Commercial decisions are largely driven by incentive structures. Therefore, if legal policy favours a particular commercial outcome, the decision-making in that regard must be placed in the hands of entities most likely to be affected by such outcomes. This logic can also be applied to insolvency proceedings. The favoured policy outcome of the Indian insolvency law framework is the maximization of value of a corporate debtor. In the context of an insolvent company, the persons most likely to gain from such maximization of value are its creditors.

The Hon’ble National Company Law Appellate Tribunal (‘NCLAT’) in its order in Standard Chartered Bank v. Satish Kumar Gupta, R.P. of Essar Steel Limited & Ors. has dealt with various important legal issues in relation to the corporate insolvency resolution process (‘CIRP’). Some of the key aspects of this judgment have been summarised below:

1. Validity of Guarantee

I. NCLAT approves the resolution plan submitted by ArcelorMittal in the resolution proceedings in respect of Essar Steel India Limited while modifying the distribution of money to the financial and the operational creditors

The Insolvency and Bankruptcy Code, 2016 (IBC) has been widely considered a landmark legislation that has brought about a paradigm shift in the recovery and resolution process.

However, during the implementation of the IBC over the past two years and eight months, several challenges have emerged, including:

Introduction

The Supreme Court in Pioneer Urban Land and Infrastructure Limited vs. Union of India (Pioneer Judgment)[1], has upheld the constitutionality of the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 (Amendment Act)[2].

In recent times, there have been multiple instances of delay in completion of the corporate insolvency resolution process (“CIRP”) as per the timelines prescribed under the Insolvency and Bankruptcy Code, 2016 (“Code”). This is primarily due to the filing of multiple legal proceedings by stakeholders, and their long continuing pendency.

The Hon’ble National Company Law Appellate Tribunal (‘NCLAT’), has recently in its suigeneris judgment in UI Pulp and Paper Industries Pvt. Ltd. vs. M/s Roxcel Trading GMBH Company Appeal (AT) (Insolvency) No. 664 of 2019 (‘Roxcel Trading’), affirmed the view of the National Company Law Appellate Tribunal, wherein, it had imposed ‘moratorium’ on the Corporate Debtor even before initiation of corporate insolvency resolution process.  

Analysis of the Judgement- Imposition of Pre IBC ‘Moratorium’  

Corel Corporation vs. Mahabali Innovative Technologies Private Limited, CS (COMM) 711/2016

A suit was instituted for permanent injunction, against the Defendant to restrain the Defendant from infringing the copyright of the Plaintiff in various software programmes of the Plaintiff including the Corel DVD MovieFactory 7 software and for ancillary reliefs.