Below are the key highlights of the newsletter:

• Supreme Court: No provision under the IBC requiring the resolution plan to match liquidation value; and an approved resolution plan cannot be withdrawn under Section 12A of the IBC
• NCLAT: No default by real estate developer if possession delayed due to reasons beyond control
• Supreme Court: Provident Fund benefits payable to contractual employees from date of filing writ petition and not retrospectively
• NCLT: Automatic waiver of legal proceedings is not permitted in a resolution plan

In yet another landmark decision in relation to the corporate insolvency resolution process (CIRP) of Jaypee Infratech Limited (JIL), the Supreme Court in Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited vs. Axis Bank Limited Etc. Etc. (Civil Appeal Nos. 8512-8527 of 2019) dated 26.02.2020, has laid down the law on two aspects: 

➢  the essential elements of a preferential transaction under Section 43 of the Insolvency and Bankruptcy Code 2016 (Code); and 

There are hundreds of cases that have been filed and closed under Insolvency and Bankruptcy Code, 2016(“IBC”) or are being battled out. There are many lessons that can be learnt from the obvious mistakes committed by some of the best lawyers, courts, and creditors. This article analyses such a case that has omitted the grey area of having matters filed against the same corporate debtor both as per the Companies Act, 1956(“1956 Act”) and Insolvency and Bankruptcy Code,2016.

FACTS

IBC – Threshold limit proposed to be enhanced for CIRP

At present Rs 1 lakh is the threshold limit to file an application in NCLT for triggering the incidence of Corporate Insolvency Resolution Process(CIRP) under Insolvency & bankruptcy Code,2017(IBC).

This had resulted into flooding of applications in NCLT. In last three and half year, approx. 23,000 cases have come to the NCLT under IBC.It is pertinent to note that almost 65% of such cases are settled prior to the admission under IBC.

The World Health Organisation (WHO) declared COVID-19 as a “pandemic” on March 11, 2020.

The Covid-19 pandemic is having an overwhelming impact on global order. These are testing times for nations. For India and for most other countries, the outbreak presents twin challenges, not only containing the virus spread, but also limiting the economic impact in an already slowing economy.

Threshold enhanced with force majeure awaited in Insolvency & Bankruptcy Code(IBC) due to COVID-19

In order to check the economical slowdown in the business, the Finance Minister on 24th March,2020 has announced various reliefs and relaxations in IBC due to the pandemic outburst of Covid-19 as below:

With more than three lakh confirmed cases and 14 thousand deaths across 190 countries, the Coronavirus disease (COVID-19) pandemic has caused (and continues to cause) unprecedented disruptions in the global political, social and economic environment. India has not remained untouched from this. With almost 500 confirmed cases and the country in lock-down mode to prevent further outbreak, social and economic activities have come to a grinding halt.

Insolvency and Bankruptcy Code, 2016 brought in a substantial financial discipline among Indian Companies. Prior to the said Code, taking advantage of delay in litigations due to high pendency of cases in the courts, companies were always dragging the payments. The above said Code mandated that if a company is not able to make the payment within 10 days from the date of receipt of a demand notice from the creditor, it is treated as default. Hence, the creditor can approach National Company Law Tribunal (NCLT) seeking to initiate insolvency proceedings against the defaulter.

Impact of COVID 19 Outbreak on Courts

In terms of the number of registered Covid-19 data across the world, India lies at the bottom of the list. However, in the last few weeks, India has witnessed a rapid increase in the number of confirmed coronavirus cases. As a result, there lies a possibility that India might witness a severe outbreak of this pandemic disease within a short period of time if its spread is left unchecked.