Skip to main content

Posts

Showing posts from July, 2020

SARFAESI Act Applicable To Cooperative Banks

IN THE SUPREME COURT OF INDIA, PANDURANG GANPATI CHAUGULE vs VISHWASRAO PATIL MURGUD SAHAKARI BANK LIMITED,  Following questions arise for consideration: (1) Whether 'co­operative banks', which are co­operative societies also, are governed by Entry 45 of List I or by Entry 32 of List II of the Seventh Schedule of the Constitution of India, and to what extent? (2) Whether ‘banking company’ as defined in Section 5(c) of the BR Act, 1949 covers co­operative banks registered under the State Co­operative Laws and also multi­State co­operative societies? (3)(a) Whether co­operative banks both at the State level and multi­State level are 'banks' for applicability of the SARFAESI Act? (3)(b) Whether provisions of Section 2(c) (iva) of the SARFAESI Act on account of inclusion of multi­State co­operative banks and notification dated 28.1.2003 notifying cooperative banks in the State are ultra vires? THE SUPREME COURT decided that the co­operative banks under the State legislation...

Schools free to decline Online Education Facility to students whose parents fail to pay tuition fees

In Queen Mary School Northend v. Director of Education, the Delhi High Court while hearing a matter with regard to parents defaulting in payment of tuition fees to schools, held that Schools can decline to provide Online Education facility to the students whose parents fail to explain the reason for the default. Petition filed sought an appropriate writ to quash the Circular dated 18th April, 2020 and to allow the School to charge the actual expenditure incurred during the lockdown period in the form of fees from the students.

Out of court settlement during ongoing Insolvency Process?

In Vivek Bansal Vs Burda Druck India Pvt. Ltd. & Anr., in a recent judgment the National Company Law Appellate Tribunal (NCLAT) held that a company could exit an ongoing insolvency process even as an interim resolution professional had been appointed and a moratorium imposed under the Insolvency and Bankruptcy Code (IBC) by the adjudicating authority, that is the National Company Law Tribunal (NCLT) triggering the debate over the best option for banks and other creditors to recover their dues-a resolution monitored by the court, or an out-of-court settlement with lenders. In the judgment, a bench headed by acting chairperson Justice Bansi Lal Bhat noted that since the operational creditor (who had taken the company to NCLT) and the corporate debtor had “amicably settled the dispute”, it allowed the parties to exit the CIRP. The tribunal decided that as the parties have reached the settlement and the ‘Committee of Creditors’ was not constituted, in exercise of powers conferred under...

Can Financial Creditor and Corporate Debtor be referred to arbitration while deciding plea under Section 7 IBC

In the matter of Application under section 8 of the Arbitration & Conciliation Act, 1996,  in the matter of Indus Biotech Private Limited vs Kotak India Venture Fund-I,  the question before the NCLT, Mumbai was whether the provisions of the Arbitration & Conciliation Act, 1996 prevail over the provisions of the Insolvency & Bankruptcy Act, 2016? If so, in what circumstances? It is settled law that generalia specialibus non derogant – special law prevails over general law. The rules of interpretation are fairly well-settled: - (1) When a provision of law regulates a particular subject and a subsequent law contains a provision regulating the same subject,  there is no presumption that the later law repeals the earlier law. The rule making authority while making the later rule is deemed to know the existing law on the subject. If the subsequent law does not repeal the earlier rule, there can be no presumption of an intention to repeal the earlier rule. (2) When t...

NCLAT applies SARFAESI Act to break deadlock in Insolvency Process

In Liquidator of Surana Power Limited vs Bharat Heavy Electricals Limited, a deadlock was created by the refusal of the Respondent to release its charge of secured assets so that the Liquidator can sale the assets. The Respondent won an arbitration award allowing lien on assets on which several other creditors were already holding charge. The Liquidator asked for direction from the NCLAT to break the deadlock. The NCLAT observed that the Learned Adjudicating Authority has rejected the Application mainly on the ground that BHEL is a Secured Creditors, entitle to proceed under Section 52 to realize its Security Interest. The Appellant Liquidator cannot cause the sale of asset filing under Section 52 in the manner as specified under Section 53 of the Code unless the charge holder relinquishes the Security Interest. The Adjudicating Authority has held that the Respondent's lien has a preference over the charge created in favour of the remaining Secured Financial Creditors. It is essent...

Magistrate can cancel or alter his order u/s 125 Cr.PC

In SANJEEV KAPOOR vs CHANDANA KAPOOR & ORS., the question before the Supreme Court was whether the embargo contained in under Section 362 Cr.P.C. prohibiting the court to alter or review its judgment or final order disposing the case applies to order passed under Section 125 Cr.P.C. The Supreme Court observed that Section 362 of Cr.P.C., puts embargo on the criminal Court to alter or review its judgment or final order disposing the case but the section has to be examined to see whether the orders passed in present case are covered by the exception i.e. “save as otherwise provided by the Code” in Section 362. Section 125 as well as Section 127 of  Cr.P.C. are soscial justice legislation which cover order for maintenance for wives, children and parents. The closer look of Section 125 Cr.P.C. itself indicates that he Section itself contains express provisions where order passed under Section 125 Cr.P.C. can be cancelled or altered which is noticeable from Section 125(1), Section 1...

Dispute as to Inheritance of Shares is a Civil dispute, can’t be decided in proceedings under Section 241/ 242 of Companies Act

In ARUNA OSWAL vs PANKAJ OSWAL & ORS., an appeal was filed before the Supreme Court against  the judgment and order passed by the NCLAT in Company Appeal (AT) No.411 of 2018, thereby affirming the order passed by the National Company Law Tribunal (for short ‘the NCLT’) concerning maintainability of the applications filed under sections 241 and 242 of the Companies Act, 2013. The case is the outcome of a family tussle. Late Mr. Abhey Kumar Oswal, during his lifetime, held as many as 5,35,3,960 shares in M/s. Oswal Agro Mills Ltd., a listed company. He breathed his last on 29.3.2016 in Russia. On or about 18.6.2015, Mr. Abhey Kumar Oswal filed a nomination according to section 72 of the Act in favour of Mrs. Aruna Oswal, his wife. Mr. Pankaj Oswal, respondent No.1, filed a partition suit being C.S. No.53/2017 claiming entitlement to one­ fourth of the estate of Mr. Abhey Kumar Oswal including shares and a Company Petition No.56/CHD/PB/2018 ­ Pankaj Oswal v. Oswal Agro Mills Ltd. ...

If Liquidator appointed by NCLT is already Registered as a distinct person it should continue to remain Registered till Liability Ceases

The WEST BENGAL AUTHORITY FOR ADVANCE RULING GOODS AND SERVICES TAX, in the matter of M/s Mansi Oils and Grains Pvt Ltd, the applicant wanted to know whether any sale done by the liquidator of the assets of the applicant results in a supply of goods and/or services or both within the meaning of “supply” as defined under section 7 of the GST Act. The applicant also wanted to know whether the liquidator needs to get registered under the GST Act.  The West Bengal Authority of Advance Ruling (AAR) ruled that the sale of the assets of the applicant by an NCLT appointed liquidator is a supply of goods by the liquidator, who is required to take registration under section 24 of the GST Act. If she is already registered as a distinct person of the corporate debtor in terms of Notification No. 11/2020 – Central Tax dated March 21, 2020, she should continue to remain registered till her liability ceases under section 29 (1) (c) of the GST Act.

Can an ex-employee of the Financial Creditor be permitted to act as Resolution Professional?

In State Bank of India vs M/s. Metenere Ltd., appeal was filed before the NCLAT against the order of the NCLT wherein the NCLT had upheld the objection raised by the ‘Corporate Debtor’- ‘M/s. Metenere Limited’ regarding the name of proposed ‘Interim Resolution Professional’- Mr. Shailesh Verma. The Corporate Debtor had objected to the said appointment apprehending bias as Mr. Verma had worked with the State Bank of India - the Financial Creditor for 39 years before his retirement in 2016 and is currently drawing pension from SBI. The NCLAT decided that the sole question arising for determination in this appeal is whether an ex-employee of the  ‘Financial Creditor’  having rendered services in the past, should not be permitted to act as  ‘Interim Resolution Professional’  at the instance of such  ‘Financial Creditor’ , regard being had to the nature of duties to be performed by the  ‘Interim Resolution Professional’  and the  ‘Resolution Profe...

NCLT does not have power to direct pre-admission enquiry

In Allahabad Bank vs Poonam Resorts Limited and Allahabad Bank vs Link House Industries Limited, two Company Petitions were filed before the NCLT under Section 7 by the Appellant- ‘Financial Creditor’ against Respondents- ‘Corporate Debtors’ praying for initiation of ‘Corporate Insolvency Resolution Process’ on the ground that the ‘Corporate Debtors’ had committed default qua the financial debt that was payable in law and in fact to the ‘Financial Creditor’. As some objections were raised on behalf of the ‘Corporate Debtors’ that the ‘Corporate Insolvency Resolution Process’ had been initiated fraudulently and with a malicious intent to drag a solvent corporate who was willing to pay amounts that were actually due and payable legally, the Adjudicating Authority, being of the view that during the entire loan process due diligence was not carried out, appointed PWC as Forensic Auditor to examine allegations raised by the ‘Corporate Debtor’ and submit an Independent Report delineating...

One Judicial Bench cannot act as an appellate authority and stay an order passed by a coordinate Bench

IN Mr. Abhijit Guhathakurta, Monitoring Agency of the Corporate Debtor vs Royale Partners Investment Fund Ltd., appeal was filed before the NCLAT against the order of a newly constituted bench of the Mumbai NCLT staying the proceedings of a matter which  has been heard at length and reserved for ‘Orders’ by an Erstwhile Bench / Co-ordinate Bench of ‘NCLT’, Mumbai.  The NCLAT observed that erstwhile bench of ‘NCLT’, Mumbai on 30.01.2020 in MA No. 249/2020 in C.P.(IB)-1832(MB)/2017 after hearing had ‘reserved the orders’. Earlier, when MA No.249/2020 came up for hearing before the erstwhile Bench, the Respondent was directed to file ‘Reply’ in next two days’ time i.e. by 29.1.2020 and it was categorically stated that ‘the matter would be heard on 30.01.2020. Thereafter only the notification dated 29.01.2020 was issued by the President of ‘NCLT’ reconstituting the Benches at ‘NCLT’ Mumbai w.e.f. 03.02.2020. The impugned order dated 12.02.2020 was passed by the newly constitu...

A person who has not suffered an invasion of his legal rights as a consumer cannot move CCI for violation of Competition law

In Samir Agrawal vs CCI, a person claiming to be an independent legal practitioner, filed Information with the Competition Commission of India alleging contravention of provisions of Section 3 of the Competition Act, 2002 in as much as the cab aggregators viz Ola and Uber used their respective algorithmic to facilitate price fixing between drivers. The allegation being rejected by the NCLT, appeal was filed before the NCLAT. The NCLAT while agreeing with the NCLT, further decided that this case merits looking into the the procedure governing inquiry by the Commission in allegations of anti-competitive agreements, including price fixation, cartelisation and abuse of dominant position. Section 19 of the Act provides for inquiry into certain agreements and dominant position of enterprise. The NCLAT observed that Under this Section, the Commission may inquire into any alleged contravention of the provisions contained in sub- section (1) of Section 3 or sub-section (1) of Section 4...

Liquidator has overriding right on company’s assets over tax department

In a case between the liquidator of S Kumars Nationwide Ltd and the revenue department, the principal bench of the National Company Law Tribunal in New Delhi ruled that the liquidator has overriding powers under the Insolvency and Bankruptcy Code to take over both movable and immovable assets of a corporate debtor and that the revenue department cannot attach the assets of a company in liquidation if the liquidator has already taken in account its tax dues 

A liquidator must pay GST on sale of assets of a defunct company

The West Bengal Authority of Advance Ruling has ruled that a National Company Law Tribunal appointed liquidator must have the GST registration till all liabilities cease to exist and that the liquidator must pay goods and services tax (GST) on sale of assets of a defunct company under liquidation, as the sale is effectively supply of goods. 

RBI Circulars On Loan Moratorium Not Applicable To Mutual Funds & Debentures

In Zee Learn Ltd. vs UTI Asset Management Co. Ltd. & Ors., the Bombay High Court has held that the Reserve Bank Of India's circulars dated March 27 and May 23 granting moratorium on payment of installment of term loans for three months and extending the moratorium on such payments respectively are not applicable to mutual funds and debentures.