay the corporate insolvency
resolution process pending appeal to NCLAT u/s 61 of Insolvency Code? Held – Yes
Case – Uttam Galva Steels Ltd V/s Union of India & others [Writ Petition No. 1122 of 2017,
Bom High Court]
Facts ‐ The appellant CD, instead of filing appeal u/s 61 of Insolvency Code before the NCLAT,
preferred a writ petition under article 226 of Constitution of India before the Bombay High
Court seeking two weeks interim protection against initiation of CIRP by NCLT to file appeal
before the NCLAT.
HC Decision – HC, keeping in view the fact that no IRP is appointed and serious consequences
if IRP appointed, granted two weeks stay to CD.
Case Analysis - Miscellaneous
55

56. 2. Whether NCLAT can stay the commencement of CIRP pending decision in appeal u/s 61 of
Insolvency Code on the ground of ongoing settlement between the parties? Held – Yes
Case – Uttam Galva Steels Ltd V/s DF Deutche Forfait AG & others [Company Appeal (AT)
(Insolvency) No. 39 of 2017]
NCLAT Order – NCLAT, vide its order dated 28 April 2017, directed NCLT Mumbai not to
appoint IRP to commence the
CIRP as the parties were discussing settlement of dispute.
Case Analysis - Miscellaneous
56

57. 3. Whether NCLT is required to follow the principles of natural justice including in cases filed
by FC u/s 7 of Insolvency Code? Held – Yes
Case ‐ Innoventive Industries Ltd. v/s ICICI Bank & Anr. [Company Appeal (AT) (Insolvency) No. 1 & 2 of 2017]
Facts: ‐ The appellant/CD challenged the order of NCLT, Mumbai on various grounds including that the order was passed by
NCLT without notice to the Appellant/ CD against the principles natural justice, as stipulated under Section 424 of CA2013.
 Exception to the Principles of Natural Justice: After discussion the various judgments of the apex court, NCLAT
noted the following exception to the Principles of natural justice:
a) Exclusion in case of emergency,
b) Express statutory exclusion
c) Where discloser would be prejudicial to public interests
d) Where prompt action is needed,
e) Where it is impracticable to hold hearing or appeal,
f) Exclusion in case of purely administrative matters.
g) Where no right of person is infringed,
h) The procedural defect would have made no difference to the outcome.
i) Exclusion on the ground of ‘no fault’ decision maker etc.
j) Where on the admitted or undisputed fact only one conclusion is possible – it will be useless formality.
Case Analysis - Miscellaneous
57

58. 4. Whether NCLT can adjudicate two CIRP against the same CD? Held – No
Case ‐ Meyer Apparel Ltd. [Company Appeal (AT) (Insolvency) No. 33 & 34 of 2017]
Facts –
• Two OC, namely, Surbhi Body Products (P) Ltd and Godolo and Godolo Exports Pvt. Ltd filed application
against CD, viz., Meyer Apparel Ltd before NCLT, Chandigarh.
• NCLT heard both applications together and admitted both the applications.
• CD challenged order of NCLT on the ground of existing disputes that was accepted by both OC.
• A joint petition was been filed by the parties for disposal of both the appeal(s) in the light of the
‘settlement’ entered between the parties.
• NCLAT held the in case of exiting dispute, the application of OC is not maintainable.
• NCLAT further held that once in a petition under Section 7 or 9 of the Insolvency Code when CIRP is
initiated, NCLT has no jurisdiction to initiate another CIRP against the same very CD, though it may allow
the FC/OC to file claim pursuant to the advertisement issued, before the ‘IRP’.
Case Analysis - Miscellaneous
58

59. 6. Whether the definition of ‘Dispute’ is inclusive and not exhaustive? Held – Yes
Case ‐ Kirusa Software Pvt Ltd. V/s Mobilox Innovations Pvt Ltd. [Company Appeal (AT) (Insolvency) 6 of
2017]
• The definition of “Dispute” has been a contentious issue.
• NCLT Mumbai Bench said the definition of Dispute as ‘exhaustive’ even though the word ‘include’ was used
in the definition.
• NCLT Delhi Bench, on the other hand, said the definition of Dispute is not exhaustive but is, in fact,
illustrative.
NCLAT Conclusion –
‐ The definition of "Dispute" is "inclusive" and not "exhaustive". The same has to be given wide meaning
provided it is relatable to the existence of the amount of the debt, quality of good or service or breach of a
representation or warranty.’
‐ Once the term “Dispute” is given its natural and ordinary meaning, upon reading of the Insolvency Code as a
whole, the width of “dispute” should cover all disputes on debt, default etc. and not be limited to only two
ways of disputing a demand made by OC, i.e. either by showing a record of pending suit or by showing a record
of a pending arbitration.
Case Analysis - Miscellaneous
59

60. 7. Whether FC’s application is maintainable if there is difference in claim amount
mentioned in demand notice and application filed u/s 7 of Insolvency Code? Held – No
Case ‐ M/s. Starlog Enterprises Limited v/s ICICI Bank Limited. [Company Appeal (AT) (Insolvency) 5 of 2017]
Facts:
• Appellant challenged the other of NCLT Mumbai inter alia on the ground that application preferred by
Respondent FC under Section 7 is incomplete, misleading and being not bona‐fide.
• Appellant submitted that notice issued by FC on 06 February 2017 claimed nearly INR 10 crores whereas
the default amount mentioned in the application was nearly INR 29.81 crores.
NCLT Conclusion:
• NCLAT held that the ascertainment of existence of default by the NCLT u/s 7(4) of Insolvency Code has to be
based on the application/ other evidence submitted by FC, suffers from non‐application of mind given the
apparent and conspicuous mismatch between the amount demanded by the Respondent from the
Appellant in its demand notice dated 06 February 2017 and the amount stated to be in default in the said
application.
Case Analysis - Miscellaneous
60

61. NCLT Conclusion:
• NCLT further held that showing an incorrect claim, moving the application in a hasty manner and obtaining
an ex‐parte order from NCLT which admitted such an incorrect claim, FC cannot disprove its mala fide
intention by stating that the claim submitted is correct amount. The Insolvency Code does not provide for
any such mechanism where postadmission, the applicant FC can modify their claim amount. [Para 21]
• NCLAT sat aside order of NCLT with cost of INR 50,000 on FC including on ground of not following the
principles of natural justice.
Case Analysis - Miscellaneous
61

62. 8. Whether submitting a certificate from financial institution by OC u/s 9(3)(c) of
Insolvency Code is mandatory? Held – Yes
Case ‐ Smart Timing Steel Ltd. v/s National Steel and Agro Industries Ltd. [Company Appeal (AT) (Insolvency)
5 of 2017]
• Foreign OC having no bank account in India requested for waiver of certificate from Financial Institution as it
has no bank account in India and presently the definition of Financial Institution includes only Indian bank.
• NCLAT held that the word 'shall' used in section 9(3) of Insolvency Code is mandatory and, thus, no waiver
can be given to foreign OC.
• NCLAT held that the argument that foreign companies having no office in India or no account in India with
any "Financial Institution" will suffer in recovering the debt from CD cannot be accepted as apart from the
Insolvency Code, there are other provisions of recovery like suit which can be preferred by any person.
Case Analysis - Miscellaneous
62

63. 9. Whether NCLT can reject CD’s application on ground of incomplete disclosure or
mala‐file intentions of applicant CD?
Held – Yes
Case ‐ UNIGREEN GLOBAL PRIVATE LIMITED [NCLT‐Delhi, COMPANY PETITION NO.IB‐39 (PB)/ 2017]
Facts –
‐ CD filed application u/s 10 of Insolvency Code wherein default of more than 100 crore was shown.
‐ NCLT asked CD to serve copy of petition on FC/banks to seek their objections, if any.
NCLT Conclusions:
• Banks informed NCLT that CD and directors also being guarantors are trying to avoid making lawful
payments of the dues owed to the Bank and also thwarting the Bankers from realizing the securities by
initiating several legal proceedings in different courts and forums with the sole motive of removing their
personal properties from the clutches of law and that the instant action before NCLT is yet another attempt
in the same direction.
• NCLT held that taking into consideration the above position and as the petitioners have not come with clean
hands before NCLT in bringing out the necessary facts, we are constrained to dismiss this petition. [para 18]
Case Analysis - Miscellaneous
63

64. 10. Whether NCLT can unwind CIRP on settlement by parties? Held – No
Case ‐ lA No.226/KB/2017 in CP 150 of 2017 of Parker Hannifin India Pvt Ltd
• The petitioner sought withdrawal of petition after admission of application.
• NCLT held that after admission of petition under Insolvency Code, the nature of petition
changes to representative suit and the lis does not remain only between OC and CD.
Therefore, OC and CD alone have no right to withdraw the petition after admission.
• But Recent Supreme Court in LOKHANDWALA KATARIA CONSTRUCTION
Pvt Ltd Vs NISUS FINANCE AND INVESTMENT MANAGERS LLP is worth
noting
• Supreme Court used the powers under Article 142 of Constitution and taken on
record the Consent Terms of the Parties and the Undertaking given by the Parties
to abide by the Consent Terms.
Case Analysis - Miscellaneous
64

65. 11. Whether Maharashtra Relief Undertaking (Special Provisions Act (Bombay Act XCVI of
1958) being a piece of legislation intended to give relief to industrial undertakings will
prevail over Insolvency Code, 2016?
Held – No
Case ‐ Innoventive Industries Ltd. v/s ICICI Bank & Anr. [Company Appeal (AT) (Insolvency)
No. 1 & 2 of 2017]
‐ NCLAT held that the Schedule to Maharashtra Relief Undertaking (Special Provisions) Act
(MRU Act) specifies only certain acts to which the restriction applies. Accordingly, the
application of MRU Act can only be extended to such acts as specified in the Schedule and
no other legislation. The legislations referred to in the ‘schedule’ to the MRU Act are
employment welfare related which is in consonance with the objects and purposed of the
MRU Act i.e. ‘employment and unemployment’.
Case Analysis - Miscellaneous
65

66. • ‐ The protection under the MRU Act, therefore, cannot be extended to other legislations
especially to union legislation which is subsequent to the MRU Act and related to
insolvency resolution i.e. Insolvency Code.
• ‐ In light of the non‐obstante provision u/s 238 of Insolvency Code (which is a subsequent
Union Law), the provisions of the Insolvency Code, 2016 shall prevail over the provisions
of the MRU Act and any instrument issued under the MRU Act including the notification.
• ‐ Following the law laid down by Hon’ble Supreme Court in “Yogendra Krishnan Jaiswal
[2016) 3 SCC 183]” and “Madras Petrochem Limited [(2016) 4, SCC 1]”, NCLAT held that
there is no repugnancy between Insolvency Code and the MRU Act as they both operate in
different fields.
• The Parliament has expressly stated that the provisions of Insolvency Code (which is a
later enactment to the MRU Act) shall have effect notwithstanding the provisions of any
other law for the time being in force. [Para 78]
Case Analysis - Miscellaneous
66

67. 12. Whether in a case where Joint Lender Forum have reached agreement and granted permission to CD
prior consent of JLF is required by FC before filing of an application under section 7 of Insolvency Code 2016?
Held – No
Case ‐ Innoventive Industries Ltd. v/s ICICI Bank & Anr. [Company Appeal (AT) (Insolvency) No. 1 & 2 of 2017]
Facts:
‐ The appellant/CD challenged the order of NCLT, Mumbai on various grounds including that It was further
contended that all the parties are bound by the Master Restructuring Agreement dated 08 September 2014
(MRA).
Contentions:
‐ Appellant contended that, after MRA, a fresh agreement came into existence and the previous debts came to
an end. Under MRA both creditors and debtors had reciprocal obligations.
Respondent No. 1 failed to fulfil its obligation under MRA. On the other hand Appellant has performed his
obligations under MRA. Thus, a party which has defaulted its obligation cannot complaint about other’s alleged
default.
‐ Appellant also contended that Respondent No. 1 has not obtained permission/consent from Joint Lender
Forum (JLF) to initiate the present proceedings even though their application would adversely affect the loans
of other members of JLF. In fact, Respondent No. 1 had applied for such permission but it was not granted.
Case Analysis - Miscellaneous
67

68. NCLAT Conclusion:
1. NCLT held that Appellant cannot take advantage of MRA because even if it is presumed
that fresh agreement came into existence, it does not absolve the Appellant from paying
the previous debts which are due to FC.
2. NCLT has noticed that there is a failure on the part of Appellant to pay debts. FC has
attached different records in support of default of payment. Apart from that it is not
supposed to go beyond the question to see whether there is a failure on fulfilment of
obligation by FC under one or other agreement including MRA. Therefore, the Appellant
cannot derive any advantage of MRA.
Case Analysis - Miscellaneous
68

69. 13. Whether failure to give assured return in case of delay in possession of flats is a FC?
Held – No.
Case: Nikhil Mehta & Sons (HUF) and others V/s AMR Infrastructure Ltd. (NCLT Delhi).
• The applicants booked units in real estate projects of CD wherein CD agreed that assured
return will be payable to applicants in case of delay in possession.
• CD paid assured return for some time and thereafter stopped payment because of
financial problems.
• Multiple winding‐up petitions were filed against CD by various unit holders u/s 433(e) of
the Companies Act, 1956 which were already admitted by Hon’ble Delhi High Court.
• Applicants filed this application claiming themselves to be FC.
NCLT –
(a) The applicants were not FC and, thus, the application was dismissed.
(b) The remedy of the applicants may lie elsewhere. [Para 15]
Case Analysis - Miscellaneous
69

70. Observation of NCLT on Financial Debt:
(a) The opening words of the definition clause would indicate that a financial debt is a debt along with interest
which is disbursed against the consideration for the time value of money and it may include any of the
events enumerated in sub‐clauses (a) to (i). Therefore, the first essential requirement of financial debt has
to be met viz. that the debt is disbursed against the consideration of time value of money and which may
include the events enumerated in various sub‐clauses. [Para 12 on page 7]
(b) The key feature of financial transaction as postulated by section 5(8) is its consideration for time value of
money. In other words, the legislature has included such financial transactions in the definition of ‘financial
debt’ which are usually for a sum of money received today to be paid for over a period of time in a single or
series of payments in future. It may also be a sum of money invested today to be repaid over a period of
time in a single or series of instalments to be paid in future. [Para 12 on page 8]
(c) It is significant to note that in order to satisfy the requirement of this provision, the financial transaction
should be in nature of debt and no equity has been implied by the opening words of section 5(8) of IBC. It
is true that there are complex financial instruments which may not provide a happy situation to decipher
the true nature and meaning of the transaction. [Para 12]
Case Analysis - Miscellaneous
70

71. The Extract of the Bankruptcy Law Reforms Committee Report on Financial Debt:
(a) Extract from Para 5.2.1 (Page 77) ‘Here, the Code differentiates between financial creditors and operational
creditors. Financial creditors are those whose relationship with the entity is a pure financial contract, such as
a loan or a debt security. Operational creditors are those whose liability from the entity comes from a
transaction on operations.’
(b) Extract from Para 4.3.3 (Page 54)
“Liabilities fall into two broad sets: liabilities based on financial contracts, and liabilities based on operational
contracts. Financial contracts involve an exchange of funds between the entity and a counterparty which is a
financial firm or intermediary. This can cover a broad array of types of liabilities: loan contracts secured by
physical assets that can be centrally registered; loan contracts secured by floating charge on operational cash
flows; loan contracts that are unsecured; debt securities that are secured by physical assets, cash flow or are
unsecured.”
Case Analysis - Miscellaneous
71

72. 14. Whether notice by OC u/s 8 is mandatory? Held – Yes
Case ‐ Era Infra Engineering Ltd. V/s Prideco Commercial Projects Pvt Ltd. – Appeal before
NCLAT Delhi
• CD issued cheques that were dishonored.
• OC issued notice u/s 271 of Companies Act 2013 on 08 January 2017.
• No reply to notice or dispute as to debt.
• OC filed application on 01 March 2017.
• NCLT admitted the application as the requirement of section 9 are substantially fulfilled.
• CD challenged the order of NCLT on ground that no notice u/s 8 of Insolvency Code was
issued.
• OC submitted that notice issued u/s 271 of Companies Act 2013 should e treated to be a
notice for this purpose.
NCLAT Order – Notice u/s 8 is mandatory and, thus, order of NCLT was set aside.
Case Analysis - Miscellaneous
72

73. 15. Whether Limitation Act 1963 is applicable to Insolvency Code? Held
– Yes [Case ‐ Deem Roll‐Tech Limited V/s R. L. Steel and Energy Ltd. – NCLT Delhi]
 OC filed summary suit u/o 37 of Civil Procedure Code and ex‐parte decree was passed in favour of OC on 19
October 2016.
 OC issued demand notice u/s 8 of Insolvency Code on 15 February 2017 and application u/s 9 on 27
February 2017.
 CD did not appear and NCLT proceeded ex‐parte.
 NCLT noted that invoices were of 2011.
 NCLT further observed that neither of the closing balance were confirmed by CD nor any other
acknowledgment issued by CD was produced by OC.
NCLT Conclusion –
(a) The provisions of section 433 of the CA2013 are applicable to Insolvency Code and, thus, the provisions of
the Limitation Act 1963 are applicable to Insolvency Code.
(b) As the debt is time barred under the Limitation Act, the proceedings under Insolvency Code are not
maintainable.
Case Analysis - Miscellaneous
73

74. 16. Whether FC can start proceedings under Insolvency Code pending dispute? Held – Yes
[Urban Infrastructure Trustee Ltd V/s Neelkanth Township and Constructions Pvt. Ltd. –
NCLT Mumbai]
‐ CD raised an objection that since arbitration proceedings have started as per section 21 of
the Arbitration Act, these
proceedings are not maintainable.
NCLT – As per sections 63, 231 and 238, the provisions of Insolvency Code will prevail over
other proceedings. Pending
dispute is irrelevant in case of application u/s 7 of Insolvency Code by FC.
Case Analysis - Miscellaneous
74

75. 17. Whether as shareholder can start proceedings under Insolvency Code for his financial
debt or operational debt? Held – Yes
Case ‐ Urban Infrastructure Trustee Ltd V/s Neelkanth Township and Constructions Pvt. Ltd.
– NCLT Mumbai
‐CD raised an objection that the applicant is a shareholder of the CD, and therefore, the
applicant cannot initiate the proceedings u/s 7 of Insolvency Code?
NCLT – Under Insolvency Code, there is no restriction on the shareholder to initiate
proceedings (i) as a financial creditor in case of financial debt; or (ii) as an operational
creditor in case of operational debt. [Para 22 on page 11]
Comment – If shareholder is related party u/s 5(24), it shall not have any right of
representation, participation or voting
Case Analysis - Miscellaneous
75

76. 18. Whether time limits mentioned under sections 7(4), 9(5) and 10(4) of Insolvency Code
are mandatory? Held – No
Case ‐ JK Jute Mills Company Ltd V/s M/s Surendra Trading Company – NCLAT – Company
appeal arising out of order dated 09 March 2017 of NCLT, Allahabad
‐NCLT delayed the proceedings for admitting/rejecting application and when objected by CD,
NCLT held that u/r 11 of NCLT Rules 2016, NCLT has inherent power to provide substantial
justice.
‐Thus, this appeal on the question ‘Whether the time limit prescribed under the Insolvency
Code for (i) admitting / rejecting a petition, or (ii) initiation of insolvency resolution
process, is mandatory?’
Case Analysis - Miscellaneous
76

77. NCLT Conclusion –
a) It is not mandatory for OC to propose resolution professional to act as an interim
resolution professional. [Para 47]
b) NCLT has different roles and its role u/s 7(4), 9(5) and 10(4) of Insolvency Code is
administrative in nature. [Para 38]
c) Provisions contained u/s 7(4), 9(5) and 10(4) of Insolvency Code like Order VIII, Rule 1 of
Civil Procedure Code being procedural in nature cannot be a mandate of law. [Para 41]
d) The objective behind such provisions is to prevent the delay in hearing the disposal of the
cases. NCLT cannot ignore the provisions. But in appropriate cases, for the reasons to be
recorded in writing, it can admit or reject the application after the period prescribed
under sections 7, 9 or 10 of Insolvency Code. [Para 42]
Case Analysis - Miscellaneous
77

78. (e) NCLAT cited various judgment of the Supreme court wherein it was held that “Processual
law is not to be a tyrant but a servant, not an obstruction but an aid to justice. Procedural
prescriptions are the handmaid and the not the mistress, a lubricant, not a resistant in the
administration of justice”.
(f) 14 days period granted to NCLT under the provisions of Insolvency Code cannot be
counted from the filing of the application but from the date on which such application is
presented before NCLT, i.e., the date on which it is listed for admission / order. [Para 39]
(g) Time granted u/s 12 of Insolvency Code is mandatory. [Para 46]
Case Analysis - Miscellaneous
78

79. Case Analysis – Grounds for rejection
of petition
79

80. • Quantum of debt is not the criteria, it is the default which triggers the CIRP
• Operational Debtor can’t become a Financial Debtor even though the terms of agreement
provides for repayment of amounts paid in case of default
• Any incorrect Insolvency Claims will backfire – ICICI Bank ltd
• Assured returns are not Financial Debt
• If FC has not nominated the IRP in the application and not filed the requisite records, petition
is liable to be rejected
• Improper and incomplete filing of application will run the risk of dismissal of petition
• If debt is time barred as per the provisions of Limitation Act, 1963 the application will be
rejected
• If total amount due from 11 Companies is enforced and claimed from one Company, them the
petition is not in line with IBC, 2016
80
Grounds for rejection

81. • When the matter is already pending for adjudication between the parties in a court having
jurisdiction to adjudicate upon the same matter, then subsequent application on the same
cause of action cannot be allowed to proceed
• Not annexing the proof of submission of demand notice is liable to be reject the petition
• If the documents is executed improperly and invoice raised given improper name – petition
will be rejected
• Winding-up petition is pending before High Court and petitioner has not taken the leave of
Hight Court – petition dismissed
• Non-performance of desired standards of services and any claim for demanding the amount
deducted – will be outsider the IBC, 2016
• If jurisdiction of bench is out the relevant bench
• Petitioner suppressed the material fact that she is a Promoter of the Company – rejected
• Tribunal does not have powers to amend the orders of BIFR
81
Grounds for rejection

82. • After Petition is admitted Petition changes to Representative Suit and Lis does not remain
only between Op C and Op D – Parker Hannifin India Private Ltd.
• Supreme Court in LOKHANDWALA KATARIA CONSTRUCTION Pvt Ltd Vs NISUS FINANCE AND
INVESTMENT MANAGERS LLP – using the powers under Article 142 of Constitution taken on
record the Consent Terms of the Parties and the Undertaking given by the Parties to abide by
the Consent Terms.
82
Grounds for rejection

83. Article 142: Enforcement of decrees and orders of Supreme Court and orders as to discovery,
etc.
(1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such
order as is necessary for doing complete justice in any cause or matter pending before it,
and any decree so passed or order so made shall be enforceable throughout the territory of
India in such manner as may be prescribed by or under any law made by Parliament and,
until provision in that behalf is so made, in such manner as the President may by order
prescribe.
(2) Subject to the provisions of any law made in this behalf by Parliament, the Supreme Court
shall, as respects the whole of the territory of India, have all and every power to make any
order for the purpose of securing the attendance of any person, the discovery or production
of any documents, or the investigation or punishment of any contempt of itself.
83
Grounds for rejection

84. • Quantum of debt is not the criteria, it is the default which triggers the CIRP
• Operational Debtor can’t become a Financial Debtor even though the terms of agreement
provides for repayment of amounts paid.
• Any incorrect Insolvency Claims will backfire – ICICI Bank ltd
• Assured returns are not Financial Debt
• If FC has not nominated the IRP in the application and not filed the requisite records, petition
is liable to be rejected
• Improper and incomplete filing of application will run the risk of dismissal of petition
• If debt is time barred as per the provisions of Limitation Act, 1963 the application will be
rejected
• If total amount due from 11 Companies is enforced and claimed from one Company, them the
petition is not in line with IBC, 2016
84
Grounds for rejection

85. • When the matter is already pending for adjudication between the parties in a court having
jurisdiction to adjudicate upon the same matter, then subsequent application on the same
cause of action cannot be allowed to proceed
• Not annexing the proof of submission of demand notice is liable to be reject the petition
• If the documents is executed improperly and invoice raised given improper name – petition
will be rejected
• Winding-up petition is pending before High Court and petitioner has not taken the leave of
Hight Court – petition dismissed
• Non-performance of desired standards of services and any claim for demanding the amount
deducted – will be outsider the IBC, 2016
• If jurisdiction of bench is out the relevant bench
• Petitioner suppressed the material fact that she is a Promoter of the Company – rejected
• Tribunal does not have powers to amend the orders of BIFR
85
Grounds for rejection

86. • After Petition is admitted Petition changes to Representative Suit and Lis does not remain
only between Op C and Op D.
86
Grounds for rejection

87. 87
Thank You