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INSOLVENCY AND BANKRUPTCY NEWS

proved in all aspect, the IBC does not protect the interest or claim of the Partner Provider (FiSP) before initiation and/or irrespective of CIRP against the
against another Partner or the Firm”. It further observed that the OC may be NBFC? AA observed that for initiation of insolvency resolution and
liable to the claims against the CD not under the Code but under any other liquidation proceedings, the asset size of the NBFC should be ` 500 crore
law which provides the remedy to OC. or more, as per last audited balance sheet. It further observed that
insolvency resolution process(es) can be initiated against the PG(s) of a
CBRE South Asia Private Limited Vs. M/s. United Concepts and
Solutions Private Limited [(IB)-797(ND)2021] NBFC / FiSP irrespective of CIRP against the NBFC, provided that the
concerned NBFC falls within the category of those FiSPs having assets size
An application was led under section 9 of the Code, whereby the of ` 500 crore or more, thus being included in the denition of CD under
applicant had claimed a total amount of `1,39,84,400/- as operational debt, Code. AA held that the asset size as per last audited balance sheet of the
out of which ` 88,50,886/- was the principal amount and ` 51,33,514/- was principal borrower is less than ` 500 crore, it is therefore, excluded from
the interest. AA observed that, interest can be claimed as ‘financial debt’, the ambit of the FiSP. Further, the principal borrower does not stricto sensu
but neither there is any provision nor there is any scope to include the qualify within the tight denition of ‘corporate person’ under the Code, as
interest to constitute as the ‘operational debt’. It held that the interest the said denition excludes FiSP. Hence, such principal borrower does not
amount cannot be clubbed with the principal amount of debt to arrive at qualify as a CD.
the minimum threshold of ` 1 crore for complying with the provision of
section 4 of the Code. Sarvesh Kashyap, as Liquidator of Komorebi Exports Pvt Ltd Vs.
Bank of India (Sole Member of Committee of Creditors)
Bank of India Vs. Agnipa Energo Pvt. Ltd. [IA No. 10 of 2021 in CP [IA No.05/ALD/2021 in CP (IB) No.344/ALD/2018]
(IB) No. 37-GB-2019]
On an application led by liquidator that sought directions against the CoC
AA observed that it is neither commercial wisdom nor a commercial to release the CIRP cost and the liquidation cost, AA observed that, “We
decision of the CoC /FC to reject a resolution plan which offers to them an are pained to note that in many cases, the creditors sitting on the CoC and on
amount of twenty times more than the liquidation value. It rejected the the Stakeholders Consultation Committee do not loosen their purse strings
prayer made by the RP for liquidation of the CD and directed the RP /CoC easily to meet even the bare minimum CIRP costs. In the vast majority of the
to start afresh CIRP, and to nd out a viable resolution plan within the cases, the insolvency professional and the professional team assembled by him
stipulated timeline under the Code. for various activities have to wait for months on end to get reimbursements or
Bank of Baroda Vs. Ms. Divya Jalan [CP (IB) No. 363/KB/2021] their fee, even after the CoC had already approved incurring the expense in
question. After patiently waiting for several months, the desperate and hapless
The question, as to whether the FC is entitled to recover dues of the CD insolvency professional is constrained to knock on the doors of the Adjudicating
from the legal heirs of the PG was considered by AA. AA observed that Authority for his basic fee and expenses, again entailing a legal cost which could
when a section 95 application is led, the assets of the PG is hit by have been avoided had the fee been paid on time…The time spent in such
moratorium and if the legal heirs of the deceased PG are put into the shoes matters can be more protably utilised by the Adjudicating Authority in
of the PG, then their personal assets will also get automatically hit by determining questions that really require some application of mind and
moratorium, which will cause grave prejudice to the rights of the third interpretation of the various provisions, instead of on issuing directions in
party. There is no provision in the Code which envisages the concept of matters that ought not to have crossed into the courthouse in the rst instance.
legal heirs stepping into the shoes of the deceased PG. It further observed Delay defeats the very purpose of the IBC”. AA suggested that IBBI may
that the legislature is very much clear in dening the term ‘personal consider issuing appropriate instructions to the banks in this regard.
guarantor’, as the Code talks about the estate/assets of the PG only and the
denition does not include the legal heirs. The petition was dismissed Punjab National Bank Vs. Saptarishi Hotels Pvt Ltd [IA (IBC)
holding that the petitioner FC can take appropriate steps to recover the 200/2022 in CP(IB) No. 599/7/HDB/2019]
guaranteed amount from the assets/estates of the deceased PG rather than On an application led by the RP seeking extension of CIRP for 60 days inter
the personal assets of the legal heirs of the PG. alia awaiting CD’s renewal of lease of immovable property by the State
Laxmi Kantha Rao Thota Vs. IRIS Electro Optics Pvt Ltd. [IA 785, Government for a further period of 33 years, AA noted that the CoC
857&858/2019 & IA 72,193&629/2020 CP(IB) No.181/7/ instead of rejecting the conditional resolution plans submitted by the PRAs
HDB/2019] is rigorously pursing their cause by seeking exclusion and extension of time.
It also observed that since the plans of PRAs were conditional, the RP ought
Bank of India, one of the FCs of the CD led an application that inter-alia to have insisted the PRAs to make their plans unconditional and ought to
sought recalling of the admission order passed by AA with respect to the have not included them in eligible prospective PRAs. Further, both CoC
CD. Bank of India alleged that allotment of 36.05% of the voting share in and the RP have actively indulged in not only promoting free negotiation of
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CoC to 3 respondent (another FC of CD) was illegal as his wife was a the terms of the resolution plan put forth by the parties/PRAs but also
director of the CD. AA noted that the long-standing business as well as the seeking time to full the contractual terms dictated by the PRAs, in utter
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matrimonial relationship between the 3 respondent and the director of disregard of the CIRP Regulations, and the intent of the Code. It further
the CD has enabled them to indulge in commercial contrivances to seek observed that time bound resolution is the prime aim and objective of the
entry into the CoC and control the CoC and thus, unfairly benet the CD Code and the members of CoC and RP are responsible for the loss of time
and jeopardise the pending recovery process. It further observed that the prescribed under the Code.
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real intention of the 3 respondent behind ling the petition is not
resolution of insolvency, but to take shelter/undue advantage under the Debt Recovery Tribunal
shield of moratorium, and to gain entry into CoC, jeopardize/dodge the
lawful measures initiated by the applicant bank, for recovery of public State Bank of India and Ors. Vs. Mr. Prashant S. Ruia & Anr. [IA No.
money lent to the CD where his wife is a director. AA further observed that 106 of 2020 in Original Application No. 650 of 2018]
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RP acted at the behest of the 3 respondent who was the applicant in the The issue which came for consideration before Debt Recovery Tribunal
main petition. In light of the above, it was held that respondent no. 3 is a (DRT) was on jurisdiction and maintainability of the Original Application
related party to the CD, and he is debarred from any right of led by the applicant banks under section 19 of the Recovery of Debts and
representation in the CoC. AA while recalling its admission order, imposed Bankruptcy Act, 1993 seeking recovery of debts, by invoking the personal
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a penalty of ₹ 1 crore on the 3 respondent, under section 65 of the Code guarantees executed by the promoter/directors in favour of the applicant
for initiating CIRP fraudulently and with malicious intent. bank. The key issues before DRT were as follows: -
Shapoorji Pallonji Finance Private Limited Vs. Rekha Singh [IA No. • Having assigned the “debt” as dened u/s 2(g) of the Recovery of Debts
229/JPR/2021 In CP No. (lB) 25/95/JPR/2021] and Bankruptcy Act, 1993, for valuable consideration, as part of the
resolution plan under the Code, is the Original Application
The issue that came up before AA was, whether insolvency resolution
process can be initiated against the PG of a NBFC / Financial Service maintainable?

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