Abott Law Office

The Ministry of Finance (Department of Revenue), exercising its authority under Section 109(1), (3), and (4) of the Central Goods and Services Tax Act, 2017, has issued Notification No. S.O. 5063(E), dated 26th November 2024, vide which it marks a redefinition of territorial jurisdiction for various State Benches of the Goods and Services Tax Appellate Tribunal (GSTAT), making amendments to the principal notification (bearing number S.O.3048(E), dated July 31, 2024. Sumit Wadhva Bharat Bhushan Ayush Patria

In a recent ruling, the Hon'ble Allahabad High Court, in the matter of National Highways Authority of India v. Dwarikesh Sugar Industries Limited And Another (Case No. 423 of 2024), made a distinction between two types of arbitrator appointments, private contracts between parties and statutory appointments under the law. The case involved the Appellant, which challenged an order from the Additional District Judge, POCSO Act, Bijnor, under Section 34 of the Arbitration and Conciliation Act, 1996. The judge had ruled that the compensation awarded to the respondent was not in accordance with the law. The Appellant argued that the judge did not have the power to remand the case back to the arbitrator, citing the Supreme Court's ruling in Kinnari Mullick. However, the Respondent relied on the Supreme Court's decision in National Highways Authority of India v. P. Nagaraju, where the remand to the arbitrator was upheld in the context of statutory appointments. The Court made a crucial observation, stating that private contracts between parties which contemplate the appointment of an arbitrator and cases where statutory arbitrators are appointed under the statute fall in two separate classes. In light of this, the Court upheld the Additional District Judge’s decision to remand the case back to the arbitrator, emphasizing the distinct nature of statutory versus private arbitration agreements. This decision clarifies the application of arbitration law in cases involving statutory versus private arbitrator appointments. Sumit Wadhva Bharat Bhushan Ayush Patria

In a recent ruling, the NCLAT New Delhi bench, in the matter of Praveen Arya & Ors. v. Anju Aggarwal (RP of Corporate Debtor) & Anr. (Company Appeal (AT) (Insolvency) No. 40 of 2024 & Connected Cases), has clarified that commercial spaces allotted by a Corporate Debtor (CD) through unregistered documents, such as allotment letters or lease deeds, do not transfer ownership to the allottees. These spaces remain assets of the CD and cannot be excluded from the Resolution Plan. The matter/ case arose from disputes involving Corporate Debtor, a real estate firm, which had allotted office spaces to various buyers. These allottees, including the Appellant, sought to establish ownership of the commercial units through unregistered documents, hoping to have them excluded from the Corporate Insolvency Resolution Process (CIRP). Key Takeaways from the Judgment are as following: (1) The tribunal underscored that unregistered documents like allotment letters or lease deeds do not grant ownership rights. The assets remain part of the Corporate Debtor's estate. (2) The Resolution Plan, approved with 87.49% voting by the Committee of Creditors (CoC), was upheld. The plan offered a 100% refund of the principal amount or equivalent commercial space alternatives, despite a liquidation value of "zero" for the commercial space buyers. (3) The tribunal emphasized that the commercial wisdom of the CoC is paramount and limited grounds exist for judicial interference in approved Resolution Plans. This ruling reinforces the principle that real estate transactions involving a transfer of ownership require proper registration and compliance with statutory formalities. Unregistered documents alone cannot divest a corporate debtor of its assets, ensuring clarity for authorities in insolvency proceedings. Sumit Wadhva Bharat Bhushan Ayush Patria

In a recent judgment, the Hon'ble Telangana High Court, in the case of PSM Energy Pvt. Ltd. v. ZAM Engineering and Logistics Pvt. Ltd. (Commercial Court Appeal No. 20 of 2024), has clarified the conditions under which arbitration clauses in commercial agreements can apply to disputes involving multiple contracts. The Court ruled that only when agreements are interconnected and part of a single commercial transaction can an arbitration clause in one agreement extend to cover disputes across all related agreements, even if some of those agreements lack an arbitration clause. Key Takeaways from the Judgment are as following: (1) The Court reiterated that for an arbitration clause to encompass disputes from multiple agreements, those agreements must be part of a single, interconnected commercial transaction. The Court emphasized that the presence of an arbitration clause in one agreement can justify arbitration across multiple agreements only if they are integrally connected to achieving a unified commercial goal. (2) The Appellant leased 30 Volvo Tippers to the Respondents under Operational Lease Agreement wherein no arbitration clause was included. A revision to the operational lease agreement was done via MOU which also lacking an arbitration clause. A separate Joint Venture Agreement for a joint venture regarding work awarded in Odisha which contained an arbitration clause. (3) The Appellant filed a suit seeking recovery based on the operational lease agreement, which did not contain an arbitration clause, leading the Respondents to challenge the suit’s maintainability, citing the arbitration clause in the joint venture agreement. (4) The Court found that the Operational Lease Agreement and Joint Venture Agreement were not interconnected. Each served a different purpose, the lease involved equipment leasing, while the joint venture dealt with a separate work contract in Odisha. Consequently, the arbitration clause in the Joint Venture Agreement could not be extended to disputes arising under the Operational Lease Agreement. (5) The Court also validated the jurisdiction of the Commercial Court, Hyderabad, as the lease agreement specified Hyderabad as the venue for legal proceedings in case of disputes. This decision underscores that an arbitration clause cannot be automatically extended to all disputes involving multiple agreements unless those agreements are clearly interconnected and intended to achieve a common commercial objective. Sumit Wadhva Bharat Bhushan Ayush Patria

In a recent ruling, in the matter of Sanjay Dave v. Andhra Bank Ltd. & Ors., Company Appeal (AT) (Insolvency) No. 1128/2024, 1131/2024, 1134/2024, the National Company Law Appellate Tribunal (NCLAT) has reinforced the autonomy of the Committee of Creditors (CoC) under the Insolvency and Bankruptcy Code (IBC), 2016. The NCLAT observed that Section 33 of the IBC allows the CoC to decide on liquidating a corporate debtor any time prior to the Adjudicating Authority’s approval of a resolution plan, highlighting that this decision rests on the CoC’s commercial wisdom and is not open to judicial review. Key Takeaways from the Judgment are as follows: (1) The NCLAT confirmed that, per Section 33(2) of the IBC, the CoC has the final say in moving for liquidation before the Adjudicating Authority’s endorsement of any resolution plan. (2) This decision reiterates that CoC’s choice to liquidate, as part of its commercial wisdom, should not be second-guessed by courts, as long as the decision adheres to IBC regulations. (3) Given prolonged CIRP proceedings and a lack of timely resolution plan acceptance by the successful resolution applicant, the NCLAT upheld the Adjudicating Authority’s decision for liquidation as being in the best interest of authorities. This ruling underscores the crucial role of the CoC in determining their decision as to corporate debtor and affirms that liquidation remains a viable outcome if restructuring efforts fall short. Sumit Wadhva Bharat Bhushan Ayush Patria

In a recent ruling in the matter of Avil Menezes v. Ministry of Coal and Ors. (Company Appeal (AT) (Insolvency) No. 944 of 2023), the National Company Law Appellate Tribunal (NCLAT) New Delhi Bench has reaffirmed the primacy of the Insolvency and Bankruptcy Code (IBC), 2016 over pre-CIRP dues, including government dues, in insolvency proceedings. This ruling underscores the responsibility of the Resolution Professional (RP) to prioritize the resolution process and protect the Corporate Debtor’s assets within the IBC framework. Key Highlights from the Judgment are as follows - (1) The assets of the Corporate Debtor must be managed by the RP, who is tasked with preserving asset value within the resolution framework. The RP cannot make pre-CIRP payments, including government dues, outside this framework. (2) The NCLAT determined that the Annual Mine Closure Cost (AMCC) is an operational debt and must be subject to the resolution plan, emphasizing that pre-CIRP dues should not bypass the IBC process. (3) The Tribunal upheld IBC’s overriding authority, stating it supersedes conflicting provisions in other acts, such as the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act. (4) The NCLAT’s decision stresses that treating any creditor preferentially outside the IBC framework undermines the CIRP’s integrity and contradicts the equitable distribution intended by the IBC. This judgment not only reinforces the IBC’s role in resolving insolvency equitably but also emphasizes the importance of adhering strictly to the resolution framework. Sumit Wadhva Bharat Bhushan Ayush Patria

In a recent ruling in the matter of Vidyasagar Prasad v. UCO Bank & Anr. (CIVIL APPEAL No. 1031 of 2022), the Hon'ble Supreme Court of India dismissed a suspended director's plea challenging the initiation of Corporate Insolvency Resolution Process (CIRP). The Court observed that companies are not obligated to specify the names of each secured or unsecured creditor in their balance sheets. The Court upheld that general debt entries in a corporate debtor’s balance sheet amount to an acknowledgment of debt, even if the particular creditor’s name is not mentioned. In this case, the corporate debtor’s balance sheet noted outstanding loans, and an auditor's note highlighted defaults in repayment. The appellant contended that since UCO Bank (the financial creditor) was not specifically named, the debt could not be acknowledged. However, the Court affirmed that balance sheets prepared under the Companies Act, 2013, do not require naming each creditor. This ruling aligns with principles established in Bishal Jaiswal v. ARCIL (2021), reinforcing that acknowledgment of liability can be inferred from general debt entries in balance sheets. Sumit Wadhva Bharat Bhushan Ayush Patria

In a recent judgment, the Hon'ble Bombay High Court has held that while non-compete clauses may be valid during the term of an agreement, they cannot be enforced post-termination, as doing so would amount to a restraint of trade under Section 27 of the Indian Contract Act, 1872. The case revolved around a Master Supply Agreement (MSA) between the Parties to the Agreement, where a non-compete clause restricted the parties from engaging with specific customers for 24 months post-termination. However, the Court ruled that this clause could not be enforced after the agreement’s termination, providing much-needed clarity on the legal standing of non-compete provisions in India. The Court also reaffirmed that legal questions arising from contract interpretation can be raised in appeals, even if not brought up in prior proceedings under Section 9 of the Arbitration and Conciliation Act, 1996. Key Takeaways from the Judgment are as follows: (1) The Court held that non-compete clauses are enforceable during the term of the agreement but not post-termination. (2) Enforcing non-compete clauses after the agreement ends would violate Section 27 of the Indian Contract Act, 1872, which prohibits restraint of trade. (3) Even if certain legal arguments were not raised earlier, they can be considered during an appeal under Section 37 of the Arbitration and Conciliation Act, 1996. (4) The Court refused to grant an injunction that would prevent the company from continuing its business after the contract ended. Sumit Wadhva Bharat Bhushan Ayush Patria

Our Senior Associate, Bharat Bhushan, and Associate, Ayush Patria, discussed the recent ruling of the Hon’ble Supreme Court of India in the case Chief Commissioner of CGST & Ors. vs. M/s Safari Retreats Pvt. Ltd., which addressed critical issues surrounding the constitutional validity of certain provisions of the CGST Act, 2017. The Supreme Court opted not to declare Section 17 (5) (c) and (d) unconstitutional, which has resulted in a complex legal landscape for taxpayers navigating input tax credit (ITC) claims related to construction activities aimed at renting and leasing. While the High Court of Orissa previously allowed ITC for the petitioner, the Supreme Court's ruling reinforced the notion that the definitions of "plant" and "machinery" under these provisions require careful judicial interpretation, further complicating the understanding of these terms within the industry. The decision highlights the ongoing tension between judicial interpretations and practical industry standards, raising concerns about how these legal definitions will impact the functioning of businesses involved in property development and leasing. Give it a read here: https://lnkd.in/g2RnUEuV