National Company Law Appellate Tribunal judgments

NCLAT clarifies that a power of attorney holder can file an insolvency application under Section 95 IBC if authorised by a board resolution, even without explicit mention in the power of attorney. The ruling underscores the sufficiency of corporate authorisation for initiating personal insolvency proceedings against guarantors.

NCLAT affirms that a tribunal-approved scheme of arrangement under the Companies Act binds dissenting creditors, even if it mandates withdrawal of pending civil suits and assigns claims to a third party. The ruling reinforces the legal sanctity of court-sanctioned compromises over individual creditor objections, impacting creditor rights in corporate debt restructuring.

NCLAT clarifies that merely mortgaging property to secure a loan does not qualify as 'financial debt' under the IBC unless funds are disbursed to the corporate debtor. Creditors relying on mortgage security alone must now assert claims as 'other creditors,' impacting insolvency priority and recovery rights.

The NCLAT has ruled that under Section 48 of the Gujarat Value Added Tax Act, 2003, state tax authorities hold a statutory first charge over assets for VAT arrears, granting them secured creditor status in corporate insolvency proceedings - but this protection does not extend to CST dues. This clarifies the hierarchy of claims in liquidation and impacts how resolution professionals prioritize tax liabilities under Section 53 of the IBC.

The NCLAT ruled that when a corporate debtor formally acknowledges an operational debt through a consequence sheet-despite prior claims of defective supply-the acknowledgment nullifies the assertion of a pre-existing dispute. This clarifies that conditional or reconciliatory admissions under commercial correspondence can constitute unequivocal liability under IBC, empowering operational creditors to initiate CIRP even amid ongoing contractual disagreements.

The NCLAT ruled that a Rs. 8.92 lakh transfer to a sister concern qualifies as preferential under Section 43 IBC because it repaid an antecedent debt, while a Rs. 39 lakh transfer does not - establishing that mere inter-company transfers without underlying debt obligations cannot be voided as preferential. This clarifies the threshold for creditor benefit in related-party transactions during insolvency, impacting resolution professionals and corporate directors alike.

The NCLAT has ruled that unsecured state tax dues, including Haryana VAT, cannot claim priority as secured creditors under Section 53 of the IBC merely by virtue of statutory charge - only creditors with actual security interest qualify. This clarifies the hierarchy in liquidation distributions and impacts all state revenue departments seeking recovery from insolvent corporate estates.

NCLAT rules that unsold inventory in a RERA-registered project must be included in the corporate debtor’s asset pool during CIRP, even if the collaboration agreement is disputed or non-enforceable. This holding strengthens creditor claims and prevents developers from shielding project assets from insolvency proceedings.

The NCLAT has ruled that once a statutory auditor resigns, the resolution professional cannot compel them to furnish documents they no longer hold or control, even under Section 19 of the IBC. This clarifies the limits of an auditor’s post-resignation obligations and protects them from being treated as de facto management agents in insolvency proceedings.

The NCLAT has ruled that corporate insolvency resolution proceedings can proceed concurrently against both the principal borrower and its corporate guarantor, even when liquidation has been ordered against the guarantor. This clarifies that Section 12A of the IBC cannot be invoked to halt liquidation after resolution failure, reinforcing creditor rights and closing a key loophole in multi-debtor insolvency cases.

NCLAT Chennai reaffirms that High Courts cannot condone delays under Section 421 of the Companies Act, 2013, as the statute vests this power exclusively with the appellate tribunal. The ruling underscores the mandatory exhaustion of statutory remedies and bars writ jurisdiction for procedural lapses, impacting corporate litigants and insolvency practitioners.

NCLAT quashes CCI's penalty order for violating principles of natural justice by imposing Rs. 301.61 crore penalty without notifying the appellant of its intent to differ from the Director General's report. The ruling reinforces that regulatory bodies must afford parties a fair hearing before departing from investigative findings, impacting all competition law proceedings.

NCLAT clarifies that a corporate guarantor's liability under the Insolvency and Bankruptcy Code arises solely upon invocation of the guarantee, not the principal borrower's default date. The ruling reinforces Section 10A's moratorium protection, shielding guarantors from insolvency proceedings until the creditor enforces the guarantee deed.

NCLAT rules that a bankrupt's travel permission under insolvency proceedings cannot be granted based on a lapsed purchase order, clarifying that 'parallel run' clauses require concurrent validity of contractual obligations. This sets a precedent for interpreting travel restrictions tied to active business engagements during personal insolvency.

NCLAT clarifies that a joint venture partner can initiate insolvency proceedings under Section 9 IBC if its supply obligations are governed by a separate agreement, independent of profit-sharing arrangements. This ruling expands the scope of operational creditors, impacting joint venture contracts and insolvency filings.

NCLAT rules that resolution applicants excluded from Form G’s final list cannot participate in CIRP, even if their delayed EOI is condoned, unless the Committee of Creditors issues a fresh invitation. The decision underscores the IBC’s zero-tolerance approach to procedural lapses, impacting distressed asset resolution timelines and stakeholder rights.

NCLAT rules that a petition filed during an existing interim moratorium under Section 95 IBC is non-est and incapable of initiating a fresh moratorium, reinforcing procedural safeguards against abuse of process in personal guarantor insolvency cases. The decision clarifies that only a validly admitted petition can trigger moratorium protections.

NCLAT rules that EPFO cannot file claims during Corporate Insolvency Resolution Process (CIRP) based on enforcement reports prepared after the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) commences. The decision reinforces that statutory creditors like EPFO must initiate assessment proceedings before CIRP begins to be admissible.

NCLAT rules that surplus cash flows generated during CIRP, if not explicitly addressed in the approved Resolution Plan, must be distributed among financial creditors as per the Section 53 waterfall mechanism. This binding precedent reinforces the sanctity of statutory distribution over contractual silence in insolvency proceedings.

NCLAT rules that secured creditors forfeit their right to realize security under Section 52 of the IBC if they fail to adhere to the 90-day timeline prescribed in Regulation 21A of IBBI Liquidation Regulations. The assets automatically vest in the liquidation estate upon non-compliance, impacting creditors' recovery strategies in insolvency proceedings.

The NCLAT has ruled that a No Objection Certificate for charge satisfaction does not equate to legal discharge of financial debt under IBC Section 7. Only verified financial statements and NeSL records can conclusively establish default, setting a critical precedent for creditors and resolution professionals relying on procedural documents over substantive evidence.

NCLAT rules that a decree against a personal guarantor does not automatically revive the limitation period for insolvency proceedings under Section 95 of the IBC. The creditor must prove acknowledgment of debt under the Limitation Act to proceed, setting a critical precedent for personal guarantor liability.

NCLAT reaffirms that Employees Provident Fund Organisation (EPFO) cannot press claims for damages and interest under Sections 7A, 14B, and 7Q of the EPF Act during the corporate insolvency resolution process. The ruling clarifies that moratorium under Section 14 of the IBC bars assessment proceedings, impacting creditor hierarchy and recovery priorities for statutory dues.

NCLAT reinforces that a pre-existing dispute under IBC Section 9 must be backed by concrete evidence-such as prior communications, quality complaints, or compensation offers-to block insolvency proceedings. Operational creditors cannot rely on spurious claims to circumvent CIRP initiation against corporate debtors.