Dayal Singh’s Post

Contract can be terminated if it is not related to insolvency | NCLT cannot intervene where there is dispute about contractual rights of the parties | The term critical used in Section 14(2A) of IBC is to be defined as per the facts and circumstances of each case. Mr. Sumit Binani, RP of KSK Mahanadi Power Company Ltd. Vs. Water Resources Department, The Executive Engineer and Anr. NCLT Hyderabad Bench Section 14 of the IBC is the pivot around which the entire controversy revolves, but the Applicant cannot take use it as shield to avoid contractual obligations. The terms “essential supplies” and critical supplies” have different meaning and connotations. The supplies which are not specific to the business of the CD but which are needs, fall under the definition of the essential supplies. The essential goods or services is limited in scope in view of Regulation 32 of the IBBI by Regulation 2016, which says that such supplies should not constitute direct input to the output produced or supplied by the CD. The supply of (1) electricity, (2) water, (3) telecommunication services, and (4) information technology services are covered within this purview. Both Embassy Property (supra) and Abhilash Lal (supra) were referred in the case of Gujarat Urja Vikas Nigam Limited versus Amit Gupta and Ors. (2021)7 SCC 209 wherein the Article 9.2.1 of the PPA enumerates the Events of Default by the Corporate Debtor, within which Article 9.2.1(e) states that the Corporate Debtor becoming voluntarily or involuntarily, the subject of a proceeding in any bankruptcy or insolvency laws, constitutes an Event of Default. Therefore, it was held that termination of the PPA solely on the ground of insolvency gives the NCLT jurisdiction Under Section 60(5)(c) to adjudicate this matter and invalidate the termination of the PPA as it is the forum vested with the responsibility of ensuring the continuation of the insolvency resolution process, which requires preservation of the Corporate Debtor as a going concern. Thus, it becomes clear contract can be terminated if it is not related to insolvency. This judgement was followed by the Hon’ble Supreme Court in Tata Consultancy Services Ltd. vs Vishal Gisulal Jain that the NCLT has no jurisdiction if the dispute arose on the grounds unrelated to the insolvency of the CD.(p35) In conclusion, the NCLT cannot intervene where there is dispute about contractual rights of the parties.

Proposal for "Voluntary Group Insolvency" under the IBC is expected to be introduced in India's Parliament. Voluntary Group Insolvency refers to a process where a group of affiliated companies, such as a corporate group with parent and subsidiary relationships, collectively initiate insolvency proceedings on a voluntary basis. This process typically occurs when the companies are unable to meet their financial obligations and voluntarily decide to liquidate or restructure under insolvency law, rather than being forced into the process by creditors or courts. The cases of Videocon Industries and Lavasa Corporation demonstrate how group insolvency has been applied to achieve better outcomes for creditors by consolidating resolution processes. Voluntary Group Insolvency is a coordinated, voluntary effort by a group of affiliated companies to address financial distress collectively, to maximize asset value, ensure fair creditor treatment, and possibly restructuring operations. While it offers advantages in terms of efficiency and centralization, it also comes with legal and practical challenges, especially when operating across different legal jurisdictions. 🔗 Read full article at : https://lnkd.in/dZ_QB7sT #GroupInsolvency #IBC #Parliament #Corporates #LegalUpdate #InCorp InCorp Global InCorp India Incorp Restructuring Services LLP (IPE)

NCLT: AMOUNT TO BE REALISED AS COMPENSATION FOR BUSINESS LOSS, NOT 'DEBT'; REJECTS INSOLVENCY-PLEA AGAINST OYO NCLT rejects insolvency application filed by a partnership firm and MSME (Operational Creditor / Applicant) for initiation of CIRP against OYO Hotels and Homes Private Ltd. (Corporate Debtor / Respondent), remarks that, “…this would not be the forum to decide the matter on the amount to be realised as damage/loss of business or compensation and this application cannot bring insolvency of the respondent as it is not to be construed as a firm financial debt that has been defaulted.”; Respondent submitted that – (i) the Applicant and the Respondent entered into a Management Services Agreement w.r.t. to a Property, (ii) as per the terms of the Agreement, in consideration of the services rendered by the Respondent, the Applicant was to pay the Respondent, a share of the Total Gross Revenue (from rooms) which amounted to 90% of the Total Gross Revenue and the remaining 10% was to be paid to the Applicant, (iii) Applicant was entitled to a minimum monthly revenue (Benchmark Revenue), (iv) the Agreement was intended to operate for 9 years, with an initial 3-year lock-in period for both the parties, during which they were to not terminate the Agreement, and during the lock-in period, same was terminable by the Respondent (later M/s Mypreferred / Assignee – a group company) upon the Applicant's breach or misrepresentation, (v) owing to an internal restructuring and transfer of business of the Respondent to Mypreferred, a transition letter was issued to the Applicant for assignment of rights and liabilities from the Respondent to Mypreferred; NCLT notes that the Master Agreement provided that if the Operator (Respondent) terminated the agreement during the lock in period on account of any material breach of by the Service Provider, the Service Provider was liable to pay an amount equivalent to the applicable Benchmark revenue for every month of the remaining portion of the Service Provider Lock–in Period, and underscores that, the Operator however has transferred his rights which was within his powers and as per the agreement and the Assignee has exercised the rights to transfer; Outlining that now the Service Provider has charged the termination loss charges due and payable, on which there has been a dispute and an arbitration case filed, NCLT opines that the parties shall refer the dispute to a single arbitrator who shall be mutually appointed;

Proposal for "Voluntary Group Insolvency" under the IBC is expected to be introduced in India's Parliament. Voluntary Group Insolvency refers to a process where a group of affiliated companies, such as a corporate group with parent and subsidiary relationships, collectively initiate insolvency proceedings on a voluntary basis. This process typically occurs when the companies are unable to meet their financial obligations and voluntarily decide to liquidate or restructure under insolvency law, rather than being forced into the process by creditors or courts. The cases of Videocon Industries and Lavasa Corporation demonstrate how group insolvency has been applied to achieve better outcomes for creditors by consolidating resolution processes. Voluntary Group Insolvency is a coordinated, voluntary effort by a group of affiliated companies to address financial distress collectively, with the goal of maximizing asset value, ensuring fair creditor treatment, and possibly restructuring operations. While it offers advantages in terms of efficiency and centralization, it also comes with legal and practical challenges, especially when operating across different legal jurisdictions. #GroupInsolvency #IBC #Parliament #Corporates #LegalUpdate

⚖️ NCLAT Halts Insolvency Proceedings Against Cafe Coffee Day Parent Company! ☕🛑 In a significant development, the National Company Law Appellate Tribunal (NCLAT) in Chennai has granted an interim stay on the corporate insolvency resolution proceedings initiated against Coffee Day Enterprises Ltd (CDEL), the entity behind the iconic Cafe Coffee Day chain. This decision comes in response to the insolvency plea filed by IDBI Trusteeship Services Limited (ITSL), one of CDEL's creditors. The appellate tribunal's decision to stay the insolvency proceedings follows a challenge by Malvika Hegde, Director of Coffee Day Enterprises, who argued that ITSL lacked the authority to invoke insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, given its non-financial creditor status. ⚖️ While the NCLAT has granted an interim relief, it will evaluate the case on its merits in due course, allowing ITSL three weeks to submit its counter affidavit. The tribunal acknowledged the procedural concerns raised by both parties and emphasized the need for a thorough review before proceeding further. The insolvency petition by ITSL stemmed from alleged defaults by CDEL in repayments related to a debenture trust deed, highlighting financial discrepancies between the parties. These legal intricacies underscore the complexities of corporate insolvency and financial obligations under the IBC framework. 💼

Kotak Mahindra Bank Ltd. Vs. Resolution Professional of Universal Buildwell Pvt. Ltd Company Appeal (AT) (Ins.) No. 1000 of 2021 In the case at hand, the Appellate Authority (AA) denied the appellant's request for a review of the order that initiated Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor (CD). The appellant then appealed this decision, contending that CIRP should be limited to a single project, as established in prior judgments, and that the AA had inadequately considered their arguments before rejecting their application. Upon review, the National Company Law Appellate Tribunal (NCLAT) in New Delhi determined that the AA's decision was justified. The NCLAT noted that the initiation of insolvency proceedings against the CD had occurred based on the appellant's application, and subsequent to the admission of the petition filed by a homebuyer against the same CD. Additionally, the appellant had later sought to confine the CIRP to one project, but this request was dismissed. The NCLAT acknowledged the possibility, in certain circumstances, for the AA to direct project-specific insolvency proceedings, citing precedent. However, in this instance, since the initiation of insolvency against the CD was at the behest of the appellant itself, the AA was not in a position to alter the scope of the CIRP post-initiation. In conclusion, the NCLAT found no fault with the AA's decision to reject the appellant's application for modification and review of the initial order admitting the CIRP, given the circumstances surrounding the case. For detailed judgement please click on below mentioned link https://lnkd.in/gWUdNVbA

As a result of changes to insolvency law introduced during Covid, suppliers of goods/services need to be aware of new rules that protect customers in financial difficulties as suppliers will not be able to terminate supply contracts (or impose other conditions) after a “relevant insolvency procedure” commences. The result is that legal remedies for suppliers are significantly reduced: ✅ a term allowing the supplier to terminate for insolvency no longer has legal effect; ✅ a term allowing for “any other thing” to occur or allowing the supplier the right to do “any other thing” as a result of the insolvency no longer has legal effect; ✅ the supplier may not terminate the contract for any reason where the termination right was not exercised before the relevant insolvency procedure began; and ✅ the supplier is prohibited from making continued supplies conditional upon any outstanding charges being paid for a supply before the insolvency period.  Exceptions to the new rules are very limited and so termination will now only be allowed to occur during the insolvency period where: ✅ the customer or the insolvency practitioner consents; or ✅ a court grants permission on the basis that continuation of the supply contract would cause the supplier “hardship”, which is not defined.   As a result of these rules, suppliers will need to ensure that: ✅ they are more vigilant than ever in monitoring the financial position of customers and be prepared to terminate early before any relevant insolvency procedure begins; ✅ the contract has termination rights for non-insolvency reasons, such as non-payment, which may be used during the insolvency period; and ✅ supply contracts allow for advance payments and/or shorter invoicing periods and that each supply is subject to a new, separate order rather than being seen as a single continuous supply obligation.   See the full article from John Warchus where he looks at the effect of the new CIGA rules - https://hubs.ly/Q02Z0Vz70 #CommercialContracts #InsolvencyRestructuring

Some of last week’s insolvency case developments: * voidable transaction limitation period extensions; * service of unsealed documents seeking that a statutory demand be set aside; * 477(2B) approval of a deed of assignment entered by a liquidator; and * a deed administrator’s application for a remuneration determination. In Giasoumi and Deane, in the matter of SLKALT Pty Ltd (in liq) [2024] FCA 403, liquidators successfully obtained orders under s 588FF(3)(b) Corporations Act 2001 (Cth) (Act) extending the time for bringing voidable transaction claims by around 18 months. Amongst other things, a ruling on whether legal professional privilege applied to a series of documents produced during a public examination process (which was handed down about 10 months after the hearing) was being appealed. The liquidators wanted the appeal determined and the question of access to the documents resolved before conducting the examinations. Dyirranga Ltd v Deputy Commissioner of Taxation [2024] FCA 411 reaffirmed the longstanding principle that service of documents seeking orders that a statutory demand be set aside under s 459G that did not bear a Court seal, proceeding number, or return date, was insufficient to meet the requirement in section 459G(3)(b) that the documents be filed and served within the 21 day period for compliance with the demand. Court rules that the application was taken to be filed at the time of electronic lodgement did not alter the outcome. In Re Atari Enterprises Pty Ltd (In Liq); Ex Parte Carrello [2024] WASC 141, the Court made orders under s 477(2B) of the Act approving entry into a deed of assignment. The facts do not disclose what claims were assigned but do consider some of the key benefits of the assignment for the winding up. The name of the assignee company “Can’t Escape Karma Pty Ltd”, is chuckle worthy too, or at least gives off some “I know what you did last summer”, vibes. Finally, in Re Newman Rivergums Village Operations Pty Ltd (Subject to Deed of Company Arrangement) [2024] WASC 134, a the Court made orders approving about $135,000 of deed administrator remuneration, in circumstances where an earlier attempt to have creditors do so by circular resolution had not succeeded. Links to all of the judgments are in the comments.

DAILY UPDATES   ALTERNA AIRCRAFT WITHDRAWS INSOLVENCY PLEA AGAINST SPICEJET IN NCLT Alterna Aircraft BV Limited, an Ireland-based aircraft lessor on March 18 withdrew its insolvency plea against low-cost airline SpiceJet at the National Company Law Tribunal (NCLT).  READ MORE https://lnkd.in/gPnBf4gs   FAILING RESOLUTIONS, FALTERING RECOVERY: UNCHECKED VIKAS OF CORPORATE DEFAULTERS Amidst the pursuit of debt recovery, the banking sector is witnessing an erosion of public money. READ MORE https://lnkd.in/gAC8Nmii   INGREDIENTS OF FRAUDULENT, UNDERVALUED & PREFERENTIAL TRANSACTIONS TO BE CHECKED SEPARATELY: NCLAT The National Company Law Appellate Tribunal has recently observed that the National Company Law Tribunal (NCLT) must consider the ingredients of Fraudulent, Undervalued, and Preferential Transactions separately and refrain from making general observations. READ MORE https://lnkd.in/gQB7zbKx   TATA SONS TO SELL 23.4 MILLION TCS SHARES WORTH ₹9,000 CRORE IN BLOCK DEAL Tata Sons, the parent company of India's leading software services exporter, is looking to sell 23.4 million shares of Tata Consultancy Services Ltd, in block deals at a price of ₹4,001 per share, amounting to approximately ₹9,300 crore. READ MORE https://lnkd.in/gqzcUZuD   ODISHA EYES ₹10,000 CRORE INVESTMENT IN TEXTILES Odisha has set an ambitious target of attracting an investment of ₹10,000 crore for its textiles sector over the next five years, with the aim to bolster the state's economy by creating more than 100,000 job opportunities. READ MORE https://lnkd.in/gK3J8exd   CA BOOKED FOR CHEATING PEOPLE THROUGH RS 54.4 CR PONZI SCHEME READ MORE https://lnkd.in/gbKtky4p   GOVT PROPOSES EXEMPTING CERTAIN M&A DEALS FROM COMPETITION COMMISSION APPROVAL REQUIREMENT The government has proposed exempting intra-group transactions and certain other mergers and acquisitions from the requirement of Competition Commission approval, a move that is likely to help in reducing the regulatory burden on the watchdog. READ MORE https://lnkd.in/g5zSDjxZ     Happy Reading!!

The Jet Airways insolvency saga has been a dramatic and tumultuous journey, filled with ups and downs. What began with the airline being acquired by Jalan at a steep discount, ended in a five-year battle, and culminated in liquidation after the Hon'ble Supreme Court stepped in. The Court's decision came after the Successful Resolution Applicant (SRA) failed to implement the approved Resolution Plan, marking a significant setback in the airline's revival. In its ruling, the Supreme Court not only ordered liquidation but also issued critical recommendations to improve the effectiveness of the Insolvency and Bankruptcy Code (IBC) 2016. These recommendations focus on ensuring that approved Resolution Plans are properly executed. The Court also sent a strong message to the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT), emphasizing: "We put the NCLT(s) and the NCLAT to notice that any act of contravention of this Court’s order and the larger rubric of judicial propriety will not be tolerated." Additionally, the Court reaffirmed the binding nature of an approved Resolution Plan, reiterating the principles established in the Ebix judgment. While this ruling closes the chapter on the long-standing litigation surrounding Jet Airways' resolution, it also raises important questions: Why are defaults still occurring even after a Resolution Plan is approved? The judgment highlights the need for a more robust approach to ensuring the successful implementation of Resolution Plans under the IBC framework.