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 

Key Highlights

I. Supreme Court: Scope of intervention by High Courts in cases of orders passed by the National Company Law Tribunal

II. Supreme Court: State legislature cannot enact law which affects the jurisdiction of the Supreme Court

III. Supreme Court: Difference between inadequacy of reasons in arbitral award and unintelligible awards

IV. NCLT: RP can take possession of a corporate debtor's assets which are subject matter of litigation to facilitate the corporate insolvency resolution process

Key Points:

No provision in the Code or insolvency regulations dictates that the bid of any Resolution Applicant has to match liquidation value of the estate of the Corporate Debtor. If the resolution plan has been approved by the Committee of Creditors by application of their commercial sense, as well as the plan has been considered as proper in terms of Section 30 of the Code, the Adjudicating Authority cannot interfere or re-assess the same under Section 31 of the said Code.

INTRODUCTION 

The Supreme Court has recently in its judgment dated 21 January 2020, in the case of Standard Chartered Bank v MSTC Limited [SLP (C) No 20093 of 2019], provided clarity on the interplay between the provisions of Recovery of Debts and Bankruptcy Act 1993 (RDB Act) and Limitation Act 1963 (Limitation Act). Supreme Court has in doing so refused to condone a delay of 28 days in filing of a review application by the government borrower entity against a decree in favour of the bank.  

BRIEF BACKGROUND: 

In the winter of 2015, the Indian Legislature sought to tackle the persistent problem of bad debts affecting Indian financial institutions and trade creditors by enacting the Insolvency and Bankruptcy Code, 2016 (“Code”), which was finally notified in May 2016. The key purpose of the enactment was to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons / entities. 

INTRODUCTION 

This is in succession to our previous con-call held on August 9, 2019. The Supreme Court in its judgment of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta dated November 14, 2019 (“Judgment”) has set aside the decision of the National Company Law Appellate Tribunal (“NCLAT”).

INTRODUCTION 

Various Indian judicial fora, including the Supreme Court, have affirmed that a creditor may proceed against a guarantor on failure of the principal debtor to repay a loan without first exhausting his remedies against the principal debtor.  

The Reserve Bank of India (RBI) issued a revised prudential framework for resolution of stressed assets on 7 June 2019 (Revised Circular) in supersession of the erstwhile circular on Resolution of Stressed Assets dated 12 February 2018 (Feb 12 Circular) which was struck down by the Hon’ble Supreme Court on 2 April 2019.

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