Recent Important Case Laws under IBC, 2016 for CA Final May 2019 Examination
S. No. Decision Case Name
1. Members of erstwhile Board of Directors, being vitally interested Vijay Kumar Jain v.
in resolution plans that may be discussed at meetings of Standard Chartered Bank
committee of creditors, must be given a copy of such plans as (SC)
part of 'documents' that have to be furnished along with notice of
such meetings
2. Financial creditors are clearly different from operational creditors Swiss Ribbons (P.) Ltd. v.
and, therefore, there is obviously an intelligible differentia Union of India (SC)
between the two which has a direct relation to the objects sought
to be achieved by the Code. Operational creditors are not
discriminated against or that Article 14 has not been infracted
either on the ground of equals being treated unequally or on the
ground of manifest arbitrariness
3. Proceedings initiated under section 7 or section 9 of the Forech India Ltd. v.
Insolvency and Bankruptcy Code are independent proceedings, Edelweiss Assets
which can continue independent of any winding up petition that Reconstruction Co. Ltd.
may be pending in a High Court under Companies Act (SC)
4. Where properties of corporate debtor under liquidation were Anil Goel, Liquidator,
attached under Prevention of Money Laundering Act (PMLA), Rotomac Global (P.) Ltd. v.
question as to whether properties attached were not proceeds of Ms. Ramanjit Kaur Sethi
crime or lenders were bona fide lenders, was to be decided by Deputy Director,
authorities under PMLA; for withdrawal of attachment, liquidator Directorate of Enforcement
appointed under IBC has to approach authorities under PMLA
5. Without initiating any CIRP against principal borrower, it is Ferro Alloys Corporation
always open to financial creditor to initiate CIRP against Ltd. v. Rural Electrification
corporate guarantor. Corporation Ltd. (NCLAT)
Where on principal borrower's failure to repay, financial creditor
initiated CIRP against corporate guarantor and consortium of
banks claimed that being a prior and first charge holder, their
right could not be defeated by said financial creditor, said claim
of consortium banks could not be accepted as role of banks came
if they file claim after admission of an application and when they
were accepted as a financial creditors and made members of CoC
6. It is not necessary to initiate CIRP against principal borrower Dr. Vishnu Kumar Agarwal
before initiating CIRP against corporate guarantors; for same set v. Piramal Enterprises Ltd.
of debt, claim cannot be filed by same financial creditor in two (NCLAT)
separate CIRP
7. Where employee union of corporate debtor sought an opportunity Edleweiss Asset
to submit a resolution plan for consideration of Committee of Reconstruction Co. Ltd. v.
Creditors (CoC), since main objective of Code is resolution of RTIL Ltd.
corporate debtor rather than liquidation, said opportunity was to
be granted to applicant association with a direction to identify an
investor to submit a resolution plan
8. Insolvency Proceedings Can Be Withdrawn Even After Invitation Brilliant Alloys Pvt Ltd v S
Of Resolution Plans Under Regulation 36A Rajagopal (SC)
(C) CA. Kamal Garg Page 1
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9. Resolution Applicant acting jointly with other persons who Arcelormittal India (P.) Ltd.
happen to either manage or control or be promoters of a corporate v. Satish Kumar Gupta (SC)
debtor classified as an NPA having debts not paid for a year, will
be ineligible to submit a resolution plan; to become, he or it must
pay off debt first
10. Limitation Act is applicable to applications filed under sections 7 B. K. Educational Services
and 9 of Insolvency and Bankruptcy Code from inception of (P.) Ltd. v. Parag Gupta &
Code Associates (SC)
11. Income-tax department cannot claim any priority in payment Leo Edibles & Fats Ltd. v.
from liquidation estate merely because it had issued attachment Tax Recovery officer
order much prior to initiation of liquidation proceedings under (Central), Hyderabad (HC
Code of Andhra Pradesh and
Telangana)
12. Upholding a Delhi High Court judgment which held that PR Commissioner of
moratorium under the Insolvency and Bankruptcy Code (IBC) Income Tax-6, New Delhi v.
will apply to the order of Income Tax Appellate Tribunal, the Monnet Ispat & Energy
Supreme Court has observed that IBC will override anything Limited (SC)
inconsistent contained in any other enactment, including the
Income Tax Act. Given Section 238 of the Insolvency and
Bankruptcy Code, 2016, it is obvious that the Code will override
anything inconsistent contained in any other enactment, including
the Income-Tax Act.
13. Section 14 refers to four matters that may be prohibited once State Bank of India v
the moratorium comes into effect. In each of the matters referred Ramakrishnan (SC)
to, be it institution or continuation of proceedings, the
transferring, encumbering or alienating of assets, action to
recover security interest, or recovery of property by an owner
which is in possession of the corporate debtor, what is
conspicuous by its absence is any mention of the
personal guarantor. Indeed, the corporate debtor and the
corporate debtor alone is referred to in the said Section. A plain
reading of the said Section, therefore, leads to the conclusion that
the moratorium referred to in Section 14 can have no manner of
application to personal guarantors of a corporate debtor.
14. The NCLT held that financial service providers such as NBFCs Randhiraj Thakur vs Jindal
are outside the purview of IBC. This is in view of the specific Saxena Financial Services
exclusion of ‘financial service provider’ from the definition of Ltd and others
‘corporate person’ under sub-section (7) of Section 3 of IBC.
15. Proceedings under Section 138 of the Negotiable Instruments Act:
Section 138 of the Negotiable Instruments Act (“NI Act”) deals with cheque bouncing; if an
amount falls due in this respect, the same can be recovered by filing a complaint under this
provision. The National Company Law Appellate Tribunal (“NCLAT”), in Shah Brothers Ispat
Pvt. Ltd. v. P. Mohanraj & Ors., held that a moratorium would not be extended to proceedings
filed under the NI Act. The reasoning adopted by the NCLAT was that the proceedings under
the NI Act are criminal in nature and that section 138 is a penal provision. The NCLAT took the
view that the action taken under the section is not a proceeding or a judgment or a decree of a
money claim.
(C) CA. Kamal Garg Page 2
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16. Proceedings under Articles 32 and 136 of the Constitution of India:
An exception was created by the National Company Law Tribunal (“NCLT”) in Canara Bank v.
Deccan Chronicle Holdings Limited. It held that the imposition of the moratorium will not
restrict any proceedings to be initiated or pending before the Supreme Court under Article 32 or
Article 136 of the Constitution of India wherein an order is passed. Moreover, the power of any
High Court under Article 226 of the Constitution of India will not be affected by such
imposition of a moratorium.
17. Arbitration Proceedings under Sec 34 of Arbitration and Conciliation Act, 1996:
In Power Grid Corporation of India Limited v. Jyoti Structures Limited, a case was initiated
under section 34 of the Arbitration Act to set aside the arbitral award which was passed in the
favour of the corporate debtor. The nature of the arbitral award was that of a pure money decree.
When the proceedings were pending, an application for the insolvency of the corporate debtor
was filed and a moratorium was imposed under section 14. The question before the Court was
whether, after the imposition of the moratorium, the arbitral proceedings ought to be stayed or
not.
The Court held that the term ‘proceedings’ mentioned in section 14 is limited to the debt
recovery actions against the assets of the corporate debtor and not any type of proceedings.
Moreover, there is no burden created on the assets of the corporate debtor when the proceedings
are continued. Hence, there is no bar on such proceedings under the moratorium provision.
Moreover, a distinction is made between usage of the term ‘against the corporate debtor’ in
section 14(1)(a) of the Code in comparison with ‘by or against the corporate debtor’ in section
33(5). It makes it clear that the latter encompasses a wider meaning.
Furthermore, only the enforceability of the arbitral award is subjected to the moratorium
provision and not the proceedings, execution of the award and the objections. Subsequently, the
proceedings can be continued by the interim resolution professional.
(C) CA. Kamal Garg Page 3
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