Insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 are overseen by the relevant adjudicating authority. The National Company Law Tribunal (NCLT) is the adjudicating authority involved in the insolvency proceedings of companies and Limited Liability Partnerships (LLPs), which are referred to as corporate debtors[1]. To initiate the Corporate Insolvency Resolution Process (CIRP) against a corporate debtor, the NCLT bench having territorial jurisdiction over the debtor’s registered office must be approached[2].

The Supreme Court has held that the dues towards the wages/salaries of only those workmen/employees who actually worked during the Corporate Insolvency Resolution Process (CIRP) are to be included in the CIRP costs.

The Apex Court in this regard observed that as per Section 5(13) of the Insolvency and Bankruptcy Code (‘IBC’), “insolvency resolution process costs” shall include any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern.

When the Insolvency & Bankruptcy Code, 2016 (“IBC”) was notified in 2016, one of its most talked about provisions was the limited scope of adjudication and consequently narrow jurisdiction conferred upon the National Company Law Tribunal (“NCLT”) in deciding insolvency cases. In fact, the provisions of the Code in respect of financial creditors were viewed by many as draconian and unconstitutional as the NCLT, prior to commencement of insolvency process, is required to only examine a debt and default and nothing else.

The Supreme Court has on 11 April 2022 dismissed a Special Leave Petition against the decision of the High Court of Tripura at Agarthala, wherein the High Court had held that the distinction of decree holders as creditors from ‘financial creditors’ and ‘operational creditors’, is intelligible and takes forward the purpose of the Insolvency and Bankruptcy Code, 2016, without being discriminatory or arbitrary.

Vigilantibus, et non dormientibus, jura subveniunt is a noted maxim which means ‘the laws assist those who are vigilant, not those who sleep over their rights‘ . This is a pertinent principle which applies predominantly while determining if a particular cause of action has been espoused within the limitation period.

Decided on 18 January 2022| Supreme Court of India

Between the lines... For Private Circulation-Educational & Information purpose only Vaish Associates Advocates… Distinct. By Experience. I. NCLAT: No possibility negotiating the resolution plan in the intervening period between approval by the CoC, and pending the approval of the NCLT. The Hon’ble National Company Law Appellate Tribunal, New Delhi (“NCLAT”) has in its judgment dated January 27, 2022, in the matter of Union Bank of India v. Kapil Wadhawan and Others [Company Appeal (AT) (Insolvency) No.

Between the lines... For Private Circulation-Educational & Information purpose only Vaish Associates Advocates… Distinct. By Experience. I. Supreme Court: Guarantor is barred from being a resolution applicant under Section 29A(h) of the Insolvency and Bankruptcy Code, 2016 if guarantee has been invoked by any creditor, not necessarily being the creditor initiating the insolvency proceedings. The Hon’ble Supreme Court (“SC”) has in its judgment dated January 18, 2022 (“Judgement”) in the matter of Bank of Baroda and Another v MBL Infrastructures Limited and Others [Civil Appeal No.

The Supreme Court of India has rejected the contention which sought to narrowly define operational debt and operational creditors under the Insolvency and Bankruptcy Code, 2016 to only include those who supply goods or services to a corporate debtor and exclude those who receive goods or services from the corporate debtor.

The Court noted that a demand notice for an operational debt by an operational creditor does not necessarily need to be accompanied by an invoice, but it may be sent where such debt arises under a ‘provision of law, contract or other document’.

Introduction:

In a recent judgment, the Supreme Court of India, while keeping up the efforts of plugging various loopholes in Insolvency & Bankruptcy Code, 2016 (“Code”), decided an interesting legal issue relating to the scope of Section 5(20) of the Code, which provides the definition of “operational creditor”.

The Apex Court, in the case of Consolidated Construction Consortium Limited vs. Hitro Energy Solutions Private Limited, was seized of the following legal questions: