Showing posts with label NCLT. Show all posts
Showing posts with label NCLT. Show all posts

Sunday, June 10, 2018

NCLT admits SBI’s plea against Videocon Telecommunications

The National Company Law Tribunal (NCLT) has admitted the insolvency petition filed by State Bank of India (SBI) against Videocon Telecommunications Ltd. This is the second firm promoted by Venugopal Dhoot to be admitted to the insolvency resolution process after the flagship company Videocon Industries.
On Friday, the division bench of NCLT Mumbai, presided over by B.S.V. Prakash Kumar and Ravikumar Duraisamy, admitted the petition by the country’s largest lender and also approved Anuj Jain as the interim resolution professional (IRP).
Animesh Bisht, counsel for the bank, argued that the company had defaulted in the payment of ₹234 crore to SBI and three of its associate banks (now merged with SBI). Of this, Videocon Telecommunications owes ₹193 crore to SBI alone in principal and interest.
A consortium of 18 banks has an exposure of ₹1,700 crore to Videocon Telecommunications, which defaulted on loans and bank guarantees in January 2018.
Zal Andhyarujina, counsel for Videocon Telecommunications, argued that the bank’s petition is defective, as it has not furnished the record of default by the company and that it should be dismissed on technical grounds. “The debt that is claimed by the bank is not the debt at all,” he said. “No notice was given to the company regarding the default and there was no crystallization of the dues by the bank.”
On Wednesday, NCLT admitted Videocon Industries’ case, also approving Jain as IRP. In February, Videocon had filed a writ petition in the Bombay high court asking for a stay on bankruptcy proceedings initiated by SBI in NCLT. It had moved the high court against the Reserve Bank of India’s decision not to extend the timeline as requested by SBI and the Joint Lenders’ Forum to rerate Videocon’s restructuring proposal following changes in cash flows after subsequent changes in the import duty policy.
As per Videocon’s FY17 annual report, it is liable to repay the liability of other group firms to the extent of ₹5,082 crore as of 31 March 2017. Its total debt was ₹19,506 crore as of March last year.

https://www.livemint.com/Companies/19avCLGjeDeidnyFL7IucO/NCLT-admits-SBIs-plea-against-Videocon-Telecommunications.html

Govt to launch fresh drive against shell companies

Over 225,000 companies and 7,000 limited liability partnerships (LLPs) face the threat of being struck off official records, with the government launching a fresh drive against companies defaulting on filing statutory returns.
The identified companies include entities with no economic activity, called defunct companies, as well as those used for financial irregularities, or shell companies.
A total of 225,910 companies and 7,191 LLPs have been identified for regulatory action due to non-filing of financial statements for the two years starting FY16, the corporate affairs ministry said in a statement. The fresh crackdown will be launched this financial year.
The identified entities will be given an opportunity to be heard and action will be taken after considering their response, said the statement.
In an earlier drive launched in the last financial year, the Registrar of Companies (RoCs) had struck off a total of 226,000 companies for having failed to file their financial statements or annual returns for a period of two or more successive financial years.
More than 300,000 directors were also disqualified for non-filing of annual returns by the companies for three years. Disqualified directors will not be in a position to sit on the boards of other companies.
About 14,000 companies got relief under the ‘condonation of delay scheme, 2018’ which was in force for four months from 1 January for regularization of returns.
The removal of the large number of defaulting entities from the records will clean up the system. However, only a small part of the entities struck off from records may have actually been involved in financial fraud.
A task force set up in 2017 to identify shell companies listed 16,537 entities as “confirmed shell companies”. It also listed 16,739 other entities having common directorships with the confirmed shell companies. The task force has also zeroed in on more than 80,000 suspected shell companies. The agencies use certain parameters to identify shell firms, including identifying persons of no means sitting on the board of directors and finding discrepancies between the volume of transactions done by a company and the profits reported.
Regulatory agencies will pursue cases against officers who are in default of statutory obligations even if the company is no longer in existence.
The crackdown highlights the importance of closing down a company as per law as many defaulting firms may actually be cases of entrepreneurs abandoning their venture and not bothering to close down the company as per law, which makes them defaulters for not filing returns in subsequent years. Also, many entrepreneurs open new companies just to hold their intellectual property rights such as trade marks but miss filing the annual returns as such companies have no operations.
“The government expects that its efforts to clean up the registry will create a transparent and compliant corporate ecosystem in India, promote the cause of ‘ease of doing business’ and enhance the trust of the public,” the official statement explained.
Pavan Kumar Vijay, founder of consulting firm Corporate Professionals, said that entities that are in default should be granted the opportunity to rectify the omissions through a simple procedure. This would ensure that struck off entities will not approach company law tribunals which are already overburdened, Vijay added.
The exercise of combing through records to find defaulters as well as those resorting to suspicious transactions has been a key part of the authorities’ strategy to identify instances of black money generation and money laundering.
According to industry observers, businesses often under-report their income or inflate expenses through bogus transactions involving companies that exist only on paper.
Over the last few years, successive governments have taken steps to curb tax evasion as well as funds that are moved out of the country coming back in the form of foreign direct investment. One key step in this regard is the renegotiation of India’s tax treaty with Mauritius.

Thursday, June 7, 2018

whether the NCLAT can dismiss a statutory appeal?

 On 18 May 2018, in M/s B Himmatlal Agrawal (Appellant) v Competition Commission of India (CCI) and Anr. [Civil Appeal No. 5029 of 2018], the Supreme Court of India (Supreme Court) distinguished the decision of the National Company Law Appellate Tribunal (NCLAT) while disposing of a statutory appeal under the Competition Act, 2002 (Competition Act).

The issue before the Supreme Court was whether the NCLAT can dismiss a statutory appeal for non-compliance of its interlocutory direction to deposit a portion of the penalty as a condition for grant of interim relief. In this instant case, the Supreme Court set aside part of the NCLAT's order and restored the appeal that had been dismissed by the NCLAT. 

Background

The CCI found the Appellant guilty of rigging the bids for tenders floated by Western Coalfields Limited and correspondingly imposed a penalty of INR 3,61,00,000, which was ordered to be deposited within 60 days (CCI Order). The Appellant filed an appeal before the NCLAT against the CCI Order, seeking inter alia a stay of the penalty deposit. In response, the NCLAT granted a stay against the CCI Order (NCLAT Stay Order), with a condition that the Appellant was to deposit a sum equal to 10% of the total penalty (Deposit). However, the Appellant was unable to execute the Deposit due to financial distress. Consequently, the NCLAT dismissed the appeal on the ground of non-compliance with the NCLAT Stay Order. Being aggrieved, the Appellant filed an appeal against the NCLAT's decision before the Supreme Court.

Decision of the Supreme Court

The Supreme Court recognised that the right to appeal is provided under Section 53B of the Competition Act and that the said provision does not require any pre-deposit of penalty for entertaining an appeal. The Supreme Court held that the right to appeal granted by a statute cannot be curtailed by imposing a condition of pre-deposit of penalty, which can result in the dismissal of the appeal, if such deposit is not satisfied.
The Supreme Court declared that non-compliance of the NCLAT Stay Order will not impact the substantive appeal. As the condition of deposit was attached to the NCLAT Stay Order, any non-compliance would result in the NCLAT Stay Order ceasing to operate, as the pre-condition is not fulfilled. However, the substantive appeal would have to be decided on merits after giving the involved parties an opportunity to be heard.
As a result, the Supreme Court set aside part of the NCLAT Stay Order and directed that the appeal be restored and decided on merits. The stay order remained vacated on ground of the non-compliance.

http://www.mondaq.com/india/x/707524/Antitrust+Competition/Supreme+Court+Clarifies+NCLATs+Powers+In+Appeal

Friday, May 25, 2018

With IBC norms changed, Jaypee homebuyers to rerun case


Hopeful of getting a fair treatment after reclassification as financial creditors, the homebuyers of Jaypee Infratech are planning to approach the court to rerun the ongoing resolution process under the amended Insolvency and Bankruptcy Code (IBC).

The government on Wednesday approved changes in the IBC through an ordinance that gives homebuyers the status of financial creditors at par with banks in the insolvency resolution process. "Once the ordinance is promulgated upon getting President's assent, we will approach the National Company Law Tribunal (NCLT) to rerun the resolution process,".

Jaypee has failed to deliver 25,000 flats to the buyers citing lack of funds. The realtor had raised around Rs 12,000 crore from the buyers for its Wishtown housing project in Noida in the National Capital Region.

Rerunning the case would mean starting the process from the stage of invitation of fresh bids and reconstitution of the Committee of Creditors (CoC). So, even if the changes are prospective, it would not matter in this case, Rai said.

Currently, the resolution process is heavily tilted in favour of banks, whereas homebuyers have little say in it, homebuyers and lawyers feel.

Even as their contribution in most real estate projects is more than that of banks, homebuyers are unable to participate equitably, leave aside preferential treatment, rue lawyers and homebuyers.

Jaypee raised about Rs 12,000 crore from homebuyers in instalments and booking amount which was much higher than Rs 8,276 crore raised by it from the banks. However, homebuyers were offered only 30% as compared to banks which were offered 70% of the bid price of around Rs 10,000 crore earlier quoted by a company during the resolution process.

With better representation on the CoC, homebuyers hope to get this order reversed.

"This is likely to get reversed if the new bids are invited. Given that Rs 3,500 crore is required to complete the remaining 60% construction in the project, the homebuyers are likely to get 4-5% of the principal amount as delay compensation," Rai said.

However, even in this scenario, the homebuyers are looking at 20% haircut on an average instead of 42% expected earlier, experts point out.

Classification as financial creditors will allow homebuyers to have a greater say in the resolution process and protect their rights. Homebuyers will have voting rights and can now participate in the CoC meetings. Till now, they had no voting rights and were sitting outside the CoC.

A total of 66% members of the CoC can decide on a resolution process. This will allow homebuyers to insist the bidders to include delay compensation in the resolution plan.

However, "placing thousands of homebuyers on CoC could be tricky. Some of them may not come to vote, while others may have a different opinion,", one of Jaypee homebuyers.

Homebuyers will be treated at par with banks during the insolvency resolution process. However, if the resolution process fails and the company is forced into liquidation, homebuyers will be placed after the banks as realtor has given land assets as collateral.

http://www.dnaindia.com/business/report-with-ibc-norms-changed-jaypee-homebuyers-to-rerun-case-2618540

NCLAT admits banks’ petition over Jaypee Infratech land

The National Company Law Appellate Tribunal on Thursday admitted a petition filed by banks against the NCLT order which had directed Jaiprakash Associates to return nearly 760 acres of land to its subsidiary Jaypee Infratech.

A two-member bench headed by Chairman Justice S J Mukhopadhaya also issued notices to the resolution professional (RP) of the company over the petition filed by three lenders -- Axis Bank, Standard Chartered Bank and ICICI Bank. The bench fixed July 13 as the next date of hearing.

During the proceedings, the appellate tribunal observed that the adjudicating authority (NCLT) does not have jurisdiction to declare any instrument illegal.

NCLAT was hearing the appeal over the order of the Allahabad bench of the National Company Law Tribunal (NCLT), which had asked debt-ridden Jaiprakash Associates Ltd to return nearly 760 acres of land to its subsidiary Jaypee Infratech, declaring the transfer of the land as “fraudulent” and “undervalued”.

NCLT had directed JP Group’s flagship firm Jaiprakash Associates Ltd (JAL) to release and discharge interest created over the land to lenders including ICICI Bank.

The order had come on a petition filed by Jaypee Infratech’s resolution professional (RP) Anuj Jain in the NCLT seeking direction over transactions entered into by the company’s promoters creating mortgage on 858 acres of land to secure debt for JAL.

Sunday, May 13, 2018

Jaypee Group Offers 2,000 Shares For Free To Each Homebuyer

Jaypee group has offered 2,000 equity shares of Jaypee Infratech Ltd. for free to each homebuyer as part of its Rs 10,000 crore proposal to revive the bankruptcy-hit real estate firm, sources said.
Earlier this week, Jaypee group promoter Manoj Gaur made an offer of over Rs 10,000 crore before the lenders of Jaypee Infratech to protect the interest of all stakeholders including financial creditors, homebuyers and minority shareholders.
Jaypee Infratech, a subsidiary of Jaypee group’s flagship firm Jaiprakash Associates, had in 2007 started development of about 32,000 flats in Noida, of which it has delivered 9,500. It has applied for occupancy certificates to hand over 4,500 flats more.
According to sources, Jaypee group in its fresh proposal has offered 2,000 shares each to every homebuyer on first registration. About 4.5 crore shares are estimated to be offered at nil consideration. That apart, the group proposed to bear 50 percent of stamp duty on behalf of the home buyers on first registration, they said adding the company plans to deliver all apartments in the next 42 months.
Jaypee Infratech will also pay penalty to homebuyers as per the agreement and India’s new real estate law RERA, sources said.
Jaiprakash Associates has already deposited Rs 750 crore with the Registry of the Supreme Court and the amount would be utilised for refund to home buyers.
Yesterday, lenders of Jaypee Infratech rejected a Rs 7,350 crore bid by Lakshadweep, the highest bidder for the company, as they found it inadequate. The decision was taken at a meeting of the committee of creditors that was called to decide on the bid received from Lakshadweep, whose offer was ranked higher than the one presented by Adani Group.
Last year, the National Company Law Tribunal had admitted the application by an IDBI Bank-led consortium, seeking resolution for Jaypee Infratech under the Insolvency and Bankruptcy Code.
The tribunal had appointed Anuj Jain as Interim Resolution Professional to manage the company’s business.
Later, Jain invited bids from investors interested in acquiring Jaypee Infratech and completing the stuck real estate projects in Noida and Greater Noida. 
Consequently, Lakshadweep emerged as a front runner to acquire Jaypee Infratech with Rs 7,350 crore bid.

NCLT suggests IBBI review insolvency code regulations


The National Company Law Tribunal (NCLT) has suggested to IBBI that there is a need to review the insolvency code regulations to ensure that they are not "misused or misinterpreted". 

It also said that the resolution professional (RP) should be competent and independent so that there are no interruptions in the process which lead to delays in disposal of insolvency cases. 

Besides, it has said the claims of operational creditors are neglected or ignored as the Committee of Creditors (CoC) has supremacy of the financial creditors (banks and financial institutions) who have control over the entire process. 


Nobody is taking care of operational creditors' claim, said the NCLT Kolkata Bench in its order passed last week on the Binani Cement.

"It is time to recognise their voice also in the committee of creditors," it said, suggesting changes to the Insolvency and Bankruptcy Board of India (IBBI). 

In the 60-page order, the tribunal has also raised concern about the functioning of RPs, saying it has been receiving several pleas from stakeholders on issues such as transparency, arbitrariness and delays in the process. 


"The adjudicating authority (NCLT) is facing too much interruption from various stakeholders. Till date we have never come across any frivolous application. All come with a genuine grievance. All challenge the independence of the resolution professional and lack of transparency, competency and arbitrariness in the matter of resolution process," said NCLT. 

While citing Binani Cement case, the tribunal said: "In the case in hand, 12 applicants came forward ...for not following the process mandated under the code by the resolution process. The arbitrary way of dealing with the cases has always led to interruptions and also caused delay in disposal of cases." 

According to NCLT, while there is a need for reforming the regulations of the insolvency code to ensure that it is not misused or misinterpreted, there can not be any question that independence and competency of RPs are essential for preserving the objective of the code in a transparent manner leaving no room for interruption from any corner. 

The NCLT Bench of Member-Judicial Madan B Gosavi and Jinan K R said: "Hopefully, we believe that IBBI take note of all the above observations and do the needful review of the code and regulation." 

Referring to the Binani Cement case, NCLT said here the RP is a CA by profession and he failed to take business decisions to run the corporate debtor on his own. He managed to run the company by appointing about 22 representatives, who are from his own partnership. 


A resolution professional, like the RP in a case of this nature, needs some basic training for handling the resolution independently, efficiently and tackle the multiple questions from different stakeholders, said NCLT order, passed on May 2. 

"Whenever a question arises, even if answerable by the RP independently or with advice from his advisors, he comes to adjudicating authority... He shifts that burden too to the adjudicating authority," the bench said. 

https://economictimes.indiatimes.com/news/economy/policy/nclt-suggests-ibbi-review-insolvency-code-regulations/articleshow/64052545.cms

Friday, December 23, 2016

Pending Companies Act matters to be transferred to NCLT

The Ministry of Corporate Affairs  has issued a notification stating that pending proceedings under the Companies Act – with some exceptions – shall be transferred from the district and high courts to benches of the National Company Law Tribunal, with effect from December 15.

The Centre has taken this step in lieu of its power under Section 434(1)(c) of the Companies Act 2013, under which it was empowered to specify a date on which pending matters relating to arbitration, compromise agreements and reconstruction and winding up of companies would stand transferred to NCLT benches.

Under the Companies (Removal of Difficulties) Fourth Order of 2016, all cases related to winding up pending in high courts wherein petitions have not been served on the respondents, shall be transferred. Moreover, the notification also states that matters other than those relating to winding up, in which orders have been reserved by high courts, shall not be transferred.

The Companies (Transfer of Proceedings) Rules 2016 also states that those cases pending before high courts relating to voluntary winding up of companies shall not be transferred. The Rules also clarify that no fee would be payable for these transfers.

The government has also notified as many as eighteen provision of the 2013 Companies Act to come into force this week. These include variation of shareholder rights, reduction of share capital, compromises, arrangements and amalgamations.



Thursday, December 8, 2016

AskMe Ashok Rajagopal gets interim bail

Ashok Rajagopal, former director of defunct e-commerce firm AskMe who represented the majority investor Malaysia’s Astro on the board, got interim bail on a case filed by one of the online sellers My Limo Trading Company. The seller had accused AskMe of not paying the company the money the latter had collected on its behalf from buyers for goods sold on the e-commerce platform.

Though Rajagopal was not in charge of day-to-day affairs at AskMe, My Limo filed a case against him since he had represented Astro, the 98.5% stakeholder in Getit Infoservice Pvt Ltd, the company that ran AskMe. Rajagopal had sought anticipatory bail in this case in the court of district and sessions judge, Patiala House, New Delhi, after a first information report (FIR) was registered against him on complaints filed by My Limo Trading Company.

My Limo claims AskMe owes the former around Rs 1.5 crore.

The court has ordered not to take any coercive action against Rajagopal till 8 January, when the bail application would again be considered. Rajagopal and Astro spokesperson did not respond to queries regarding the legal proceedings.

The legal imbroglio involving Astro and AskMe is getting more complex with another FIR being registered against former AskMe board members on a case filed by My Limo’s affiliate company EBiz International seeking Rs 2.5 crore of defaulted payments.

AskMe suspended operations and top management led by CEO Sanjiv Gupta left the company in August when Astro stopped funding the company. A number of sellers are now filing cases against former directors while Gupta and the investor Malaysian conglomerate Astro are slugging it out at the National Company Law Tribunal (NCLT).

NCLT has scheduled for hearing on the winding down petition moved by Astro along with several other petitions related to this matter for 12 December.  Various parties including hundreds of online sellers and 4,000 unpaid employees of AskMe are awaiting the conclusion of the legal battle that was set off end-August following the collapse of talks regarding a management buyout.


Corporate Insolvency - National Company Law Tribunal

On November 25 2016, the provisions of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (SICA Repealing Act) were notified with effect from 1 December 2016. This means that the Sick Industrial Companies (Special Provisions) Act 1985 stands repealed and consequently, the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (Appellate Authority) are dissolved. On the same day, Section 4(b) of the SICA Repealing Act, as substituted by the Eighth Schedule of the Insolvency and Bankruptcy Code 2016 (Code), was also notified with effect from 1 December 2016. It seems that as a corollary to these notifications and possibly to avoid creating a vacuum in the legal process, the Government of India decided to notify substantive parts of the Code relating to corporate insolvency resolution process on 30 November 2016, effective from 1 December 2016.

In our Ergo Newsflash of 25 November 2016 we had outlined that the Code was being notified in phases and that the provisions dealing with intermediaries had been notified into law on 27 November 2016. In May 2016, we had shared our thoughts on the broad contours of the Code with you. In addition to these, we provide below in FAQ format (i) a brief outline of what has been notified; and (ii) the implication of notifying the SICA Repealing Act on the Code.

The Code is here; long live the Code

What provisions of the Code have been notified?

Per the latest notification issued on 30 November 2016, the provisions relating to corporate insolvency have been notified into law, namely:

Sections 4 to 32: These deal with the substantive as well as procedural aspects of initiating a corporate insolvency resolution process, moratorium, constitution of the committee of creditors, and appointing of insolvency professionals, etc.;

Sections 60 to 77: These deal with offences and penalties for various actions;

Section 198: This allows the National Company Law Tribunal (NCLT) to condone any delay by the Board for reasons recorded in writing;

Section 231: The section bars the jurisdiction of civil courts in respect of any matter which the NCLT is empowered to pass orders on;

Sections 236 to 238: These sections (i) empower the special courts created under the Companies Act 2013 to try offences under the Code; (ii) empower the High Court to hear appeals and revisions from the special court; and (iii) make clear that the Code overrides all other laws in India;

Sections 239(2)(a) to (f): These sections empower the Central Government to make rules for various purposes; and

Sections 246 to 248 and 250 to 255: These sections amend various other laws and were notified prior to 1 December 2016.

In addition, the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016 were also notified with effect from 1 December 2016. These regulations are substantive guidelines which outline how a corporate insolvency resolution process can be triggered, what constitutes proof of claim, the governance of the committee of creditors, and the power of the insolvency professional, amongst other things.

Impact of the notification of the SICA Repealing Act

What does notifying the SICA Repealing Act and, inter alia, Part II (Chapter 1 and 2) of the Code (both effective from today, 1 December 2016) mean for pending cases under the erstwhile SICA?

Section 252 of the Code, notified on 1 November 2016, amended the SICA Repealing Act by substituting Section 4(b) therein with the Eighth Schedule of the Code. This was later followed by the notification on 25 November 2016 notifying the SICA Repealing Act itself with effect from 1 December 2016. The net effect of this is that BIFR and the Appellate Authority are, as of today functus officio (ie defunct). In terms of the Eighth Schedule of the Code, it means that any appeal preferred to the Appellate Authority or any reference made to the BIFR or any inquiry pending before the BIFR or any other authority or any proceeding of whatever nature pending before the Appellate Authority or the BIFR immediately before the commencement of the SICA Repealing Act stand abated. Any company in respect of which such an appeal or reference or inquiry stands abated has been given an option to make an application to the NCLT under the Code within 180 (One hundred and eighty) days from the commencement of the Code in accordance with the provisions therein. The provisions of the Code giving such an option have come into force from 1 December 2016.
What is the impact of the SICA Repealing Act on the orders passed either under Section 22 of SICA or scheme sanctioning order or any other order affecting the rights of the parties therein?

As stated above, the SICA Repealing Act read together with Section 252 of the Code, does state that all proceedings pending before the BIFR or Appellate Authority, shall stand abated with effect from 1 December 2016. However, the SICA Repealing Act also contains a "savings" section. The way this section is drafted, it intends to "save" any rights and obligations which have vested in a party under SICA upon its repeal. Given the substantive nature of the above orders passed under SICA, it may be argued by some that these orders are saved. Having said this, considering that the criteria for reference to NCLT and declaration of moratorium under the Code are substantively different from what was prescribed under SICA, it remains to be seen if such an interpretation is maintainable and merits a clarification from the Government to remove ambiguity.

Do the notified provisions of the Code apply to all companies (and not just industrial companies)? What is the test for "sickness" under the Code?

The Code is a significant change from the erstwhile SICA regime, particularly on this point. As a remedy, the Code is available for and against all companies and partnerships in India, but as of now only against companies and limited liability partnerships. Further, as a remedy it is available not just to scheduled commercial banks in India but to all financial creditors (ie lenders or beneficiaries of corporate guarantees) and operational creditors (ie trade creditors).

Furthermore, the balance sheet test under SICA for determination of "sickness" has been replaced with a low threshold cash flow test. Where a corporate debtor has committed a default of INR 100,000 (Indian Rupees One lakh) or more, an operational creditor or a financial creditor or corporate applicant itself may initiate a corporate insolvency resolution process.

Source: http://www.mondaq.com/india/x/549680/Corporate+Commercial+Law/India+Steps+Into+A+New+Era+For+Corporate+Rescue+And+Insolvency