#Corporate Insolvency

The Supreme Court held that jurisdiction to extend an arbitral mandate under Section 29A lies exclusively with the 'court' defined in Section 2(1)(e), not the Section 11 appointing authority. A party waives its right to a three-member tribunal by twice consenting to a sole arbitrator and participating for 18 months. The IBC moratorium does not bar a corporate debtor from initiating arbitration to recover dues.

The NCLAT Chennai Bench held ESI contributions are trust assets excluded from liquidation estate under IBC Sec 36(4)(a)(i), overturning a plan paying only 1% of the claim and affirming priority for employees' statutory dues in insolvency.

By setting aside a ₹1,885 cr inflated claim and correcting the information memorandum, the NCLAT affirmed that a guarantor can claim subrogation rights under the IBC. The ruling tightens claim valuation standards and protects guarantors in corporate insolvency cases.

The Bombay High Court ruled that the interim moratorium under Section 96 of the IBC applies only to corporate debtors and does not halt criminal proceedings under Section 138 of the NI Act against company directors. This limits the moratorium’s protective reach, leaving directors exposed to prosecution during insolvency.

Delhi High Court ruled that an arbitral award not incorporated into an approved IBC resolution plan is legally extinguished, and ordered the return of the petitioner’s security deposit of INR 5.52 crore with accrued interest. The decision clarifies that Section 34 petitions become infructuous when the award is omitted from the resolution plan, impacting parties in corporate insolvency arbitrations.

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 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 ruled that ongoing settlement discussions and partial debt repayments cannot override clear evidence of financial default under Section 7 of the IBC. This clarifies that corporate insolvency proceedings remain valid if the debt is undisputed and due, reinforcing creditor rights against tactical delays and undermining the integrity of the insolvency process.

NCLAT rules that inter-group fund transfers lacking genuine credit disbursal or repayment obligation fail the 'financial debt' test under Section 5(8) of the Insolvency and Bankruptcy Code. The ruling shields corporate debtors from IBC proceedings where transactions are sham or circular, reinforcing the need for commercial substance in financial creditor claims.

NCLAT clarifies that third parties, like Orix Leasing, can be held liable under Section 66 IBC for fraudulent trading if complicit in the corporate debtor's scheme. The ruling mandates a fresh hearing to assess evidence of collusion, setting a precedent for extending liability beyond directors in insolvency proceedings.

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 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 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.

Supreme Court holds that a bank cannot initiate insolvency proceedings under Section 7 of the IBC if the loan was disbursed to a builder rather than the corporate debtor. The ruling underscores that financial creditor status requires a direct lending arrangement, not merely a contractual transaction.