In a recent development, the Supreme Court dismissed the review petitions filed against its decision in State Tax Officer v Rainbow Papers Ltd., which had disturbed the settled position that in insolvency resolution proceedings, statutory dues (including tax claims) fall in the category of operational debt. Instead, the Supreme Court held that statutory dues qualify as debts owed to a secured creditor, and a resolution plan that ignores such debts is liable to be rejected.

Rainbow Papers: The Judgment

In State Tax Officer (1) v. Rainbow Papers Ltd., 2022 SCC OnLine SC 1162 ("Rainbow Papers"), the Supreme Court dealt with the question as to whether the provisions of the Insolvency and Bankruptcy Code, 2016, ("IBC") (specifically Section 53) overrides Section 48 of the Gujarat Value Added Tax Act, 2003 ("GVAT Act").

Section 48 of the GVAT Act provides as follows.

Section 48. Tax to be first charge on property:

In a recent decision in the case of Infrastructure Leasing and Financial Services Ltd. v. HDFC Bank Ltd. and Another, the Supreme Court of India (“Supreme Court”) has held that the rents receivable by a borrower which was assigned to a lender of a lease rental discounting facility would not be treated as an asset of the borrower, and thus fall outside the purview of the asset and security freeze order of the National Company Law Appellate Tribunal (“NCLAT”).

Brief Facts

On 31 October, 2023, in Sanjay Kumar Agarwal v State Tax Officer 1, 2023 SCC OnLine SC 1406, the Supreme Court of India (SC) in the exercise of its powers of review under Article 137 of the Constitution of India, (Rainbow Review) affirmed the view expressed by another bench of the SC in State Tax Officer (I) v. Rainbow Papers Limited 2022 SCC OnLine SC 1162 (Rainbow Judgment) that may have far reaching effects on the treatment of dues to the Government or governmental authorities in insolvency resolution proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC).

In an application filed by Vishram Narayan Panchpor, resolution professional of Blue Frog Media Private Limited (“Corporate Debtor”) in the matter of M/s Blue Frog Media Private Limited¹ for approval of a resolution plan, the Mumbai bench of the National Company Law Tribunal (“NCLT Mumbai”) ruled that the object of Section 29A of the Insolvency and Bankruptcy Code, 2016 (“IBC”) requires a resolution professional to conduct adequate due diligence on a prospective resolution applicant and its related parti

While the Insolvency and Bankruptcy Code, 2016 (“IBC”) provides for insolvency resolution and liquidation of ‘corporate persons’, it excludes ‘financial service provider’ (“FSP(s)”) from the said provision.

The National Company Law Appellate Tribunal (New Delhi Bench) (“NCLAT”) in two recent judgments passed in Raiyan Hotels and Resorts Pvt. Ltd. vs. Unrivalled Projects Pvt. Ltd. [Company Appeal (AT) (Insolvency) No. 1071 of 2023] and Aryan Mining & Trading Corpn Pvt. Ltd. vs Kail limited and Anr. [Company Appeal (AT) (Insolvency) No.

In the matter of Mr. Shantanu Prakash vs. Mr. Mahendar Singh Khandelwal (resolution professional of Educomp Solutions Limited) and others, while disposing of an interim application filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (“IBC”), the New Delhi bench of the National Company Law Tribunal (“NCLT New Delhi”) held that a guarantor can question the valuation at which the security pledged by the borrower with its secured creditor is enforced.

Brief Facts

Introduction

INTRODUCTION: