OCDs Not Converted Into Equity By Notice Alone: NCLT Admits CIRP Against Arcturus Developers

The National Company Law Tribunal (NCLT) at Delhi has admitted insolvency proceedings against Arcturus Developers Private Limited for a default of Rs 1,258.73 crore, holding that a mere conversion notice does not legally convert debt into equity unless mandatory statutory steps are completed. A bench of Judicial Member Ashok Kumar Bhardwaj and Technical Member Reena Sinha Puri held that Optionally Convertible Debentures (OCDs) continue to retain the character of “financial debt” in the...

Labour Court Award Cannot Give Priority To Workmen's Dues Beyond 24 Months Before Liquidation: NCLT Indore

The National Company Law Tribunal, Indore Bench, has held that a labor court award by itself cannot give priority to old workmen's dues in liquidation under the Insolvency and Bankruptcy Code. The tribunal said that priority for workmen's dues is limited to amounts arising in the twenty-four months preceding the liquidation commencement date as per waterfall mechanismA coram of Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta said a prior labour adjudication cannot...

Resolution Professional's Duty Is Limited To Taking Control of Assets, Not Improving Their Value: NCLT Mumbai

The National Company Law Tribunal (NCLT), Mumbai Bench, has recently clarified that a resolution professional's duties under the Insolvency and Bankruptcy Code are limited to taking custody and control of a corporate debtor's assets and do not extend to improving their value. The tribunal said the duties under Section 18 “only include to take control and possession of the assets of the Corporate Debtor” and do not require any effort “to improve the quality of the assets.” The observation was...

Oral Deposit Still Repayable: NCLT Allahabad Directs NBFC To Refund Over ₹30 Lakh To Depositor

The National Company Law Tribunal (NCLT) at Allahabad has directed a non-banking financial company (NBFC) to refund nearly Rs 30 lakh with interest to a depositor with whom the company did not have any written deposit agreement. The tribunal held that the absence of a written agreement cannot be used as a defense to withhold repayment once receipt of funds is admitted and there is utilization. Allowing a petition filed by Nidhi Agarwal against Shivam Traders and Hire Purchase Private...

NCLT Ahmedabad Admits Another Blu-Smart Entity To Insolvency Over Rs 142 Cr Default

The National Company Law Tribunal (NCLT) at Ahmedabad has admitted Blu-Smart Charge Private Limited into the Corporate Insolvency Resolution Process after a default of Rs 142.95 crore on debenture payments. A bench of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma admitted a petition filed by Catalyst Trusteeship Limited under Section 7 of the Insolvency and Bankruptcy Code. The bench said the material on record clearly showed the existence of a financial debt and a...

Negative Cash Balances, Salary Mismatches Alone Don't Prove Fraud: NCLT Ahmedabad

The National Company Law Tribunal (NCLT) at Ahmedabad has held that accounting lapses such as a small negative cash balance, salary mismatches, and routing of funds through non-consortium banks do not, by themselves, amount to fraudulent or wrongful trading under the Insolvency and Bankruptcy Code. A coram of Judicial Member Shammi Khan and Technical Member Sanjeev Kumar Sharma said that every irregularity in accounts cannot be treated as fraud. On the issue of a negative cash balance, the...

Party Taking Over Contract Cannot Deny Liability By Claiming No Privity: NCLT Mumbai

The National Company Law Tribunal (NCLT) at Mumbai has held that where a party steps into the shoes of the original contracting entity and expressly assumes contractual obligations, it cannot subsequently evade liability by pleading absence of privity of contract.It said that a party that has solemnly entered into a written arrangement acknowledging specific obligations cannot be permitted to approbate and reprobate by later denying those very obligations.A coram of Judicial Member Nilesh Sharma...

Resolution Applicants Must Exercise Due Diligence, Cannot Fault CIRP Over Public Disclosures: NCLT Mumbai

The National Company Law Tribunal (NCLT) at Mumbai has held that Prospective Resolution Applicants (PRAs) are required to exercise due care and diligence while submitting resolution plans.It said the applicants cannot later fault the insolvency process merely because they discovered additional information from the public domain.A coram comprising Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar dismissed an application filed by the consortium of Ashdan Properties Pvt....

NCLT Mumbai Sets Aside Reclassification of PNB from Secured To Unsecured Creditor In Arshiya CIRP

The National Company Law Tribunal (NCLT) at Mumbai has recently set aside the resolution professional's (RP) unilateral reclassification of Punjab National Bank (PNB) from a secured to an unsecured creditor in the corporate insolvency resolution process of Arshiya Ltd.A bench of Technical Member Prabhat Kumar and Judicial Member Sushil Mahadeorao Kochey held that once PNB's claim had been admitted, the resolution professional had no authority to alter its classification. It held that any such...

Mere Pendency Of Appeal Does Not Stall Bankruptcy Proceedings: NCLT Kochi

The National Company Law Tribunal (NCLT), Kochi Bench, on 14 January held that the mere pendency of an appeal does not operate as a stay on proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC), in the absence of a specific interim order from the appellate forum. A Bench presided over by Judicial Member Vinay Goel was dealing with a batch of applications filed by Tata Capital Limited seeking initiation of bankruptcy proceedings against five personal guarantors of Simtel Trading...

NCLT Mumbai Urges IBBI Advisory To Cut Insolvency Professionals' Dependency On Suspended Management Records

The National Company Law Tribunal (NCLT) at Mumbai has suggested that the Insolvency and Bankruptcy Board of India issue an advisory to insolvency professionals and financial creditors on reducing their dependence on information supplied by suspended management and on actively using third-party sources to reconstruct company records. A coram of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar made the suggestion while dealing with an application filed by the...

Full Payment Of Admitted Claim In Guarantor's CIRP Bars Creditor's Recovery From Principal Borrower

The NCLT Guwahati has recently held that full settlement of an admitted claim under a resolution plan in the corporate guarantor's CIRP discharges the debt, extinguishing the creditor's rights against both the borrower and the guarantor.A coram of Judicial Member Rammurti Kushawaha and Technical Member Yogendra Kumar Singh was dealing with applications arising out of the Corporate Insolvency Resolution Process of National Plywood Industries Limited.“Upon implementation of the Resolution Plan and...