Birbal’s Update
July 2018
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Key Updates

Recent Judgements

Filing a parallel petition under IBC along with Winding up petition amounted to abuse of the process: Rajasthan High Court.

In the matter of Jaipur Metals Electricals Ltd., In Re. [S.B. Company Petition No. 19/2009], which was filed before the Rajasthan High Court, Jaipur Bench for winding up of the company, parallel proceedings were initiated by a financial creditor for appointment of Insolvency Resolution Professional under the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal. The main issue to be by decided by the Hon’ble High Court was whether the case stood transferred from the High Court to NCLT and whether the directions issued by the NCLT superseded the Orders of the High Court. Taking into account all the circumstances surrounding the case, the High Court held that as the transfer was for such case only where notice had not been served, this case having been initiated way back in 2002, did not qualify to be transferred. Further, since all the steps as enumerated under the IBC for Resolution Professional to be undertaken had already been performed, the winding up petition having been initiated thereafter, filing a parallel petition under IBC for the same amounted to abuse of the process of law and multiplicity of proceedings would do no less than to defeat the very purpose of the Code for which it was passed. Accordingly, the Court directed the state government to ignore the order passed by the NCLT.

Supreme Court transfers Binani Cement insolvency resolution case to NCLAT, Kolkata:

The Supreme Court on July 2, 2018, transferred the Binani Cement insolvency case i.e. Rajputana Properties Private Limited v. Ultratech Cement Limited & Ors. (Civil Appeal No(s). 5789-5790/2018), which included the question of UltraTech Cement’s eligibility under Section 29A as well the legality of its bid pending at the National Company Law Tribunal (NCLT), Kolkata Bench to the National Company Law Appellate Tribunal (NCLAT), Kolkata to be heard on merits and adjudicated upon all the issues. As per Section 29 (A) (c) of the IBC, any person or promoter who is managing a company classified as non-performing asset for a period of one year till commencement of insolvency proceedings stands disqualified. The provision mentions that any other person acting jointly or in concert with the ineligible resolution applicant also stands disqualified. Rajputana Properties, one of the Resolution Applicants, had moved the NCLAT in May against the order of NCLT, which allowed the resolution professional and committee of creditors for Binani Cement to consider the revised resolution plan submitted by UltraTech, while offering Rajputana Properties an opportunity to revise its resolution plan of ₹6,930 crore. The NCLAT had refused to stall the insolvency process and asked the resolution professional to continue with the resolution process. The court while transferring the case, observed that “we are of the view that all points should be left open for arguments before the Appellate Tribunal, including the preliminary objection of Rajputana Properties Private Limited that the bid of Ultratech Cement Limited cannot be looked at all in view of the fact situation in the present case”.

Policy Updates

Home-Buyers are now Financial Creditors under IBC

The President of India has promulgated the Insolvency and Bankruptcy (Amendment) Ordinance, 2018 vide notification dated 06.06.2018, whereby the Home Buyers can now be considered as Financial Creditors under IBC. According to the said Ordinance, any amount raised under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing. This gives home buyers the power to apply for the initiation of IRP against errant developers and gives them their due position in the Committee of Creditors and therefore, the decision-making process. Further, the withdrawal of application for IRP, post its admission would require an approval from committee of Creditors and will only be permissible before publication of notice inviting Expressions of Interest.

SEBI amends its Delisting of Equity Shares Regulations

SEBI has amended SEBI (Delisting of Equity Shares) Regulation, 2009 vide Notification No. SEBI/LAD-NRO/GN/2018/23 dated June 1, 2018 whereby it removes the delisting of equity shares of listed entity from the ambit of the SEBI (Delisting of Equity Shares) Regulation, 2009 if such delist fulfils the following criteria:

(i) That such delisting should be pursuant to a resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016; and

(ii) That such Resolution Plan shall lay down specific procedure to complete the delisting of such shares; or

(iii) The Resolution Plan provides an exit option to the existing public shareholders at a price specified in the Resolution Plan.

The amendment also lays down regulations regarding pricing of the exit option provided to the existing shareholders.

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