IBBI to celebrate its Sixth Annual Day

By Staff Reporter

The Insolvency and Bankruptcy Board of India (IBBI) is celebrating its Sixth Annual Day on 1st October, 2022. Union Minister for Finance and Minister of Corporate Smt. Nirmala Sitharaman, Affairs will grace the occasion as the Chief Guest and Shri Rao Inderjit Singh, Union Minister of State (Independent Charge) of Ministry of Statistics and Programme Implementation; Union Minister of State (Independent Charge) of Ministry of Planning; and Union Minister of State in the Ministry of Corporate Affairs, will be the Guest of Honour.

In order to commemorate the establishment of the IBBI, it has instituted an Annual Day Lecture Series. Chief Justice (Retd.) Shri Ramalingam Sudhakar, President, National Company Law Tribunal and Shri Ashok Kumar Gupta, Chairperson, Competition Commission of India will be delivering the Annual Day Lecture this year.

To mark the occasion, an annual publication, “IBC: Idea, Impressions and Implementation” will also be released.

Senior officers of the Government and regulatory bodies will grace the occasion. The occasion will witness the presence of stakeholders of the insolvency regime, namely, the insolvency professionals, registered values, other professionals, debtors, creditors, business leaders, academicians, and researchers.

Supreme Court order: NCLT cannot coerce allottees into settlements

By Fiona Mehta


The Hon’ble Supreme Court’s recent decision in E. S. Krishnamurthy & Others v. Bharath Hi Tech Builders Pvt. Ltd. defined and limited the jurisdiction of the National Company Law Tribunal (“NCLT”) and the National Company Law Appellate Tribunal (“NCLAT”) as well as the courses of action available to these authorities under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”).


Facts of the case: A agreement was made for the M/s Bharath Hi Tech Builders Pvt. Ltd. (Respondent) to raise money for the development of some agricultural property. The Respondent was required to transmit and register the plots to the allottees within the specified timeframe after a Facility Agent of the Respondent was designated to market the plots to potential buyers (Allottees) in exchange for the payment of a lump sum price.

The Respondent took out a term loan after failing to gather the necessary funds. The Respondent also asked the allottees for extensions on when they needed to transmit the plot, promising to pay back the full amount plus interest if they didn’t succeed. The Respondent requested additional extensions and provided additional assurances in response to its subsequent inability to fulfil its responsibilities.

The Respondent’s failure to make reparation, however, prompted the Appellants to file a petition before the NCLT, Bengaluru Bench under Section 7 of the IBC. The NCLT dismissed the petition on the grounds that the Respondent was making sincere attempts to seek a settlement, had already made settlements with some of the petitioners, and was still in the process of obtaining settlements with more petitioners. It gave the Respondent a deadline by which to reach a settlement with the additional claimants.

This NCLT order was appealed to the NCLAT, which dismissed the appeal on the grounds that the NCLT had already dismissed the petition at the pre-admission stage because a settlement process was in progress and the rights of all the appellants were protected because the NCLT had set a deadline for settlement and granted leave to appeal to the NCLT if the claims were not resolved.

Aggrieved by this order of the NCLAT, the Appellants filed a Civil Appeal before the Supreme Court under Section 62 of the IBC.

Court findings: When ruling that the NCLT had violated Section 7(5) of the IBC by acting outside of its authority, the Court noted that the NCLT has only two options when filing a petition under Section 7. It must accept the application in accordance with Section 7(5)’s Clause (a) or reject it in accordance with Clause (b). The Act does not give the NCLT any other options.

The NCLT may admit the application when:

  1. A default has occurred;
  2. The application under Section 7(2) is complete; and
  3. No disciplinary proceeding is pending against the proposed resolution professional.

In the event that any of the above conditions are not met, the NCLT may reject the application.

The Supreme Court has limited the NCLT’s authority at that stage and its possibilities by strictly interpreting Section 7 to limit the NCLT’s jurisdiction there. This has increased predictability, certainty, and clarity by limiting the NCLT’s options and setting boundaries on its power.

The Supreme Court correctly viewed that the NCLT may only support settlements in a period when they are fashionable and preferred to litigation. Settlements may be a quick and effective way to resolve disputes, but they may also aggravate one or more parties. As a result, they cannot be forced onto a party in order to achieve the goal of the corporate debtor’s rehabilitation in a timely manner.

NCLAT Delhi: Even after becoming a citizen of a foreign country, a personal guarantor is still liable.

By Fiona Mehta


In ruling on an appeal in Sudip Dutta v. State Bank of India, the National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, concluded that the obligation of a Personal Guarantor does not disappear upon later obtaining citizenship of a foreign nation. Additionally, it was decided that if the Personal Guarantor’s assets are located in India, the provisions of Sections 234 and 235 of the IBC would not be applicable.


Facts of the case: Sudip Dutta, who served as the Personal Guarantor in the credit facilities provided to M/s Ess Dee Aluminum Ltd., was the subject of a petition by State Bank of India under Section 95 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) (“Corporate Debtor”). A Deed of Guarantee dated October 19, 2015 was also signed by the appellant.

By decision dated 3.08.2021, the NCLT Kolkata had accepted the petition and named Mr. Prashant Jain as the Resolution Professional, charging him with recommending whether or not to accept it. Following that, the Resolution Professional submitted its application under Section 95(1) of the IBC proposing that an insolvency process be started against the Appellant. As a result, the NCL T Kolkata launched an insolvency resolution process against the Appellant by decision dated 16.06.2022. The Appellant appealed the orders from the 3.08.2021 and 16.06.2022 before the NCLAT.

The Appellant claimed that because he became a citizen of Singapore after signing the Deed of Guarantee on June 18, 2018, or as of that date, he was exempt from the provisions of the IBC because foreign persons are not considered personal guarantors.

Sections 234 and 235 of the IBC, which only allow for IBC enforcement outside of India when the Central Government enters into an agreement with the Government of Any Country Outside of India, provide clarification of the legislative intent. The Appellant, a Singaporean citizen, could not have been subject to an insolvency resolution process because there was no such agreement between the Central Government and the Government of Singapore.

The Respondent contended that the Appellant’s later acquisition of Singaporean citizenship was of no consequence because he was completely bound by the Deed of Guarantee he provided on October 19, 2015.

According to the contention, since the Appellant’s properties and assets are located in India, Sections 234 and 235 of the IBC were not implicated. The definition of “person” as used in Section 3(23) of the IBC includes individuals who reside outside of India. Additionally, the Appellant had consented to fulfil the Guarantee by paying a Principal Amount not to exceed Rs. 50 crore together with interest, costs, and fees in her role as the Corporate Debtor’s Personal Guarantor.


Decision of NCLAT: It was noted that Section 60(1) of the IBC expressly states that the insolvency resolution process must be started before the adjudicating authority whose territorial jurisdiction includes the location of the registered office of the corporate person. When legal action is brought against a personal guarantee, the personal guarantor’s residency is not taken into account.

The “personal guarantors” indicated in Section 60(1) were further noted to be personal guarantors regardless of whether they were Indian citizens or foreign nationals. When a personal guarantee is accepted, a person is obligated by it regardless of who provided it—even if they are a foreigner or someone who lives outside of India.

The Bench ruled that the statutory structure does not give the Personal Guarantor a way out of his obligation to make a Personal Guarantee simply because he acquired citizenship in a foreign nation after the Guarantee Deed was executed.


Counsel For Appellant: Mr. Dhruba Mukherjee, Sr. Advocate with Mr. Raja Ratan Bhura and Mr. Shwetank Singh, Advocates.
Counsel For Respondents: Mr. Ashwini Kr. Singh, Mr. Joydeep Mukherjee, Advocates for State Bank of India.

NCLT Mumbai: Terminates Sahara Hospitality’s CIRP

By Fiona Mehta


In the case of Delta Electro Mechanical Pvt. Ltd. v Sahara Hospitality Ltd, it was permitted withdrawal of insolvency proceedings and termination of Corporate Insolvency Resolution Process (CIRP) against Sahara Hospitality Ltd. has been terminated as Parties enter full and final settlement, according to the National Company Law Tribunal (“NCLT”), Mumbai Bench, on July 28, 2022.


Facts of the case: For a total of Rs. 32 crore, Sahara Hospitality Ltd. (the “Corporate Debtor”) had given Delta Electro Mechanical Pvt. Ltd. (the “Operational Creditor”) the go-ahead to supply, install, test, and commission the HVAC and electrical system at the Hotel Sahara Star in Mumbai (approx.).

The Operational Creditor filed a petition under Section 9 of the Insolvency and Bankruptcy Code 2016 (“IBC”) in 2018 after the Corporate Debtor fell behind on payments, asking for the start of CIRP against the Corporate Debtor for a default of Rs. 51,77,97,495 (principal amount of Rs. 32,72,03,256 and interest at 18 percent, Rs. 19,05,94,239/-). When the parties came into settlement terms on April 23, 2019, the NCLT decided to dismiss the case in 2021. Under these conditions, the Corporate Debtor agreed to pay the Operational Creditor Rs. 20 Crore over 14 instalments. In the event that the provisions of the settlement are broken, the Operational Creditor is free to resurrect the Petition, according to the NCLT Bench.

The Operational Creditor filed MA 2649 of 2019 to request the reactivation of the earlier Company Petition since the Corporate Debtor disregarded the conditions of the settlement agreement. The Parties then agreed upon a Second Terms of Settlement on November 21, 2019. However, the Corporate Debtor once more disregarded its obligations to make the payments.


Application for withdrawal: In light of the full and final settlement reached between the parties for an amount of Rs. 8,00,00,000/- to be paid by the Corporate Debtor, the IRP filed an application under Section 12A of the IBC seeking the dismissal of the petition filed by the Operational Creditor.

In light of the full and final settlement reached between the parties for an amount of Rs. 8,00,00,000/- to be paid by the Corporate Debtor, the IRP filed an application under Section 12A of the IBC seeking the dismissal of the petition filed by the Operational Creditor.

Before the Bench, the operational creditor confirmed that it had received the total sum specified in the settlement agreement. The Bench noted that nothing remains in the Company Petition after accounting for the consent requirements, and therefore the rigour of the CIRP was terminated against the Corporate Debtor.


NCLT Mumbai Bench: Justice P.N. Deshmukh (Judicial Member)

Counsel for Operational Creditor: Mr. Abhay Itagi

Counsel for Corporate Debtor: Mr. Nausher Kohli

Counsel for erstwhile management: Mr. Sandeep Bajaj

NCLAT Delhi: Earnest money paid towards land purchase is not financial debt

In the matter of S. Chandriah v Sunil Kumar Agarwal & Ors. under the National Company Law Appellate Tribunal (“NCLAT”), it was held that payment of Earnest Money towards purchase of land is a financial liability but not a ‘financial debt’ as per the Section 5(8) of the  Insolvency and Bankrupt Code, 2016 (“IBC”), as it has not been disbursed for consideration of time value of money.



Facts of the case: S. Chandriah (“Appellant”) had written to M/s. Digjam Ltd. on September 14, 2018, proposing to purchase any surplus land that was present at the Mills complex of the aforementioned business in Jamnagar, Gujarat. The Appellant then paid Digjam Ltd. earnest money totaling Rs. 7 Crores between 26th September, 2018 and 8th April, 2019.
M/s. Oman Inc. filed an application under Section 9 of the IBC in the meantime, requesting the start of the Corporate Insolvency Resolution Process (“CIIRP”) against M/s. Digjam Ltd. (“Corporate Debtor”). The NCLT Ahmedabad Bench accepted the plea and launched CIRP against the Corporate Debtor on April 26, 2019. The Resolution Professional has been named as Mr. Sunil Kumar Agarwal.

The latter advised the appellant that sending money as an interest-free advance to be offset by the sale price for a potential sale of land does not constitute “financial debt.” Thereafter, the Appellant applied to the NCLT to be added to the Committee of Creditors; however, the application was denied in an order dated February 7, 2020. The Appellant then appealed the abovementioned order that was issued on February 7, 2020 before the NCLAT Delhi.

Furthermore, on February 11, 2020, both the CoC and the NC LT approved the Resolution Plan filed by M/s. Finquest Financial Solutions Pvt. Ltd. The aforementioned Resolution Plan suggested paying “other creditors” NIL.


Order: The NCLAT observed that a contract between the parties can be oral as well as in writing however, the Appellant had failed to prove that there was even an oral agreement between the Parties.
The payment of a debt must be made in consideration for the time worth of money in order for it to qualify as financial debt. The amount paid over the period of time for which the money has been disbursed is referred to as the time value of money. The disbursement by the Appellant to the Corporate Debtor was argued to be only a payment of Earnest Money, to be adjusted in the sale of the land, and not a disbursement in consideration for the time worth of money.

Therefore, the NCLAT Delhi Bench dismissed the appeal and upheld the order of the NCLT.

Insolvency and Bankruptcy Board of India amends the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016

By Staff Reporter

The Insolvency and Bankruptcy Board of India (IBBI/Board) notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2016 (CIRP Regulations) on 14th June, 2022.

The amendment provides the operational creditors to furnish extracts of Form GSTR-1, Form GSTR-3B and e-way bills, wherever applicable along with the application filed under section 9 of the Insolvency and bankruptcy Code, 2016. These additional set of documents, can  be used as evidence of transaction with the corporate debtor, debt and default easing the process of admission. These documents will also to be submitted as part of the claims submitted to the resolution professional to help collation of claims. Further, creditors filing applications under section 7 or 9 of the Code are required to furnish details of their PAN and Email ID to ensure smooth correspondence.

In order to improve information availability, the amendment places a duty on corporate debtor, its promoters or any other person associated with the management of the corporate debtor to provide the information in such format and time as sought by the resolution professional.

The amendment places a duty on the creditors to share information regarding the assets and liabilities of the corporate debtor, the financial statements and other relevant financial information from their records and available reports to help the resolution professional in preparation of the information memorandum and relevant extracts from the transaction or forensic audit reports to aid the resolution professional in preparation of the avoidance application.

The Amendment also addresses the issue of treatment of avoidance applications filed with the Adjudicating Authority after closure of the corporate insolvency resolution process (CIRP). It provides that the resolution plan shall provide for manner in which such applications will be pursued after the approval of the resolution plan and the manner in which the proceeds, if any, from such proceedings shall be distributed.

The amendment includes a definition of significant difference in valuations during CIRP and enables the committee of creditors to make a request to the resolution professional regarding the appointment of a third valuer.

The amended regulations are effective from today. These are available at www.ibbi.gov.in.

IBBI amends Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017 and the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017

By Staff Reporter

With a view to put in place, a streamlined and swift complaint handling procedure, the Insolvency and Bankruptcy Board of India notified the Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) (Amendment) Regulations, 2022 and the Insolvency and Bankruptcy Board of India (Inspection and Investigation) (Amendment) Regulations, 2022 to amend the Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017 and the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017.

The Insolvency and Bankruptcy Code, 2016 (Code) read with Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017 provide mechanism for redressal of complaints and grievances filed against insolvency professionals, insolvency professional agencies and information utilities. Further the Code read with Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017 provide mechanism for carrying out inspections and investigations on insolvency professional agencies, insolvency professionals and information utilities and passing orders by Disciplinary Committee.

The mechanism of complaint/ grievance redressal and subsequent enforcement action has been amended to have expeditious redressal and also to avoid placing undue burden on the service providers. To curtail such delays and to ensure expeditious and result oriented enforcement mechanism, the Amendment Regulations provides for following:

  • Revisions in various timelines related to enforcement process provided in the (Grievance and Complaint Handling Procedure) Regulations, 2017 and (Inspection and Investigation) Regulations, 2017 for addressing the issue of delay in present mechanism.
  • Effective participation of IPAs in regulating the IPs through examination of grievances received against IPs.
  • Intimation to Committee of Creditor (CoC)/ Adjudicating Authority (AA) about the outcome of Disciplinary Committee (DC) order.

The Amendment Regulations are effective from 14th June, 2022. These are available at www.ibbi.gov.in.

Supreme Court allows the settlement plan of Promoter at Liquidation stage

By Fiona Mehta


In the matter of Vallal RCK Vs. M/s Siva Industries and Holdings Limited and Ors. [Civil Appeal Nos. 1811-1812 of 2022] under the Supreme Court of India on 3th June 2022, it was held that when 90% or more of the creditors decide that allowing the promoter of the Corporate Debtor to file a Settlement Plan and withdrawing the Corporate Insolvency Resolution Process as per Section 12A of the Insolvency and Bankruptcy Code, 2016, will be in the best interests of all stakeholders, the adjudicating authority (NCLT) or the appellate authority (NCLAT) cannot sit in appeal over such commercial wisdom of the Committee of Creditors.

This Judgement will now change legality of Section 12 of the Insolvency ad Bankruptcy Code, 2016.



IDBI Bank Limited had filed an application under Section 7 of the IBC seeking initiation of Corporate Insolvency Resolution Process (CIRP) against M/s Siva Industries and Holdings Limited (Corporate Debtor). The NCLT accepted the application on July 4, 2019, and the CIRP process began. The Resolution Professional (RP) presented a resolution plan to the COC, but it was not adopted since it did not earn the required 66 percent of votes. The RP applied to start the liquidation process. Mr. Vallal Rck, the Corporate Debtor’s promoter, then submitted a settlement application under Section 60(5) of the IBC, proposing a one-time settlement plan.

The learned NCLT, in an order dated August 12, 2021, dismissed the application for withdrawal of CIRP and adoption of the Settlement Plan, stating that the said Settlement Plan was not a settlement simpliciter under Section 12A of the IBC but a “Business Restructuring Plan.” The learned NCLT began the liquidation process of the Corporate Debtor in IA/837/IB/2020 as well, pursuant to another ruling of even date. As a result of this, the appellant filed two appeals with the learned NCLAT.


Supreme Court Judgement:

The Court noted that Section 12A, which deals with withdrawal of petitions admitted under Sections 7, 9, or 10, was included by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, following significant consideration by the Insolvency Law Committee. The Committee had suggested that a departure be permitted if the COC supports it with a 90% vote share.

The Court noted that the Committee issued the proposal because the IBC’s aim, according to the Committee, is to prevent individual enforcement and settlement actions. In light of this, it was suggested that a settlement may be negotiated between all creditors and the debtor in order for a withdrawal to be approved. Regulation 30A was added to the Regulations, 2016 as a result of the addition of Section 12A to the IBC, which lays out the detailed procedure for withdrawing an application.

The legality of Section 12A was also confirmed in Swiss Ribbons Private Limited and Anr. v. Union of India and Ors. Furthermore, a slew of Apex Court decisions have already concluded that NCLT and NCLAT have no authority to intervene with COC’s business judgement.

The Code 2016’s major goal is to resolve corporate debtor issues through a reorganization and resolution procedure while keeping the corporate debtor as a going business. Liquidation of a corporate debtor is the last resort when all other options have failed and there is no other option than liquidation. When a better plan for the Corporate Debtor’s business exists and has been accepted by a majority of the Committee of Creditors, it is the duty of the Adjudicating Authority or the Appellate Authority not to interfere with the COC’s decision.

NCLT Chennai: IBC does not apply to project-based CIRPs of real estate companies

By Fiona Mehta

The National Company Law Tribunal in the case of N Kumar v. Tata Capital Housing Finance Ltd. held that the project wise Corporate Insolvency Resolution Process (CIRP) of a real estate company is outside the purview of Insolvency and Bankruptcy Code, 2016 (IBC/Code) under Section 60(5).

Facts of the case: NCLT Chennai commenced the CIRP of Sheltrex Developers Pvt. Ltd (Sheltrex) with an order dated 10.12.2019, and Mr. N Kumar was appointed as the Interim Resolution Professional and then confirmed as Resolution Professional.

Sheltrex has established two real estate projects, Appur Village in Oragadam, Chennai, which has 296 homes, and Nammavedu in Coimbatore, which has 110 homes. Sheltrex’s Resolution Professional filed an application under Section 60(5) of the IBC, requesting authority to form a project-based Committee of Creditors and conduct Sheltrex’s project-based CIRP.

Resolution Professional contended that Sheltrex’s sole business is marketing real estate projects, particularly affordable housing. Sheltrex’s projects have several types of creditors who are unrelated to one another. The Resolution Professional also cited NCLAT’s decision in Flat Buyers Association v. Umang Realtech Pvt. Ltd., which allowed for a real estate company’s project-based insolvency.

Tata Capital Housing Finance Ltd objected to the Resolution Professional’s request for relief, claiming that it has 17 percent voting rights in COC and that the RP’s action is not maintainable because neither the IBC, 2016 nor other rules specify project-specific CIRP. Tata Capital also claimed that CIRP laws need a resolution plan for the Corporate Debtor’s whole business, not project by project, and so the Resolution Professional’s application violates IBC provisions.


Decision: According to NCLT, there is no concept of limited CIRP or CIRP for specific projects under the IBC, 2016 or its regulations. In the case of Pioneer Urban Land and Infrastructure Ltd. v. Union of India, the Supreme Court declared that the IBC is a beneficial legislation that can be used to get a corporate debtor back on its feet.

The verdict of Umang Realtech is not applicable to the present issue, according to NCLT, since the process used by NCLAT was too unique to the facts and circumstances of that case to be used as a precedent in this situation. NCLT dismissed Resolution Professional’s case, ruling that the reliefs sought by Resolution Professional are outside the purview of IBC, 2016, and so are not maintainable.


Final Decision: This IA(IBC)/1245(CE)/2020 stands dismissed without cost.