Connect with us

Legally Speaking




Prior to the amendment inserting Chapter III-A to the Insolvency and Bankruptcy Code, 2016 (‘Code’), the corporate insolvency resolution process (‘CIRP’) for Micro, Small and Medium Enterprises (‘MSME’) was covered by Chapters II and III of the Code with no regard for the peculiarities in operations and compliances of corporate entities classified as micro, small, medium or otherwise. Prompted perhaps by the global pandemic and the ensuing stresses on corporate balance sheets the nodal ministry in the Government of India decided to enact the ‘Pre-packaged Insolvency Resolution Process’ (‘PIRP’) by way of an ordinance in April 2021. Surely wide ranging amendments and perhaps improvements have been introduced in so far as the MSME and resolution of their insolvency is concerned, yet the PIRP in harking back to the clutches of Sections 43, 45, 50 and 66 of the Code has failed to address crucial hurdles faced by the beneficiaries outlined therein.

Even prior to the PIRP enactment, the legislative intent for MSMEs under the Code was very clearly outlined by way of relaxations vide Section 240A in so far as Clauses (c) and (h) of Section 29A were concerned in that the Code permitted erstwhile MSME directors/promoters to perform a dual role in the CIRP/PIRP, i.e. that of a ‘resolution applicant’ as at the same time being ‘ex-management/suspended directors’ of the debtor concern. Consonantly, a contradictory dilemma informs the Code with the Resolution Applicant seeking to push a duly approved and viable resolution plan while also being subjected to the scrutinising processes and rigour of avoidance applications vide Sections 43, 45, 50 & 66 of the Code.

It is no one’s case that MSME corporate debtors ought not be subjected to the scrutiny of avoidance applications by the Resolution Process, however in practicality what is transpiring is that resolution of such debtor concerns is being held up much beyond the mandated period of 330 days solely because the outcome of applications vide Sections 43, 45, 50 & 66 would have a direct bearing on the viability and functionality of the Resolution Plan forwarded by the ex-directors/promoters.

Though Delhi High Court’s judgment in M/s Venus Recruiters Pvt Ltd vs. Union of India & Ors1 concerning the timelines vide Regulation 35A of CIRP Regulations, 2016 furthered the intent of the Code, yet non-uniform application thereof by the different benches of the National Company Law Tribunal (hereinafter ‘NCLT’) has only further fogged up the issue at hand.

Prior to the judgment in Venus Recruiters benches of the NCLT across the country prioritised resolution plans presented before them for approval vide Section 30(6) of the Code. In all honesty though the Delhi High Court intended to tidy up the uncalled for delays in CIRP conclusion, it practically played into the hands of those intending to throw a spanner in the works. In fact the vicious circle was complete when Resolution

1 Writ Petition (Civil) No. 8705 of 2019

Professionals began realising that non-filing of avoidance applications could and does in many situations lead to allegations of professional misconduct and thus such applications were being filed even during the absolute last stages of the CIRP thereby denting the possibilities of achieving a timely successful resolution vis-à-vis the Corporate Debtor.

In consonance therefore, with the Delhi High Court having clarified the functus-officio nature of the Resolution Professional post plan approval, NCLT benches across the spectrum began entertaining the avoidance applications at the expense of any pending approval of the Resolution Plan. At the expense of repetition, it must be stressed that the CIRP/PIRP timelines with regard to the role of the Resolution Professional in opinion formation, determining avoidance transactions and thereafter filing of applications under Sections 43, 45, 50 and 66 of the Code, is crucial in so far as driving the debtor concern towards resolution as opposed to liquidation is concerned. Ultimately resolution of the stressed corporate being the preferred option over liquidation, certainty and timelines must not be allowed to venture astray.

Despite the Supreme Court’s repeated exhortations what seems to have gotten lost in translation is that with every passing day the value of the Corporate Debtor in terms of both assets and revenue generation deteriorates exponentially. Now consider the same for MSMEs what with their limited capital base and tight margins and the issues highlighted above become all the more pronounced and troublesome.

It is here that two wholly divergent and conflicting viewpoints emerge for the consideration of the reader vide pronouncements on avoidance applications filed before the NCLT Kolkata Bench in Suraj Fabrics Industries Ltd & Anr vs. Bipin Kumar Vohra & Ors2 as also the one filed before NCLT, New Delhi in M/s A.C. Goel Distributing Company Pvt Ltd vs. M/s Webtech India Pvt Ltd.3

Instructively, in both cases the application for approval of the Resolution Plan vide Section 30(6) of the Code came to be filed prior in time to the filing of the avoidance applications. Furthermore, in both cases the subsequent avoidance application was filed in the interregnum between filing of the Resolution Plan and its eventual approval by the respective adjudicating authorities. Yet, the NCLT Kolkata Bench taking a more prudent view of the matter did not stall the approval process and went ahead with affording a final approval to the plan within an approximate time period of 30 days thereafter.

Antithetically, the NCLT, New Delhi Bench failed to take up the Resolution Plan for final approval and the same was re-notified and adjourned on a repeated basis. On the other hand the pending avoidance applications as were already grossly beyond the ambit and timelines vide Regulation 35A were taken up with the plan getting pushed further on in time to the effect that in all probability the financial proposal of the submitted Resolution Plan will be adversely affected and the same will fall through.

2 IA(IB) No. 750/KB/2020 in CP(IB) No. 1635/KB/2018 (NCLT Kolkata Bench)

3 IA(IB) No 102/ND/2021 in CP(IB) No. 984/ND/2019 (NCLT New Delhi Bench-II)

Clearly therefore, the law on point is res integra and until the Supreme Court pronounces on the same (hopefully soon in Piramal’s appeal filed against NCLAT’s order in the DHFL saga), the mantle must be taken up by the IBBI as also the nodal ministry to settle the issue especially such that going forward the inordinate delays of CIRP don’t get attracted to the PIRP process.

The issue at hand is larger than individual insolvencies and their culmination into resolution or liquidation. Rather what must be realised is that many a commercial laws have fallen by the wayside simply for the fact that judicial delays were routinely accepted as part and parcel of the process. In fact in the above two examples the fate of the parties involved be they debtors, creditors, workmen, government authorities etc would be considerably enhanced with the approach adopted by the NCLT Kolkata Bench. However, change shall only come to those when lessons from past mistakes are not thrown asunder and ill-advisedly that is precisely what seems to be happening currently. What therefore defies logic is that despite recognition of the peculiarities and family-run nature of such MSMEs there has been laxity in legislative as well as judicial uptake in that direction.

The Daily Guardian is now on Telegram. Click here to join our channel (@thedailyguardian) and stay updated with the latest headlines.

For the latest news Download The Daily Guardian App.

Legally Speaking

‘The crime committed has to be considered in the remission or premature policy of the state’



The Supreme Court in the case Radheshyam Bhagwandas Shah, Lala Vakil vs State of Gujarat observed that where the crime was committed has to be considered in the remission which is applicable in the State and the pre­mature release in terms of the policy

The Court noted while hearing the writ petition that in terms of the policy which is applicable in the State of Gujarat where the crime was committed and not the State where the trial stands transferred and concluded for exceptional reasons under the orders of this Court once the crime was committed in the State of Gujarat, after the trial been concluded and judgment of conviction came to be passed, all further proceedings have to be 6 considered including remission or pre­mature release, as the case may be, in the instance case. under Section 432(7) CrPC, there cannot be a concurrent jurisdiction of two State Governments, can be either the Central or the State Government of the appropriate government.

in terms of Section 432(7) CrPC, the trial was to be concluded in the same State and ordinarily in the State of Gujrat the crime in the instant case was admittedly committed. by an order 06.08.2004., the case was transferred in exceptional circumstances by this Court for limited purpose for trial and disposal to the neighbouring State i.e., the State of Maharashtra, observed by the bench of Apex Court.

As mentioned by the petitioner in the plea that by judgment impugned dated 17.07.2019., the application for pre­mature release has to be filed in the State of Maharashtra and not in the State of Gujarat and His petition filed in the High Court of Gujarat was dismissed taking note of Section 432(7) CrPC on the premise that since the trial has been concluded in the State of Maharashtra. under Sections 433 and 433A of the Code of Criminal Procedure, 1973, the petition was filled by the petitioner for premature release further the petitioner stated that that he had undergone under the custody of more than 15 years 4 months.

Section 302, 376(2) (e) (g) and reading it with Section 149 IPC, Shah was found guilty for the offence, the offence committed by him in the State of Gujrat.

The bench comprising of Justice Ajay Rastogi and the justice Vikram Nath observed that under Section 432(7) CrPC can be either the Central or the State Government but there cannot be a concurrent jurisdiction of two State Governments of that appropriate government.

The bench comprising of Justice Ajay Rastogi and the justice Vikram Nath observed that under Section 432(7) CrPC can be either the Central or the State Government but there cannot be a concurrent jurisdiction of two State Governments of that appropriate government.

Continue Reading

Legally Speaking

Seeking reduction of qualifying the percentile for admission in ayurveda course: A plea in Supreme Court



The Supreme Court in the Case Amit Kumar v UOI & Or’s observed in Ayurveda course in view of large number of vacancies and for seeking reduction of qualifying percentile for admission, an ayurveda aspirant who appeared in NEET 2021 has approached the Court.

the court had observed that lowering the minimum marks and reducing the percentile for admission to first year BDS Course would not amount to lowing the standards of Education and further the Court directed to lower the percentile mark by 10 percentiles for admission in first year of BDS Course for academic year 2020-2021, with regards to substantive the contentions made by the petitioner by referring the judgement passed in the case in Harshit Agarwal & Or’s v Union of India.

the percentile may also be reduced for Ayurveda programme enabling the Petitioner to take admissions then If percentile is being reduced/considered for reduction for BDS course was further stated by the petitioner in the plea, while referring to an order dated 04.29.2022. Thereafter the top Court had asked Centre to consider lowering the percentile for BDS Courses.

Seeking the Centre’s response in a plea by filing a counter affidavit, noted by the Top Court specifying the above-mentioned information:

after deducting the admission granted for MBBS Courses (BDS Courses), the total number of Candidates.

in All India Quota and State Quota, the totals number of vacant seats.

in government colleges on one hand & private/deemed colleges on the other hand, the number of seats which are remaining.

the petition was filed through AOR Neeraj Shekhar and for the petitioner Advocate Shivam Singh appeared.

Continue Reading

Legally Speaking

Bank case rejected by Supreme Court against farmer



The Supreme Court in the case Bank of Maharashtra & Or’s v Mohanlal Patidar observed an order given by the High Courts of directing the bank the OTS proposal given by a farmer who had availed a loan from the bank, the court further pulled up the Bank of Maharashtra for challenging the order.

The Bank shall complete remaining formalities and provide all consequential benefits flowing therefrom to the petitioners, the court further stated that it is needless to emphasize The OTS proposal given by the petitioners in both the cases shall be accepted by the Bank and ‘sanction letters’ be issued forthwith, the court allowed the petitioner plea.

The petitioner not only promptly challenged the said order, it is noteworthy that petitioner never acceded to the unilateral decision dated 25th August 2021 and even otherwise the letter dated 25th August 2021 is held to be illegal by us, clause-7 of policy cannot take away the fruits of OTS benefits, within two months from the date of issuance of order dated 22th September 2021, the petitioner filled the instant petition and further the court directed we are unable to give stamp of approval to the impugned orders and action of the Bank, observed by the bench comprising of Justice Sujoy Paul and the justice Dwarka Dhish Bansal while setting aside the impugned orders of the bank.

In an order dated 03.09.2021 it was stated and it showed that the petitioner was required to pay minimum 10% of the OTS amount within stipulated time and that he had deposited Rs.35,00,000/- out of Rs.36,50,000/- within the stipulated time, it was argued before the court by the counsel.

As full and final settlement of the dues, he will be required to deposit Rs.50.50 lakhs as he was informed by the Asset Recovery Branch of the Bank.

Whole law comes into place when a matter of farmers come as the down payment were also accepted and it was further stated by the bench in an oral remark You don’t file cases against the ones who loot 1000s of crores.

The respondent had obtained a loan and intended to pay it in terms of a One Time Settlement which was quantified as Rs 3650000/-. in furtherance thereof the respondent had deposited Rs 35,00,000 with the bank, in the above-mentioned matter.

The bank had miserably failed to accept the same and on the contrary, decided to enhance the compromise amount to Rs.50.50 lakhs unilaterally which was contrary to the OTS scheme, contended by the counsel further the counsel stated that the bank had miserably failed to accept the same and on the contrary, decided to enhance the compromise amount to Rs.50.50 lakhs unilaterally which was contrary to the OTS scheme.

The bench comprising of Justice DY Chandrachud and the justice Surya Kant observed and remarked while dismissing the plea assailing Madhya Pradesh High Court’s order dated 02.21.2022 Such a litigation in Supreme Court will spoil the families of farmers financially, Go after bigger fish.

Continue Reading

Legally Speaking

In Company Law the duomatic principle is applicable even in Indian context: Supreme Court



The Supreme Court in the case Mahima Datla vs Renuka Datla observed and stated that it will be applicable even in the Indian context, if the same is consented by all members ‘strict adherence to a statutory requirement may be dispensed with if it is demonstrated in the Duomatic Principle.

It was therefore held that G.V. Rao never seized to be a Director of the Company in view of the acquiescence by Dr. Datla and he had withdrawn his resignation prior to its acceptance, the resignation dated 6th April 2013 was clearly not accepted by Mr. G.V. Rao, as it is clearly being showed by her conduct and there is overwhelming evidence to show that Dr. Datla had accepted Mr. G.V. Rao back into the Board, in this case the court noted.

anything the members of a company can do by formal resolution in a general meeting, they can also do informally, if all of them assent to it, as stated briefly in the Duomatic Principle as derived from the decision In Re: Duomatic Ltd further the court noted the case of Salmon v. Salmon Co. Ltd, as it was held in that case if a company is bound in a matter intra vires by the unanimous agreement of its members. As In Re the court noted that the Duomatic Principle as derived from the decision.

Mr. G.V. Rao continued to carry on as the Director in view of the acquiescence by Dr. Renuka Datla? And weather can the Duomatic Principle can be invoked to state that the issue of resignation of the Director had lapsed, as one of the issues being raise in the appeal filled before the Apex Court.

The High Court of Judicature at Hyderabad for the State of Telangana and Andhra Pradesh allowed the Company appeal filed by Dr. Datla and the court further issued the various directions as this petition was dismiised by the Board as only to ensure Dr. Datla doesn’t have sufficient shareholding to maintain a petition under Sections 397 and 398 of the Companies Act, 1950, as it was being approached by Dr. Datla to the Company Law Board complaining that the holding of board meetings was illegal as an attempt was made to increase the number of members in the Company.

there is no protest by Dr. Renuka Datla regarding attendance of Mr. G.V. Rao. Dr. Renuka Datla also participated in the Board Meetings dated 22nd August 2013 and 25th September 2013, without any protest for continuation of Mr. G.V. Rao as its Director as in the resolution passed. The latter which was placed in the meeting of the Board on 9th April 2013, seeking withdrawal of his resignation as on 6th April 2013, G.V Rao submitted his resignation letter and further which it was later withdrawn by G.V Rao on 9th April 2013. As on 20th March 2013 the late Dr. Vijay Kumar Datla as the directors of the Company were Biological E. Ltd are Dr. Renuka Datla and one G.V Rao.

The bench comprising of Justice Vineet Saran and the justice JK Maheshwari clarified that the said principle is only applicable in those cases wherein bona fide transactions are involved and that ‘Fraud’ is a clear exception.

Continue Reading

Legally Speaking




The Supreme Court in the case Budhadev Karmaskar v. State of West Bengal and Or’s observed that women of older age groups are being forced into prostitution after the onset of the COVID-19 pandemic and further the court ordered the State of West Bengal to look into the issue that in South 24 Parganas District of West Bengal.

The traffickers who were finding it difficult to get hold of young women due to the lockdown had shifted focus and by taking advantage of their acute poverty which was being worsened by the pandemic engaged older women from West Bengal’s costa regions in prostitution. An article was referred by the Amicus, The Article covered the plight of the women in the Sunderban Delta region of West Bengal and stated and noted that the pandemic coupled with climate change is now pushing older women and even the grandmothers into the trade, the Article was published on the website of The Print.

The pandemic that has stretched on for more than two years, it was said by the activists working in the area and this made them vulnerable to traffickers who found it difficult to procure young women and minor girls and shifted focus to middle aged women from West Bengal’s coastal regions due to their abject poverty.

No precautionary measure are taken by the State Government though the State Government is aware it further request the State Government to look upon the issue as due to the pandemic In South 24 Parganas (West Bengal), aged women are being used for this purpose for their poverty.

The Bench asked the Counsel representing the State of West Bengal to look into this issue and respond when the matter is put up for hearing on 05.17.2022., At the request of the Amicus the bench directed.

The Bench Comprising of Justice L. Nageswara Rao and the justice B.R. Gavai observed that the older women in South 24 Parganas District of West Bengal, from poor families, especially after the onset of the pandemic, are being pushed into prostitution and the Amicus further alleged though the State Government aware of the same but the State Government have not taken any precautionary measures. The Bench noted while hearing a plea seeking various benefits for sex workers across the country, Amicus Curaie, Mr. Piyush K. Roy apprised it that, as per news reports.

Continue Reading

Legally Speaking

Supreme Court sets aside POCSO conviction; TN custom is of marriage of girl with maternal uncle



The Supreme Court in the case K Dhandapani vs State observed while hearing a plea that after noticing that he had married the prosecutrix and had two children, a man accused in a POCSO case, the court set aside the conviction.

The Court cannot shut its eyes to the ground reality and disturb the happy family life of the appellant and the prosecutrix. Thereafter the Court said that it has been informed of the custom in Tamil Nādu of the marriage of a girl with the maternal uncle. if the accused-appellant does not take proper care of the prosecutrix, she or the State on behalf of the prosecutrix can move for modification of this Order, further being clarified by the Court. The bench is of the considered view that the conviction and sentence of the appellant who is maternal uncle of the prosecutrix deserves to be set aside in view of the subsequent events that have been brought to the notice of this Court, while considering the facts and circumstances of the Case.

The Court observed, while allowing the appeal that the marriage between the accused and the prosecutrix is not legal and it was submitted by the state in an appeal that the prosecutrix was aged 14 years on the date of the offence and gave birth to the first child when she was 15 years and the second child was born when she was 17 years.

the prosecutrix stated that she has two children and they are being taken care of by the appellant and she is leading a happy married life, the statement given by her was being noticed by the Court. the allegations submitted by the

the appellant against him was that he had physical relations with the prosecutrix on the promise of marrying her and that he married the prosecutrix and they have two children, submitted before the Apex Court.

Section 6 of Protection of Child from Sexual Offences (POCSO) Act, 2012 and reading with the Sections 5(j)(ii) read with Section 6, 5(I) read with Section 6 and 5(n). the maternal uncle of the prosecutrix who is the accused in the said case was being convicted under the said sections and was sentenced to undergo rigorous imprisonment for a period of 10 years by the Madras High Court.

The Bench comprising of Justice L Nageswara Rao and the justice B R Gavai observed while rejecting the objection raised by the State which contended that the marriage might be only for the purpose of escaping punishment that the court have been informed about the custom in Tamil Nādu of the marriage of a girl with the maternal uncle and on the ground of reality and to disturb the happy family life of the appellant and the prosecutrix, The Court cannot shut its eyes.

Continue Reading