23rd December 2022

"Your life is as good as your mindset."

 NCLT Delhi Imposes Cost Of Rs. 1 Lakh On Suspended Director

The National Company Law Tribunal ("NCLT"), New Delhi Bench, comprising of Shri
Bachu Venkat Balaram Das (Judicial Member) and Shri L.N. Gupta (Technical
Member), while adjudicating an application filed in Indian Bank (Erstwhile Allahabad
Bank) v Nimitaya Hotel & Resorts Pvt. Ltd., has imposed a cost of Rs. 1 Lakh upon the
Suspended Director of Corporate Debtor (Applicant) for instituting multiple
proceedings seeking same reliefs and wasting precious judicial time.

Indian Bank (Erstwhile Allahabad Bank) ("Financial Creditor") had filed a petition
under Section 7 of the Insolvency and Bankruptcy Act, 2016 ("IBC"), seeking initiation
of Corporate Insolvency Resolution Process ("CIRP") against Nimitaya Hotel &
Resorts Pvt. Ltd. ("Corporate Debtor"). The Adjudicating Authority had initiated CIRP
against the Corporate Debtor on 24.12.2021.

Mr. Sanjeev Mahajan ("Applicant/Suspended Director") who is a Suspended Director

of Corporate Debtor, had submitted Settlement Proposal and was permitted to
participate in the Committee of Creditors ("CoC") meetings. Further, the Suspended
Director had alleged that the Petition has been filed by the Financial Creditor over
malicious intent.

The Suspended Director filed an application bearing I.A. No. 2611 of 2022 before the
Adjudicating Authority under Section 65 of IBC, seeking (i) Imposition of cost on the
Financial Creditor for an amount of Rs. 1 Crore; (ii) Direction to the CoC to re-consider
the settlement proposal of the Applicant; and (iii) Direction to the CoC and the
Resolution Professional of Corporate Debtor to keep the CIRP and finalization of
Resolution Plan in abeyance till disposal of the Application.

During the pendency of I.A. No. 2611 of 2022, the Suspended Director filed a similar
application bearing I.A. No. 3204/ND/2019 with verbatim prayers as mentioned in
I.A. No. 2611 of 2022.

The Adjudicating Authority dismissed the application (I.A. No. 2611 of 2022) while
observing that the Tribunal would not intervene in the decision making of the CoC.
 Decision Of NCLT

Decision Of NCLT When the I.A. No. 3204/ND/2019 came for hearing before the
Bench, the Bench observed that the Applicant had preferred the said application
during the pendency of I.A. No. 2611 of 2022, seeking verbatim reliefs. The Bench
held that same reliefs cannot be sought in two parallel Applications against the same
party.

"The Application is barred by the doctrine of Res Sub-Judice. Since, the applications have
resulted in multiplicity of proceedings and in wastage of precious judicial time, we
discourage such practice. The Application is accordingly dismissed with a cost of Rs.
1,00,000/- (one lakh) only to be deposited by the Applicant herein in the Prime
Minister's Relief Fund within 15 days, the receipt of which shall be filed with the NCLT
Registry."

The Bench imposed a cost of Rs. 1 Lakh upon the Applicant for instituting multiple
proceedings seeking same relief and wasting precious judicial time. The Application
was dismissed.

Case Title: Indian Bank (Erstwhile Allahabad Bank) v Nimitaya Hotel & Resorts Pvt.
Ltd.

Case No.: C.P. (IB) 1913 (ND)/2019

Source: Live Law

Read Full news at: https://www.livelaw.in/news-updates/nclt-delhi-imposes-cost-of-rs-1-lakh-on-
suspended-director-corporate-debtor-217339?infinitescroll=1

 Moratorium Under Companies Act, 2013, Parties Cannot Be

Referred To Arbitration: Delhi High Court
The Delhi High Court has ruled that the moratorium granted by the National
Company Law Appellate Tribunal (NCLAT), staying the institution of suits and
proceedings against the Corporate Debtor, after the resolution process is initiated
against it under Sections 241 and 242 of the Companies Act, 2013, is akin to an order
of moratorium passed under Section 14 of the Insolvency and Bankruptcy Code,
2016 (IBC). Thus, in view of the moratorium issued by the NCLAT, the Corporate
Debtor cannot be referred to arbitration.

The bench of Justice V. Kameswar Rao was dealing with an application filed under
Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act), seeking reference
of the dispute to arbitration. The High Court dismissed the contentions raised by the
applicant that since the resolution of IL&FS was initiated under Sections 241 and
242 of the Companies Act, 2013 and not under IBC, the rigours of Section 14 of the
IBC were not attracted.

Further, while holding that the order passed by the NCLAT has certain consequence,
the bench rejected the averments made by the applicant that since NCLAT is
subordinate to the High Court, the High Court is not bound by the moratorium
granted by the NCLAT. The petitioner DLF Ltd. and the respondent- IL&FS
Engineering and Construction Company, executed a Construction Contract. After
certain disputes arose between the parties, the petitioner invoked the arbitration
clause and issued a notice under Section 21 of the A&C Act.

The respondent, in its reply to the notice invoking arbitration, contended that in
view of the order passed by the NCLAT, staying the institution of suits and
proceedings against IL&FS, i.e., the parent company of the respondent, and its 348
Group Companies, the parties cannot be referred to arbitration.

Thereafter, the petitioner filed an application under Section 11 of the A&C Act
seeking appointment of an Arbitrator before the Delhi High Court.

The respondent- IL&FS Engineering and Construction Company, submitted before

the High Court that it is a part of the IL&FS Group, which is subject to a moratorium
by virtue of an order passed by the NCLAT under Sections 241 and 242 of the
Companies Act, 2013. Thus, it argued that the respondent cannot be referred to
arbitration. The respondent added that in furtherance of the resolution process, a
public advertisement was issued in the Economic Times.

In the said advertisement, the creditors of the IL&FS Group Companies, including the
petitioner, were directed to submit their claims regarding undischarged liabilities,
that were due up to October 15, 2018. The respondent averred that the claims
submitted by the petitioner, which were due up to October 15, 2018, were dismissed
by the Claims Management Advisor, adding that the said fact was suppressed by the
petitioner.

To this, the petitioner DLF argued that the claims which accrued post October 15,
2018 were outside the resolution framework of IL&FS and thus, they must be
referred to arbitration, failing which the petitioner would be rendered remediless.

The respondent- IL&FS Engineering and Construction Company, submitted that

since it is subject to a resolution process, the claims raised by the petitioner that
accrue after October 15, 2018, cannot be referred to arbitration. It contended that a
successful resolution applicant cannot suddenly be faced with undecided claims
after the resolution plan submitted by him has been accepted.

The petitioner DLF contended before the High Court that the moratorium granted by
the NCLAT was not a statutory moratorium under Section 14 of the IBC. It argued
that since the resolution of IL&FS was initiated under Sections 241 and 242 of the
Companies Act, 2013 and not under IBC, the rigours of Section 14 of the IBC were
not attracted.

It added that NCLAT is a statutory Tribunal over which the High Court has
supervisory jurisdiction, therefore, the order passed by the NCLAT cannot curtail the
jurisdiction of the High Court under Section 11 of the A&C Act. Thus, the petitioner
argued that the NCLAT could not have passed the orders restraining institution and
continuation of proceedings before the High Court.
While observing that the order passed by the NCLAT was challenged before the
Supreme Court, the High Court noted that no stay order has been granted by the Apex
Court. The bench referred to the decision of the Coordinate Bench of the Delhi High
Court in M/s. Apco-Titan (JV) versus National Highways & Infrastructure
Development Corporation Ltd. (2019), where the High Court had concluded that in
view of the NCLAT order, no suit was maintainable against the Group Companies of
IL&FS.

Dismissing the contention of the petitioner that the moratorium granted by the
NCLAT was not a statutory moratorium, the High Court ruled that the order passed
by the NCLAT is akin to an order of moratorium passed under Section 14 of the IBC.
While holding that the purpose and rationale behind granting a moratorium is to
ensure that the assets of the corporate debtor are protected, the bench ruled that
moratorium is granted with an intention to keep the company a going concern and
for using the said period to strengthen its financial position.

Thus, it concluded that the intent of the order passed by the NCLAT is to protect the
assets of IL&FS and its group companies, in order to make the resolution process
effective and purposeful.

"Further, the order does not make any distinction between the claims before October
15, 2018 and after October 15, 2018. It restrains not just continuance of suits or
proceedings already instituted, but also filing of fresh suits or proceedings. In other
words, the order of stay/moratorium prohibits the initiation of any proceedings,
regardless of the period to which the claims in the proceedings pertain", the Court
observed.

Therefore, the bench held that it cannot be the intent of the NCLAT order to allow
proceedings with respect to claims arising after the cut-off date, i.e., October 15,
2018.

"Mr. Nayar has submitted that NCLAT being subordinate to this Court, this Court is not
bound by the order dated October 15, 2018. The plea is unmerited for the reason that
the order passed by the NCLAT has certain consequences. The said order is not under
challenge in this petition. It is pending consideration before the Supreme Court. The
relief as sought for by Mr. Nayar, if granted, shall make the order of the NCLAT otiose,
defeating the very purpose for which such an order was passed", the Court said.

The Court thus dismissed the petition.

Case Title: DLF Ltd. versus IL&FS Engineering and Construction Company

Dated: 21.12.2022 (Delhi High Court)

Source: Live Law

Read Full news at: https://www.livelaw.in/news-updates/moratorium-under-companies-
act-2013-parties-cannot-be-referred-to-arbitration-delhi-high-court-217353
 India mulls rules for quicker resolution of builders’ insolvency
India plans to introduce new rules for handling real estate bankruptcies, which
would help homebuyers even as their builders wind down, people familiar with the
matter said.

The proposed change to the nation’s Insolvency and Bankruptcy Code will permit
resolution of the cases on a project-wise basis, the people said, asking not to be
named, as the information is not public. That will allow handing over completed
apartments to the home buyers even when the developer’s insolvency process is
underway, they said. A spokesperson for the corporate affairs ministry declined to
comment.

Indian realty sector has seen many builders going bust over the years, leaving home
buyers in a fix due to the uncertainty of completion and delivery of houses that their
life savings were tied up in. Under the current norms, admission into insolvency
procedure halts the completion of all projects of the developer in default. As of June
this year, 436 out of the pending 1,999 cases of corporate insolvency were in the real
estate sector, junior minister for corporate affairs Inderjit Singh Rao had informed
the lawmakers in August. The IBC had little success in the timely resolution of such
cases, making the need for a special framework to address the nuances of the real
estate sector more pronounced.

To speed up the resolutions, the government also plans to introduce a centralized

platform for registration of cases, simplify pre-packaged resolution plans, and
provide flexible plans for handling operational and nonviable assets separately, they
said.

Source: The Economic Times

Read Full news at: https://economictimes.indiatimes.com/industry/services/property-/-
cstruction/india-mulls-rules-for-quicker-resolution-of-builders-
insolvency/articleshow/96415931.cms

Insolvency Professional Agency of Institute of Cost Accountants of India

(A Section 8 Company registered under Companies Act, 2013)
CMA Bhawan, 3, Institutional Area, Lodhi Road
New Delhi - 110003