Lenders Law

  In the recent ruling of Home Kraft Avenues vs Jayesh Sanghrajka and Anr . [1] , the National Company Law Appellate Tribunal has held that the creditor will be treated as “secured” during corporate insolvency resolution process (CIRP) despite the charge being unregistered under Section 77 of Companies Act 2013. In this article, the author has tried to analyse the said ruling. Provisions relied upon by NCLAT: The Hon’ble NCLAT relied upon the language stipulated in Section 77(3) of Companies Act 2013, reproduced as follows: “Notwithstanding anything contained in any other law for the time being in force, no charge created by a company shall be taken into account by the ‘liquidator’ or any other creditor unless it is duly registered under subsection (1) and a certificate of registration of such charge is given by the Registrar under sub-section (2).” Considering the aforementioned, the Hon’ble Appellate Tribunal observed that the said section casts an obligation only upon “l...

  In Jaypee Kensingon Boulevard Apartments Welfare Association vs. NBCC (India) Limited [1] , the Hon’ble Supreme Court had held that in case a resolution plan requires modification, the Adjudicating Authority must send back the resolution plan to committee of creditors (CoC) to consider the modifications, so as to afford an opportunity to resolution applicant to modify the plan, and CoC may then re-consider the plan and vote upon same. Similar understanding reflects even from the Hon’ble Supreme Court decision in Committee of Creditors of Essar Steel India Ltd vs. Satish Kumar Gupta [2] , wherein it had affirmed this power to remand back. Now, recently, in Bank of Maharashtra vs. Videocon Industries Ltd. [3] , the primary issue that arose for consideration before the National Company Law Appellate Tribunal, New Delhi (NCLAT) was whether CoC can review its decision of approving the resolution plan. Facts of the case: a) The dissenting financial creditor filed an appeal before N...

  The creditors might have given loan to a company based on the credentials of the group, and the management might have siphoned the funds into related entities, causing insolvency of the borrower company. In such a situation, the creditors of the borrower insolvent company will suffer huge financial loss. Further, in some cases, there may be practical difficulties in carrying out the insolvency proceedings of one or more entity within a group due to intermingling of assets of the group entities. There is, therefore, a need to carve an exception to the concept of separate legal entity, and pierce the corporate veil by bringing the assets of the solvent entities within the purview of the insolvency proceedings of its associate or subsidiary.   In India, the concept of group insolvency gained prominence in the case of Videocon Industries Limited [1] , wherein the Hon’ble National Company Law Tribunal, Mumbai Bench held that in the corporate insolvency resolution process of Video...