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Insolvency and Bankruptcy - Case Laws
Showing 61 to 80 of 86 Records
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2020 (11) TMI 535
Completion of period of 116 days from the statutory period of 180 days' time limit for completion of the CIRP - section 12(2) of IBC, 2016 R/w Rule 11 of NCLT Rules, 2016 - HELD THAT:- Hon'ble Supreme Court of India in [2020 (5) TMI 418 - SC ORDER] where it was held that the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak shall not be counted for the purposes of computation of the time-line for any task that could not be completed due to such lockdown, in relation to any liquidation process.
The material facts of the issue are not in dispute, and the law on the issue is also settled by the judgments cited above. Therefore, the Applicant is justified to seek extension and exclusion of time as sought for in the Application, and thus we are inclined to allow the instant Application.
The exclusion of 116 days i.e., from the statutory period of 180 days and to complete the Corporate Insolvency Resolution Process - application disposed off.
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2020 (11) TMI 533
Amicable Settlement - Applicant represents that he does not have any objection to the terms and conditions as reflected in the memo, which correlates with the exchange of the e-mail communications happened as transpired between the parties namely the Applicant and the 1st Respondent viz., the Scheme Proponent - HELD THAT:- According to the terms and conditions contained in the joint memo filed by the 1st and 2nd Respondent, the period within which the Applicant is manning the dredger as covered in the joint memo, is only up to 30.09.2020 and in the circumstances, the mediation referred to the Chartered Accountant/Statutory Auditor of the Corporate Debtor in relation to the claim pertaining to the Applicant is to be suitably withdrawn - In relation to the balance claim which has been made by the Liquidator, both the parties represent, namely the 1st and 2nd Respondent and the Liquidator, Learned Counsel for the Liquidator represents that the same will go on for the mediation/Chartered Accountant.
Application dismissed as withdrawn.
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2020 (11) TMI 515
Liquidation of Corporate Debtor - section 33(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It is evident in the averments as contained in the application that in the second meeting of the CoC held on March 5, 2020 the CoC discussed in detail the possibility of resolving through resolution, and considering the fact that the company was not in operation for the last two years and that the industry as such was not attracting new investors now due to the Government policies manufacturing and selling of agricultural fertilizers and also that no concrete information about the prospective investor was provided by the promoter group, the CoC has come to the conclusion to liquidate the corporate debtor.
The CoC has unanimously decided to liquidate the company namely the corporate debtor and appoint the present resolution professional as liquidator.
Since, no resolution plan has been received by this Authority under sub-section (6) of section 30 of the I and B Code, 2016, before the expiry of the maximum period of 180 days CIR process, in exercise of the powers conferred under sub-clauses (i), (ii) and (iii) of clause (a) of sub-section (1) of section 33 of the I and B Code, 2016, this Authority proceeds to pass the liquidation order - Application allowed.
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2020 (11) TMI 514
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The application made by the financial creditor is complete in all respects as required by law. It clearly shows that the corporate debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the Insolvency and Bankruptcy Code at the relevant time. Therefore, the default stands established and there is no reason to deny the admission of the petition. In view of this, this Adjudicating Authority admits this petition and orders initiation of CIRP against the corporate debtor.
Petition admitted - moratorium declared.
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2020 (11) TMI 439
Liquidation of Corporate Debtor - no resolution plan submitted - HELD THAT:- The fact remains that during the CIRP period, there was no resolution plan received which was available for CoC to consider. As such Liquidation Order would be unavoidable - Under Section 12 of IBC in 180 days from date of admission of application and after extension, in extended period of 90 days CIRP was required to be concluded. According to the Respondent No. 2, the extended period of CIRP was ending on 16th August 2019. The Respondent Nos. 2 and 3 state that because the Consortium which included the Appellant had stated that they want to submit resolution plan, the initial extension under Section 12 of IBC seeking another 90 days was sought and taken from Adjudicating Authority. The record shows that in spite of giving opportunities to the Consortium (which included Appellant) no resolution plan was submitted and consequently in the fifth CoC meeting, CoC decided to move for liquidation.
The Respondent No.1 filed CA No. 452 of 2019 under Section 33 (2) on 01st July 2019 (Annexure A-11). The Liquidation order came to be passed on 06th January, 2020 by when time stated even in Second Proviso of Section 12 (3) of IBC was already over - there are no error in the conclusion of Adjudicating Authority that the liquidation order was required to be passed as no resolution plan was submitted even in the extended period of time.
Whether Resolution Professional/Prospective Liquidator should have been charged? - HELD THAT:- In the present matter, the Resolution Professional had already given the written consent and sub-clause a and b of Sub-Section 4 of Section 34 did not arise - The Application filed by CoC Annexure A-12 was under Section 60 (5) of IBC read with rule 11 of National Company Law Tribunal Rules, 2016. The Resolution Professional/Liquidator act in trust of CoC and Creditors. Under Section 10 (3) (b) of IBC name of Resolution Professional is proposed by Corporate Applicant at the time of initiation of CIRP. Under Section 34 the Resolution Professional subject to submission of consent is appointed Liquidator unless replaced by Adjudicating Authority under sub-section (4).
The Adjudicating Authority should have considered appointing any other Professional as liquidator instead of appointing the Respondent No. 1 in the face of the Joint Lenders’ Meeting Minutes reproduced above which claimed that the lenders were of the view that entire CIRP had not been conducted in desired way by the RP. Liquidation Order was yet to be passed and claim of CoC could not have been ignored under Section 27 of IBC. The interest of Financial Creditors and other Creditors is there even during Liquidation proceeding and it would not be appropriate if there are doubts regarding the manner in which the Liquidator is conducting the process.
The liquidation order passed by the Adjudicating Authority is maintained - matter is remitted back to appoint another Insolvency Professional as Liquidator replacing Respondent No. 1 - Appeal disposed off.
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2020 (11) TMI 357
Eligibility to become insolvency professional - it became necessary for IPs to obtain a valid AFA - Rejection of application for AFA - Constitutional validity of Regulation 7A of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 (the IP Regulations) read with Bye-Law 12A of the Insolvency and Bankruptcy Board of India (IBBI) (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 - power to frame the impugned regulations and bye-laws - excessive delegation or not - HELD THAT:- It is clear that the said regulations were framed under the power conferred by Sections 196, 207 and 208 read with 240 of the IBC. In an earlier judgment, namely, V. Venkata Sivakumar v. IBBI, [2020 (8) TMI 58 - MADRAS HIGH COURT], this Court rejected a challenge by the Petitioner herein to Regulation 7(2)(ca) of the IP Regulations as regards the power of the IBBI to charge a fee from IPs by using the annual turnover as a measure, including the allegation that there was excessive delegation. In this case, in addition to Regulation 7A of the IP Regulations, Regulation 12A of the Model Bye-Laws IPA Regulations is under challenge. On perusal of the Model Bye-Laws IPA Regulations, we find that the said regulations were framed by the IBBI under the power conferred by Sections 196, 203 and 205 read with Section 240 of the IBC.
Given the fact that the IBBI has framed the Model Bye- Laws IPA Regulations and IPAs, such as the IIIPI, have framed bye-laws in consonance with the model bye-laws, it cannot be said that there is excessive delegation. Indeed, Section 205 of the IBC expressly stipulates that, subject to the provisions of the IBC and rules and regulations thereunder, after obtaining the approval of the IBBI, an IPA should frame bye-laws that are consistent with the model bye-laws framed by the IBBI - as regards the criteria for accepting or rejecting an application for an AFA, Regulation 12A(2) of the Model Bye-Laws IPA Regulations stipulates the criteria. Therefore, it certainly cannot be said that principles or norms have not been laid down in respect of the exercise of power by IPAs.
Whether the impugned regulations violate Article 14, 19 and 21 of the Constitution of India - primary ground on which the regulations are assailed is that it subjects registered IPs to the added requirement of obtaining an AFA from the IPA - HELD THAT:- The existence of more than one authority with regulatory or disciplinary control over a professional is per se not a ground to hold that the impugned regulations are unconstitutional. In the specific context of IPs, the registration of an enrolled professional member as an IP and the cancellation of such registration are within the domain of the IBBI, whereas the grant of or cancellation of membership and the issuance, renewal and cancellation of an AFA are within the domain of the IPA, which functions under the supervisory control of the IBBI - Whether the equality clause is violated by the impugned regulations is, however, a separate matter to be examined. IPs perform a distinct function in insolvency resolution and liquidation under the IBC and the regulations framed thereunder. Therefore, they indubitably constitute a distinct class.
The admitted position is that there are only three IPAs in India, and the Petitioner has admittedly obtained membership from the IIIPI. Accordingly, as per Regulation 12A of the Model Bye-Laws IPA Regulations, he is required to apply for and obtain the AFA from the IIIPI - Section 238 A of the IBC does not apply in this situation.
The time limit under Regulation 12 A(7) of the Model Bye-Laws IPA Regulations clearly runs from the date of receipt of the order, and the Petitioner would be entitled to reckon limitation from 16.07.2020 if that were indeed the date of receipt of the order of rejection as alleged. More importantly, in contrast to a withdrawal of registration or loss of professional membership as an IP, the rejection of the application for an AFA is not final and apart from the appellate remedy, it is always open to the IP concerned to remedy the non-compliance, as cited in the order of rejection, and re-apply - Regulation 12A is not unconstitutional - thus, the time limit prescribed in Regulation 12A(7) may be revisited by the IBBI by considering an appropriate amendment either providing for a larger time limit or by conferring power to condone delay for sufficient cause.
The Petitioner has failed to make out a case to declare the impugned regulations as unconstitutional - Petition dismissed.
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2020 (11) TMI 356
Maintainability of application - initiation of CIRP - Corporate Debtor committed default in not completing the Construction of the flat in time and handing over possession of the same in terms of Agreement - Financial Creditor/Home Buyer committed default in making payment of the instalments or not - Time Limitation.
Time Limitation - HELD THAT:- There is nothing on record to show that the Corporate Debtor has ever offered possession of the flat and that the occupation certificate was applied for within the stipulated time of handing over possession. When the Corporate Debtor failed to complete the Construction and could not deliver the possession, the default was committed. The petition is filed within three years from the date, when possession was scheduled to be delivered. Thus, it is clear that the objection of the Appellant regarding limitation is not sustainable.
Whether the Corporate Debtor has committed default in not completing the Construction of the flat in time and handing over possession of the same in terms of Agreement? - Whether Financial Creditor/Home Buyer committed default in making payment of the instalments as per 'ABA' under construction link Plan? - HELD THAT:- Based on the admission of the Corporate Debtor, it is clear that till 22nd November 2018, flooring and finishing work of the Apartment was still going on. The Appellant has annexed the copy of a letter dated 29th October 2019 by which the concerned authorities granted permission for the occupation of the said building. The Corporate Debtor had applied for issuance of Occupation Certificate on 03rd July 2019, which was granted on 29th October 2019.
From facts of this case, it is evident that the corporate debtor has failed to honour its promise in completing the Project and handing over possession in time as per terms of the Agreement. Therefore due to non-payment of an instalment on account of delay in Construction cannot be treated as default committed by the Allottee - the Corporate Debtor had committed default in not completing the construction work of the flat in time and failed to deliver the possession on the stipulated date as per Agreement. The Corporate Debtor himself has admitted in its reply to notice dated 15th November 2018, that unlike most builders who have abandoned the Project and stopped the work, it is completing the Project which is at the final stage where flooring and finishing work is underway. It is also evident that flat was to be delivered by 2nd week of February 2016, but the Corporate Debtor failed to honour its promise and could not deliver the flat in time. The Appellant admits the overall situation prevailing everywhere; therefore, in such a situation, there would have been reasonable apprehension in the mind of Allottee that building may not be completed. Therefore, the possibility cannot be ruled out that in the circumstances stated above the Allottee might have stopped further payment after 2013. It is also on record that in 20th December 2016 the Corporate Debtor raised a demand of VAT charges of ₹ 3,00,615/, which was paid by the Allottee.
The Corporate Debtor had not placed any record to show as to when the internal finishing and flooring work started. Mandatory condition of issuing Notice through speed post or courier to the Allottee, at every stage of Construction as per Agreement has not been followed. Therefore in terms of Clauses 2.17 &2.18 of the Agreement, it cannot be said that the Allottee/Financial Creditor has committed default in paying the instalments when due. It is undisputed that flat was to be delivered latest by 2nd week of February 2016, but construction work was still going on in the year 2018.
Whether the Application U/S 7 of the Code is filed fraudulently with malicious intent for the purposes other than for the Resolution of Insolvency or liquidation, as defined under Section 65 of the I&B Code, 2016? - HELD THAT:- The Appellant /Real Estate Developer has failed to prove that Allottee is a speculative Investor and is not genuinely interested in purchasing the flat/Apartment and has initiated proceeding under the Code to pressurise the Corporate Debtor. Thus there are no justification to invoke Section 65 of the I&B Code against the Allottee.
The Order of Adjudicating Authority in admitting the petition filed U/S 7 of the Code needs no interference - Appeal dismissed.
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2020 (11) TMI 355
Recovery of Arrears from Corporate Debtor - applicant’s contention is that the rejection under Regulation 14 is not sustainable for the reason that there is no un-preciseness in the amount claimed by the creditor either due to any contingency or other reasons - HELD THAT:- It is true that the claim of GST amounting to ₹ 28,41,59,349.06 has been made from the Corporate Debtor by the applicant, as per the detailed statement furnished by them to the Resolution Professional. It is stated that different notices envisaged under Section 46 was issued by the applicant for the period from April, 2018 to September, 2019 (18 months). In this connection, it is to be noticed that the Corporate Debtor was inoperative from July, 2019 and the applicant made the claim before the Resolution Professional only in February, 2020.. It is not clear as to why the applicant slept over till 19.2.2020 to recover the amount from the Corporate Debtor.
The Resolution Professional even though has admitted the full amount, as per Regulation 14(2) of the CIRP Regulations, the RP can revise the amounts of claims admitted, including the estimates of claims made under Sub-Regulation (1) when he comes across additional information warranting such revision, This additional information he has received from the suspended Managing Director on 13th Jul, 2020 that the amount charged by the GST Department is not correct, as the GST is to be charged only on certain heads of income and not on total turn over of the Corporate Debtor. After re-assessing the amount payable by the Corporate Debtor with the assistance of the Internal Auditor of the Corporate Debtor, the amount worked out to be ₹ 1,06,09,299, which fact has been intimated to the applicant - It was resolved to file an appeal before the Joint Commissioner after getting the audited financial statements of the financial year 2018-19. The RP was directed that after receipt of proper and validated information from the part of the promoters of the Corporate Debtor he shall revise the claim amount after due verification and to explore other possibilities to arrive at a correct GST liability.
Since the quantification of the actual amount to be paid as GST due by the Corporate Debtor is to be decided in an appeal going to be filed by the Resolution Professional before the concerned authorities, this Tribunal is not going into the question whether the Resolution Professional has adjudicatory power to decide the amount of GST due from the Corporate Debtor. - the Resolution Professional is directed to immediately, at any rate within two weeks from today, to file an appeal before the Joint Commissioner, State Sales Tax Department with the relevant papers for re-assessing the GST amount payable, based on the audited financial statements for the financial year 2018-19 and also based on the Notification No.9/2017-Integrated TA (Rate) dated 28.6.2017 issued by the Government of India.
Application disposed off.
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2020 (11) TMI 354
Continuation of Liquidation Process - exclsusion of time period between February 20, 2020 to November, 30, 2020 from calculation of 365 days/One year as provided under Regulation 44 of the IBBI (Liquidation Process) Regulations, 2016 - HELD THAT:- In the Report No.100/KOB/2020, regarding ‘E’ Auction conducted on 30th September, 2020 it is stated that “No bid has come for Asset Blocks numbered 1 to4 ie., Land and Building and Plant and Machinery. There were many interested buyers who had shown interest, however one of the reasons for the bid not being received could be due to a demonstration in front of the factory on 4.9.2020 by few workmen/employees which was also published in the newspaper in Kochi and that have scared away the prospective buyers to come forward.
As mandated in Regulation 44(2) a report explaining why the liquidation has not been completed and specifying the additional time that shall be required for liquidation.
The applicant is permitted to continue with the liquidation process - The period between February 20,2020 to November, 30,2020 is excluded from calculation of 365 days/One year as provided under Regulation 44 of the IBBI (Liquation Process) Regulations, 2016 for completing the Liquidation Process, following the norms prescribed in the Regulations.
Application disposed off.
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2020 (11) TMI 288
Upfront Charges - arrangement of the remaining amount by way of bank finance - Applicant submits that the performance guarantee is on the higher side when the Resolution Plan itself is for ₹ 23 Crores - HELD THAT:- Considering the facts and circumstance of the case and the time required for the CoC to take such a decision, in the interest of justice we order that the CoC may consider the Resolution Plan by accepting the bank performance guarantee of ₹ 3 Crores as agreed to be provided by the Resolution Applicant.
Application disposed off.
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2020 (11) TMI 287
Exclusion of the period of lockdown due to Covid-19 imposed by the Central Government and the State Government of Telangana from the Corporate Insolvency Resolution Process period - HELD THAT:- It is true lockdown commenced from 22.03.2020. It is the case of Resolution Professional that Resolution Applicants are from Singapore and Hongkong, those countries are affected with Covid-19 and hence the process of evolving the resolution process could not be completed - Learned counsel for Resolution Professional relied on Regulation 40C of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and contended that lockdown period to be excluded from CIRP. The COC also approved the same. Therefore, there are grounds to allow the application for excluding the lockdown period from CIRP and as such CIRP to be completed by 06.09.2020.
The application is allowed directing completion of CIRP by 06.09.2020.
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2020 (11) TMI 246
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The date of default is 31.05.2019, that is much prior the declaration of "Lock-Down" period by the Government due to pandemic of "COVID-19" virus - The record reveals that the Operational Creditor produced all invoices raised against the Corporate Debtor where under, bricks were sold and delivered or service rendered. It has also proved from the evidence of record that notice under Section 8 of the I.B. Code, 2016 has been served on Corporate Debtor. In view of this, there are no reason to reject the application.
The Operational Complied the provision of Section 9(3)(b) and Section 9(3)(c) of the I.B. Code, by filing an affidavit stating that it did not received the amount of claim and no reply from the Corporate Debtor or received any pendency of dispute relating the same - application admitted - moratorium declared.
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2020 (11) TMI 245
Direction to allow the applicant physical access to the registered office and corporate office of the Corporate Debtor to enable the applicant to take custody of the books of accounts and all other records of the Corporate Debtor - disclosure of applicant full details and particulars of the steps taken by it in relation to the assets and properties of the Corporate Debtor - HELD THAT:- Filing of an application like the one in hand as against one of the members of the CoC is found not fair and just. It is the CoC who has to give proper diction to RP to expedite the process so as to reduce the CIRP cost. If one among the members of the CoC is holding possession of secured interest and registered office of the CD, keeping in hand even long after the initiation of CIRP, it is improper and contrary to the provisions of the Code. The submission of the Ld. Counsel for the R1 that the only predicament of the R1 in not allowing the Resolution Professional to get access to the Registered Office of the Corporate Debtor in the absence of any specific order from the Adjudicating Authority because of litigious nature of the Corporate Debtor and its suspended directors is found devoid of any merit. R1 is bound to hand over all the assets in its possession inclusive of the registered office.
In view of the facts that SBI holds possession of the registered office and according to R4 to R6 all the documents are kept in the office, unless and until it is open, the RP could not ascertain what further documents or information is required from R4 to R6 - R1/State Bank of India is directed to forthwith hand over possession of all the assets of the CD and the registered office and corporate office of the Corporate Debtor in its possession to the RP - Application allowed.
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2020 (11) TMI 244
Direction for payment of professional fees - extension of the cooperation of the Corporate Debtor and its personnel i.e. promoters, directors etc. to the RP - section 19 of the IB Code - HELD THAT:- It is clear that on the garb of the instant application, which is filed under section 19 of the IB Code, RP is seeking direction for reimbursement of his payment from Respondent No. 3 and 4. The very impleadment of the Respondent No. 3 and 4 in the instant application is not only bad in the eye of law but is blatant misuse of the process of law and thereby, the Respondent No. 3 and 4 are dragged before this Bench for no fault of them. Consequent upon which, they are compelled to file their reply, causing loss not only in the form of pecuniary as well as mental and physical harassment. Such type of act is not expected from the RP.
The instant application is dismissed as against the Respondent No. 3 and 4 with a cost of ₹ 30,000/- to be paid to the Respondent No. 3 only, as Respondent No. 4 neither shown his presence nor filed any reply.
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2020 (11) TMI 243
Maintainability of application - initiation of CIRP - Debt relates to invoice raised for audit fees and other professional work done in the Financial Year 2017-2018 and 2018-2019 - time limitation - HELD THAT:- The amount of debt is more than ₹ 1 lacs which is not barred by law of limitation. The said amount has not been paid and no plausible defence has been put forward by Corporate Debtor. The Applicant has also provided MCA Data of the Corporate Debtor. The application is otherwise complete and defect free. It is also noted that no disciplinary proceedings are pending against the IRP whose consent is on record. Hence, he can be appointed to conduct Corporate Insolvency Resolution Process (CIRP).
Application admitted - moratorium declared.
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2020 (11) TMI 242
Validity of retraction of resolution to approach the Central Government for its approval with regard to the remuneration of the Applicant passed in the seventh meeting of the Committee of Creditors held on 30.08.2018 - compliance with the directions of the Committee of Creditors in the meeting held on 26.04.2018 to make an application to the Central Government seeking approval for the remuneration paid to the Applicant - reimbursement of legal expense incurred by the Applicant - HELD THAT:- It is seen that the instant IA was filed during the period of CIRP of the Corporate Debtor and any action on the part of the RP for getting approval from the Central Government required CoC's approval with ' the requisite majority which was not forthcoming. Meanwhile this Adjudicating Authority vide its order dated 26.07.2019 in 1A Nos. 544 & 680 of 2019 has passed an Order of Liquidation.
In view of the Liquidation of the Corporate Debtor, this Adjudicating Authority deems it proper not to adjudicate upon the instant IA at this point of time and feels it proper to direct the Applicant herein to approach Liquidator for the relief in relation to the approval of remuneration by Central Government - application disposed off.
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2020 (11) TMI 193
Refund of amount which had been adjusted during CIRP by the Appellant Bank from Fixed Deposits of the Corporate Debtor - restoration od credit to the Corporate Debtor’s account so as to facilitate Resolution Plan - HELD THAT:- It is apparent that CIRP was initiated on 27th March, 2019 and later on, the Respondent found that the Appellant Bank had adjusted certain amounts which it could not, considering Section 14 of IBC.
The facts and developments are apparent from the above letter and considering the provisions of Section 14, we have no doubt that the impugned order as passed by the Adjudicating Authority is required to be maintained. Once CIRP was initiated and Section 14 of IBC applied such adjustment by Appellant cannot be maintained. Lack of knowledge of initiation of CIRP would not be relevant. When CIRP was initiated, the Appellant Bank could not have adjusted the amounts as has been done in this matter.
Appeal dismissed - decided against appellant.
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2020 (11) TMI 158
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- As per Section 7 of IBC, in an application preferred by the Financial Creditor for initiation of Corporate Insolvency Resolution Process, the Adjudicating Authority is required to see the existence of financial debt and ascertain the existence of default. As per the documents submitted by the Petitioner that there is a financial debt in the form of loans availed by the Corporate Debtor. The date of default is on 26.10.2015. The last date of transaction from the statement of accounts furnished is on 22.06.2017. The application is filed on 12.04.2018, hence the application is filed well within the period of limitation.
From the documents placed on record, this Adjudicating Authority is satisfied that default has been committed by the Corporate Debtor in repayment of loan amount to the Bank. The petition is complete - Petition admitted - moratorium declared.
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2020 (11) TMI 157
CIRP Proceedings - Levy and Recovery of Capital Gains Tax - proceeds received from sale of assets of the corporate debtor - the amount to be included in the liquidation cost or to be distributed as per waterfall mechanism under Sec 53 of IBC? - HELD THAT:- This Adjudicating Authority is of the view that the applicability of Sec 45 and 46 of The income Tax Act will not have an overriding effect on the water fall mechanism provided under Sec 53 of the IBC, 2016, which is a complete code in itself and thus capital gain shall not be taken into consideration as the liquidation cost.
Further, it is observed that Sec 178 of Income Tax Act, 1961 provides for a priority in appropriation of the amount set aside by the liquidator for clearance of tax dues but it is to consider that the liquidation of accompany could be under the provisions of different enactments. And as for liquidation under IBC, Sec 178 of IT Act stands excluded by virtue of amendment of Section 178(6) with effect from 01.11.2016, in accordance with the provision of Sec 247 of the IBC read with Third Schedule appended there to, therefore, as the corporate debtor is in liquidation under the Code, the Income Tax Department can no longer claim a priority in respect of clearance of tax dues as provided Under Sec 178(2) and (3) of the Income Tax Act, 1961.
As per Sec 238 of the Code, the provision of the Code shall have an overriding effect on any other enactment and Sec 53 of the Code provides the waterfall mechanism for distribution of assets in which Sec 53(b) i.e. the debt owed to the secured creditors has been given priority over government dues as reflected under Sec 53(i) and has to be dealt accordingly.
Thus, the tax liability arising out of the sale of assets by the liquidator shall be distributed in accordance with the provisions of Section 53 of the Insolvency and Bankruptcy Code, 2016 and the capital gain tax shall not be treated as the liquidation cost - application disposed off.
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2020 (11) TMI 129
Extension of 30 days beyond 270 days from Corporate Insolvency Resolution Process - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The very Objective of the IB Code is to "consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the priority of payment of government dues and to establish an Insolvency and Bankruptcy Fund, and matters connected herewith or incidental thereto. An effective legal framework for timely resolution of insolvency and bankruptcy would support development of credit markets and encourage entrepreneurship. It would also improve ease of doing business, and facilitate more investments leading to higher economic growth and development."
Looking to the very object of IB Code, CoC desires to get extension of 30 days as there is every likelihood that some Resolution Plan will be accepted and/or approved by the CoC. In that event, a Corporate Debtor - However, the Supreme Court has observed that 330 days is the outer limit within which resolution of the stressed assets of the Corporate Debtor must take place.
The application so filed by RP is allowed by extending 30 days from 13.08.2020 - Application disposed off.
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