#Corporate Insolvency Resolution Process

Recalling a CIRP initiated via fraud or collusion is within an Adjudicating Authority’s power, but continuation depends on whether it serves insolvency resolution with integrity, the Supreme Court held, requiring a hearing of the RP, CoC and stakeholders.

The NCLAT held that a fraud-initiation claim under Section 65 IBC must be raised before the Adjudicating Authority and cannot be raised for the first time on appeal, forcing parties to raise such allegations at the CIRP stage to avoid belated challenges.

The NCLAT held that a without-prejudice deposit cannot substitute the mandatory adjudication of debt, default, and maintainability under Section 7 IBC. Setting aside an NCLT order that closed proceedings upon deposit, the tribunal ruled such deposits do not dispense with the creditor's right to a full determination of statutory prerequisites for CIRP initiation.

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 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 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 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.

The Bombay High Court has ruled that Section 32A of the IBC wipes out pre-CIRP attachments made under the MPID Act when a corporate debtor was never named as an accused, affirming the clean slate principle even for properties attached before insolvency. This shields resolution applicants from legacy liabilities, reinforcing the IBC’s intent to restore operational viability without collateral legal entanglements.

The NCLAT has ruled that a welfare association can initiate corporate insolvency proceedings under Section 7 of the IBC by submitting affidavits from 98 out of 152 homebuyers, even if nine affidavits contain minor discrepancies. This clarifies that procedural imperfections do not nullify financial creditor status when the core authorization and identity verification are intact, empowering homebuyer collectives to act collectively under the IBC.

The NCLAT has ruled that a financial creditor may initiate Corporate Insolvency Resolution Process under Section 7 of the IBC solely on the basis of a loan recall triggered by a Material Adverse Change clause, even if the debtor challenges the recall through arbitration. This clarifies that MAC-based defaults are actionable under IBC without waiting for arbitration outcomes, strengthening creditors' ability to act swiftly on contractual breaches that undermine financial viability.

The NCLAT has ruled that RERA orders passed after the commencement of CIRP cannot be used to impose new financial liabilities on a corporate debtor. Only debts existing before the moratorium qualify as operational claims, ensuring that post-CIRP adjudications do not disrupt the insolvency process or unfairly prioritize homebuyers over other creditors.

NCLAT ruled that co-developers of the completed 'Doon Square' project can execute registration deeds for homebuyers under the Master Agreement dated 08.10.2024, despite the corporate debtor's insolvency. The Tribunal directed statutory authorities to accept joint applications, reinforcing homebuyers' rights in project-wise resolution under the Insolvency and Bankruptcy Code.

The NCLAT has clarified that operational creditors, even with admitted claims under the IBC, cannot invoke RERA’s statutory trust provisions to extract funds from the project’s 70% escrow account during corporate insolvency. This upholds the hierarchy of the IBC framework, ensuring resolution plans - not piecemeal claims - govern asset distribution, protecting homebuyers and the integrity of the insolvency process.