INTRODUCTION
Recently, the Hon’ble National Company Law Appellate Tribunal has passed an order reiterating that once a resolution plan is approved by the Committee of Creditors (CoC), the successful resolution applicant cannot be permitted to be withdraw its plan.
RELEVANT FACTS
A contentious issue in the interplay between the Insolvency and Bankruptcy Code, 2016 (IBC) and the Limitation Act, 1963 (Limitation Act) has been the applicability of Section 18 of the Limitation Act (Section 18), which stipulates that a fresh period of limitation shall be computed from the time of the acknowledgement of liability in writing before the expiration of the prescribed period of limitation.
What have we been up to?
The days and nights may well be getting noticeably cooler, but as a team we remain very much at simmer point in terms of the demands of newlyacquired business support and insolvency work and staying on top of recent legislative changes.
Amongst this month's work highlights have been:
The National Company Law Appellate Tribunal, Delhi (NCLAT) in the case of Sh. Sushil Ansal Vs Ashok Tripathi and Ors, has reiterated that a decree-holder though covered under the definition of creditor under Section 3(10) of the Insolvency and Bankruptcy Code (IBC) would not fall within the class of financial creditors and therefore, a decree holder cannot initiate a corporate insolvency resolution process (CIRP) against a corporate debtor with an object to execute a decree.
As we discussed in our July newsletter, the Corporate Insolvency and Governance Act 2020 (CIGA 2020) has introduced a new Restructuring Plan, which is similar to existing Schemes of Arrangement. In essence a Court can sanction a restructuring plan which binds a dissenting class of creditors, if that class would be in no worse a position than the most likely alternative.
This was an application by the administrators of Lehman Brothers International (Europe) Ltd for a direction under paragraph 63 of Schedule B1 IA86 that they be at liberty to consent to a request from the company’s directors to distribute surplus funds to the company’s sole shareholder.
The Court has granted one of the first Winding Up Orders under CIGA 2020.
The winding up petition had been issued on 1 May 2020, 8 weeks before CIGA 2020 came in to force, but after 27 April 2020, the date from which CIGA 2020 applies retrospectively. As a result, the petitioner could not have ensured that the winding up petition satisfied the requirements of CIGA 2020, as those requirements were not in existence at the time that the petition was presented.
The liquidators of a subsidiary company had submitted a proof in the CVA of the parent company. The proof was based upon a claim under section 239 of the Insolvency Act 1986 (IA86) that certain payments by the parent to the subsidiary had amounted to unlawful preferences of the company. The liquidators appealed against the decision by the supervisor of the CVA to reject that proof.
Following the Insolvency Service’s announcement that it will produce monthly (as opposed to quarterly) company and individual statistics for England and Wales, to assist the Government and the insolvency sector in monitoring the impact of COVID19, the results for July showed that:
The Department for Business, Energy & Industrial Strategy (BEIS) has recently issued a press release regarding proposed changes in the law to better protect consumers in the event that a company, and in particular a retailer, becomes insolvent.
Under existing law, if a company becomes insolvent but goods prepaid for are still in its possession, they may be considered as assets belonging to the business and can be used by administrators to pay off the company’s debts.