National Company Law Appellate Tribunal judgments

NCLAT quashed the liquidation order of Jeppiaar Cements, revived the corporate insolvency resolution process and permitted withdrawal of the Sec 12A application even though the Committee of Creditors failed to meet the 66 % voting threshold prescribed by Sec 33. The ruling affirms a resolution professional’s discretion to deem a Sec 12A withdrawal viable, protecting creditor interests and keeping restructuring options open for the debtor.

The NCLAT held that, under Section 60(5) of the IBC, the adjudicating authority can issue personal directions to suspended directors of a debtor to locate and recover leased electric vehicles. This expands the tools available to resolution professionals during a CIRP.

NCLAT ruled that a contribution order under Section 14 of the IBC can be imposed without a prior Section 66 finding, and that a Section 74 direction is only a reference now rendered moot by amendment. This means directors and resolution professionals may be liable for contributions during the moratorium even absent a default finding.

NCLAT upheld NCLT’s ruling that a 100% share transfer and property transfer were illegal for non-compliance with mandatory deed requirements under Section 56(1) Companies Act. The decision underscores the strict procedural compliance needed for share transfers to be legally valid.

NCLAT affirmed NFRA's imposition of ₹3L and ₹5L penalties on a chartered accountant and his firm for professional misconduct in the Vikas WSP Limited audit. The ruling reinforces that audit firms and engagement partners share joint liability under Standards on Quality Control (SQC 1), setting a precedent for stricter accountability in statutory audits.

NCLAT rules that interest on inter-corporate deposits must be included in calculating the financial debt threshold under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. This decision overturns NCLT's exclusion of interest based solely on TDS deductions, impacting creditors' eligibility for initiating CIRP.

NCLAT Chennai upholds liquidation under Section 33(1)(a) of the IBC, ruling that repeated failure to honor settlement proposals and non-cooperation with the Committee of Creditors (CoC) justifies bypassing resolution efforts. The judgment reinforces that liquidation is a last resort but becomes binding when promoters undermine the Corporate Insolvency Resolution Process (CIRP).

NCLAT upholds liquidation of a corporate debtor after the resolution applicant failed to secure RBI approvals within the one-year deadline under Section 31(4) of the Insolvency and Bankruptcy Code. The ruling reinforces strict compliance with regulatory timelines, impacting insolvency practitioners and creditors in CIRP proceedings.

NCLAT holds that any renewal, novation, or variance of credit facilities without the personal guarantor's consent automatically discharges their liability under Section 133 of the Indian Contract Act. This ruling reinforces the protection of guarantors under the IBC and sets a precedent for creditors to secure explicit consent for modifications.

The NCLAT has ruled that advance payments made under a consortium agreement for goods supply qualify as operational debt under Section 5(21) of the IBC, even when payment obligations are structured between consortium members rather than directly with a corporate debtor. This expands the scope of operational creditors in complex supply chains and clarifies that inter-se financial arrangements do not negate the existence of a debt arising from a transaction in the ordinary course of business.

The NCLAT has clarified that Regulation 29 of the IBBI Liquidation Regulations does not permit set-off claims between a corporate debtor and a creditor through affiliated group entities, upholding the doctrine of corporate separateness. This ruling directly impacts how operational creditors and liquidators assess mutual obligations in insolvency proceedings, preventing cross-entity netting that could distort the waterfall of claims under the IBC.

NCLAT rules that the three-month timeline under Section 121(2) of the IBC for filing bankruptcy applications against personal guarantors is directory, not mandatory, allowing condonation of delay under the Limitation Act. This decision clarifies that financial creditors can proceed with insolvency applications even beyond the prescribed period, ensuring flexibility in personal guarantor insolvency proceedings.

NCLAT ruled that fraudulent transactions under Section 242 of the Companies Act can be set aside without the consent of involved parties, reinforcing RBI directions as legally binding. The judgment impacts insolvency proceedings and corporate governance, particularly for NBFCs and group companies engaged in sham lending arrangements.

NCLAT rules that denying parties the opportunity to file additional affidavits after remand violates natural justice, especially when prior proceedings were not adjudicated on merits. The judgment reinforces that procedural rigidity must yield to fairness, impacting insolvency and commercial dispute resolution.

NCLAT holds that disbursements made into unauthorized accounts through fraudulent means cannot be classified as financial debt under the Insolvency and Bankruptcy Code, 2016. The ruling bars initiation of Corporate Insolvency Resolution Process (CIRP) where loan agreements lack valid authorization, reinforcing the doctrine of indoor management in financial transactions.

NCLAT rules that a single creditor’s unjustified refusal to accept repayment of an admitted debt during CIRP constitutes abuse of process under Section 65 IBC, warranting termination of insolvency proceedings. The ruling protects corporate debtors from frivolous or malicious creditor actions that undermine the IBC’s objectives.

NCLAT rules that a financial creditor can revive Corporate Insolvency Resolution Process (CIRP) if the corporate debtor breaches court-recorded settlement terms, treating non-compliance as a material default. This reinforces strict adherence to settlement agreements under the Insolvency and Bankruptcy Code, impacting creditors' rights to reinitiate insolvency proceedings.

NCLAT has ruled that control exercised indirectly through subsidiary entities qualifies as 'related party' under the IBC, triggering strict scrutiny of claims and denying secured creditor status for immovable asset claims. This clarifies the scope of related party exposure in CIRP and caps recoveries to principal paid under FEMA, significantly impacting restructuring strategies for corporate groups with layered ownership.

NCLAT rules that a financial creditor’s interest default exceeding ₹1 crore constitutes a valid default under Section 7 of the IBC, even if the corporate debtor breached a One Time Settlement (OTS). The ruling clarifies that service of notice via MCA-registered email suffices for CIRP initiation, impacting creditors’ rights and insolvency proceedings.

NCLAT rules that parties in oppression and mismanagement proceedings under Section 242(4) of the Companies Act have an absolute right to file a detailed para-wise reply after remand, reinforcing principles of natural justice. The judgment clarifies that this right cannot be denied even if procedural defects exist, ensuring fair adjudication in corporate disputes.

NCLAT rules that a debenture trustee can file a Section 95 IBC application against a personal guarantor only if the guarantee deed expressly permits it, clarifying the scope of creditor locus in personal insolvency proceedings. This holding impacts debenture trustees, personal guarantors, and lenders relying on guarantee deeds for insolvency actions.

NCLAT rules that under RERA, secured creditors' claims in corporate insolvency resolution processes (CIRP) are restricted to unsold units only, prioritizing homebuyers' rights. NOIDA's statutory dues are recognized as secured claims under registered lease deeds, impacting real estate insolvency proceedings.

NCLAT clarifies that Resolution Professionals under the IBC can request documentation to verify claims but lack adjudicatory powers. The ruling denies NOIDA’s claims for farmer compensation and time extension charges due to insufficient substantiation, reinforcing the limited scope of RP authority during CIRP.

NCLAT holds that contempt proceedings cannot be sustained if the underlying court order rests on a mistaken factual basis. The ruling clarifies that compliance must be objectively possible-disbursements made prior to the order render contempt inapplicable, offering critical protection to liquidators and parties acting in good faith.