Between the lines... For Private Circulation-Educational & Information purpose only Vaish Associates Advocates… Distinct. By Experience. I. Supreme Court: A liability in respect of a claim arising out of a recovery certificate under the Recovery of Debts and Bankruptcy Act, 1993 would be a "financial debt" under the IBC and a holder of such recovery certificate would be a "financial creditor" under the IBC. The Supreme Court (“SC”) has in its judgment dated May 30, 2022, in the matter of Kotak Mahindra Bank Limited v. A. Balakrishna and Another [Civil Appeal No.

The Insolvency and Bankruptcy Code, 2016 (Code) was enacted to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons.

Introduction

The Indian Supreme Court holds in Ebix[1] that once a Resolution Plan has been approved by the Committee of Creditors (CoC),it cannot be withdrawn by the Successful Resolution Applicant(“SRA”). It comes to this conclusion by holding that principle applicable under common law or the contract act, viz frustration or force majeure, are not available to the SRA under the Insolvency and Bankruptcy Code (“Code”) regime.

Holding that liability in respect of a claim arising out of a recovery certificate would be a ‘financial debt’, the 3-Judge Bench of the Supreme Court has held that a person who holds a recovery certificate would be a ‘financial creditor’ within the meaning of clause (7) of Section 5 of the Insolvency and Bankruptcy Code, 2016.

The Court was hence of the view that the holder of the recovery certificate would be a financial creditor and entitled to initiate CIRP, within a period of three years from the date of issuance of the recovery certificate.

The Supreme Court of India in Indian Overseas Bank v M/s RCM Infrastructure Ltd. & Anr. held that a sale under section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”), would be regarded as complete only upon receipt of full consideration towards the sale properties.

Who is a corporate debtor?

A corporate debtor refers to a company, a limited liability partnership or any person who owes a debt to its creditors. Under the Insolvency and Bankruptcy code, a corporate debtor is liable to the financial and operational creditors for the payment of such debt.

What types of creditors are there with respect to a corporate debtor?

The Hon’ble Supreme Court vide its order dated April 18, 2022 in State Bank of India Vs Krishidhan Seeds Private Limited has observed that Section 18 of the Limitation Act, 1963 is applicable to proceedings under the Insolvency and Bankruptcy Code, 2016.

Brief Facts

Between the lines... For Private Circulation-Educational & Information purpose only Vaish Associates Advocates… Distinct. By Experience. I. NCLT: Corporate debtor cannot be sent into liquidation just because liquidation value is more than the value of the resolution plan. The National Company Law Tribunal, Kolkata (“NCLT”) has in its order dated April 6, 2022, in the matter of CFM Asset Reconstruction Private Limited v. S. S. Natural Resources Private Limited and Another [IA No. 538/KB/2021 in CP (IB) No.

Facts

The Supreme Court of India (“SC”) in the judgment New Delhi Municipal Council v. Minosha India Limited, dated 27 April, 2022, Civil Appeal No. 3470 of 2022 has clarified the position on the applicability of the Limitation Act, 1963 (“Act”) and the Insolvency and Bankruptcy Code, 2016 (“IBC”).