Supreme Court – Page 2 – Vinod Kothari Consultants

Cryptotrading’s tryst with destiny- Supreme Court revives cryptotrading, RBI’s circular struck down

-Megha Mittal

(mittal@vinodkothari.com)

April 2018, the Reserve Bank of India (RBI) issued a “Statement on Developmental and Regulatory Policies” (‘Circular’) dated 06.04.2018, thereby prohibiting RBI regulated entities from dealing in/ providing any services w.r.t. virtual currencies, with a 3-month ultimatum to those already engaged in such services. Cut to 4^th March, 2020- The Supreme Court of India strikes down RBI’s circular and upheld crypto-trading as valid under the Constitution of India.

Amidst apprehensions of crypto-trading being a highly-volatile and risk-concentric venture, the Apex Court, in its order dated 04.03.2020 observed that RBI, an otherwise staunch critic of cryptocurrencies, failed to present any empirical evidence substantiating cryptocurrency’s negative impact on the banking and credit sector in India; and on the basis of this singular fact, the Hon’ble SC stated RBI’s circular to have failed the test of proportionality.

In this article, the author has made a humble attempt to discuss this landmark judgment and its (dis)advantages to the Indian economy.

RESOLUTION VALUE MAY BE LOWER THAN LIQUIDATION VALUE?

March 6, 2020/0 Comments/in Case laws, Insolvency and Bankruptcy, Liquidation & Winding-up /by Vinod Kothari Consultants

-Richa Saraf

(richa@vinodkothari.com)

The Apex Court, vide its order dated 22.01.2020, in the matter of Maharasthra Seamless Limited vs. Padmanabhan Venkatesh & Ors.[1] held that there is no requirement that the resolution plan should match the maximized asset value of the corporate debtors. Reiterating the principle laid down in the case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta[2], the Hon’ble Supreme Court held that once a resolution plan is approved by the committee of creditors (CoC), the Adjudicating Authority has limited power of judicial review.

The judgment of the Supreme Court boldly brings out the object of the Insolvency and Bankruptcy Code, 2016 (“Code”), i.e. “resolution before liquidation”. However, it will be pertinent to understand whether this ruling should be considered as a benchmark? Further, what will be the situation in case of liquidation? Whether sale under liquidation can be done for a value lower than the reserve price?

Below we analyse the ruling, seeking to answer the aforementioned questions.

Case Update: SC extended the CIRP by exercising Article 142 of the Constitution

November 7, 2019/0 Comments/in Case laws, Insolvency and Bankruptcy /by Vinod Kothari Consultants

-Priya Udita

(resolution@vinodkothari.com)

The Supreme Court (SC) in the case of Jaiprakash Associate Ltd. & Anr. v. IDBI Bank Ltd. & Anr. dealt with 2 issues. Firstly, whether the National Company Law Tribunal (NCLT) or National Company Law Appellate Tribunal (NCLAT) can exclude any period from the statutory period in exercise of inherent powers sans any express provision in the Insolvency and Bankruptcy Code (I&B Code) in that regard. Secondly, whether the bidders can submit revised resolution plan after they were originally rejected by Committee of Creditors (CoC).

Dealing with the first issue, the SC in its order dated November 6, 2019 held that an extraordinary situation had arisen because of the constant experimentation which went about at different level due to lack of clarity on matters crucial to the decision making process of CoC. Besides that, the SC held that the case on hand is a classic example of how the entire process got embroiled in litigation initially before court and adjudicating authorities due to confusion or lack of clarity in respect of foundational processes to be followed by the CoC. Depending upon the uniqueness and unanimity of the stakeholders and resolution applicant to eschew the liquidation of corporate debtor, the SC by exercising its power under Article 142 of the constitution reckons 90 days extended period from the date of this order instead of the date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019.

With regard to second issue, the SC relied on the sub clause (7) of Regulation 36B inserted with effect from 4th July, 2018, dealing with the request for resolution plans. It postulates that the resolution professional may, with the approval of the CoC, reissue request for resolution plans, if the resolution plans received in response to earlier request are not satisfactory, subject to the condition that the request is made to all prospective resolution applicants in the final list. Consequently, applying the principle underlying Regulation 36B(7), the SC found it appropriate to permit the interim resolution applicant to reissue request for resolution plans to the two bidders and/or to call upon them to submit revised resolution plans, which can be then placed before the CoC for its due consideration.

However, the SC has clarified that this order is issued in an exceptional case and it will not be construed as a precedent. Further, the SC made it clear that this order does not answers to the question of law as to whether NCLT or NCLAT has the power to issue direction or order inconsistent with the statutory timelines and stipulations specified in the I&B Code or regulations.

Though the SC has extended the CIRP period in an exceptional case, it is still not sufficient to complete the process within the stipulated time period as there are constant amendments being done for the effective implementation of the I&B Code. The NCLT/NCLAT is burdened with the application for clarification on the various procedures or regulation while the time for resolution flies. There are numerous cases pending before adjudicating authorities whose stipulated time period for the resolution has been surpassed.

Schemes under Section 230 with a pinch of section 29A – Is it the final recipe?

November 2, 2019/1 Comment/in Companies Act 2013, Insolvency and Bankruptcy /by Vinod Kothari Consultants

-Sikha Bansal (resolution@vinodkothari.com)

Note: This article is in continuation of/an addition to our earlier article wherein the author discussed various aspects pertaining to schemes of arrangement in liquidation under section 230 of the Companies Act, 2013 read with various provisions of the Insolvency and Bankruptcy Code, 2016. The author has described various factors and principles which the judiciary may consider while sanctioning a scheme of arrangement for companies in liquidation, how a scheme is different from a resolution plan or a going concern sale, what constitutes ‘class’ in the context, whether the waterfall under section 53 will apply to such schemes, etc. The author also pointed out the lack of clarity as to applicability or inapplicability of section 29A on such schemes. However, very recently, NCLAT has clarified that persons ineligible under section 29A are not qualified to propose a scheme during liquidation. This Part discusses this ruling and ponders upon some questions which still remain open-ended/unanswered.

The conundrum as to whether section 29A of the Insolvency and Bankruptcy Code, 2016 (‘Code’) will apply to schemes under section 230 of the Companies Act, 2013 (‘Companies Act’) has been put to rest, at least for the time being, by a recent ruling of the National Company Law Appellate Tribunal (‘NCLAT’). In Jindal Steel and Power Limited v. Arun Kumar Jagatramka & Gujarat NRE Coke Limited (Company Appeal (AT) No. 221 of 2018), vide order dated 24.10.2019, NCLAT held, while a scheme under section 230 is maintainable for companies in liquidation under the Code, the same is not maintainable at the instance of a person ineligible under section 29A of the Code. The NCLAT relied on the observation of the Hon’ble Supreme Court in Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors., WP No. 99 of 2018, that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation.