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26 Feb

IBC Clarity: Supreme Court’s Definitive Verdict on Set-Off Rights in Insolvency Proceedings

“Section 14 of the IBC will not be operative and applicable. Moratorium under Section 14 is to grant protection and prevent a scramble and dissipation of the assets of the corporate debtor. The contention that the “amount” to be set-off is not part of the corporate debtor’s assets in the present facts is misconceived and must be rejected”.

In the case of Bharti Airtel Limited and Another v. Vijaykumar V.IYER and Ors. [ Civil Appeal No.S 3088-3089 of 2020] the facts of the case initiates with the civil appeal case in the Supreme Court of India involved Bharti Airtel Limited and Vijaykumar V. Iyer and Others. The dispute arose from spectrum trading agreements between Bharti Airtel Limited and Aircel Limited, contingent on approval from the Department of Telecommunications. Aircel entities failed to submit bank guarantees, prompting Bharti Airtel to approach the court and make a payment of Rs. 341.80 crores. Airtel entities sought a set-off of Rs. 145.20 crores owed by Aircel entities, which was initially rejected by the Resolution Professional. While the Adjudicating Authority upheld Airtel’s right to set-off, the National Company Law Appellate Tribunal overturned the decision, asserting that set-off contradicts the objectives of the Insolvency and Bankruptcy Code (IBC).

The Supreme Court’s analysis in the civil appeal involving Bharti Airtel Limited and Vijaykumar V. Iyer and Others delved into the intricacies of set-off rights within the ambit of the Insolvency and Bankruptcy Code (IBC). The core issue revolved around the spectrum trading agreements between Bharti Airtel and Aircel, highlighting the significance of compliance with regulatory conditions, especially the submission of bank guarantees by Aircel entities. The court meticulously examined various forms of set-off, including statutory/legal set-off, contractual set-off, equitable set-off, and insolvency set-off. It elucidated that the IBC serves as a complete legal code, emphasizing the need for a meticulous adherence to its provisions and objectives.

While acknowledging the permissibility of contractual and transactional set-offs under specific circumstances, the court categorically stated that insolvency set-off is not recognized during the Corporate Insolvency Resolution Process.

The judgment underscored the importance of principles such as mutuality and reciprocity in determining the validity of set-offs in insolvency proceedings. It highlighted that strict adherence to the statutory framework is essential, and any deviation could undermine the objectives of the IBC. The court’s analysis clarified the nuanced distinctions between various forms of set-off, offering a comprehensive understanding of their applicability in the context of insolvency. Moreover, the judgment addressed prevailing misconceptions and misapplications of statutory provisions related to set-off, setting a clear precedent for the treatment of such claims in insolvency proceedings. By providing a structured analysis, the court not only resolved the immediate dispute but also laid down a foundation for consistent and principled adjudication of set-off issues within the overarching framework of the IBC. The decision serves as a guiding precedent, ensuring coherence and adherence to legal principles in future insolvency cases involving set-off claims.

The court do not find any merit in the present appeals and the same are dismissed. There will be no order as to costs.

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Written by- Komal Goswami

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26 Feb

Supreme Court Preserves Dissenting Creditors’ Rights in IBC – Championing Fairness and Security

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The provisions of Section 30(2) (b)(ii) by law provides assurance to the dissenting creditors that they will receive as money the amount they would have received in the liquidation proceedings. This rule also applies to the operational creditors. This ensures that dissenting creditors receive the payment of the value of their security interest.”

In Case of DBS Bank Limited Singapore v. Ruchi Soya Industries Limited and Another [Civil Appeal no. 9133 of 2019] The facts of the case initiates when , DBS Bank Limited Singapore and Ruchi Soya Industries Limited are embroiled in a dispute concerning the payment of a dissenting financial creditor under the Insolvency and Bankruptcy Code (IBC), incorporating amendments introduced in 2019. The crux of the matter lies in DBS Bank’s claim that its security interest holds superior standing compared to other creditors, justifying its entitlement to the minimum value of its security interest. Despite DBS Bank’s assertion, the Committee of Creditors approved a resolution plan that did not acknowledge the bank’s argument, prompting DBS Bank to file appeals with the National Company Law Tribunal and Appellate Tribunal.

The court’s scrutiny delves into the intricacies of the resolution process governed by the IBC. The resolution professional’s assessment encompasses various facets, including payment priority, creditor disbursements, management plans, compliance with legal requirements, and other specifications outlined by the board. Recent amendments, applicable to ongoing proceedings, underscore the authority to implement changes at both the original and appellate stages. The court emphasizes that dissenting financial creditors must, under the IBC, receive at least the liquidation amount, aligning with the overarching objectives of balancing stakeholder interests, resolving insolvency, attracting investments, maximizing asset value, and enhancing credit availability. Legal provisions safeguard minority creditors’ autonomy by ensuring that dissenting financial creditors receive no less than the liquidation value. The court clarifies that payments to dissenting creditors should be in the form of money, preserving fairness in the distribution process. It underscores the importance of adherence to statutory requirements, preventing inequitable scenarios, and promoting insolvency resolution over liquidation. The judgment stresses the delicate balance between protecting dissenting financial creditors’ rights and maximizing asset value during the Corporate Insolvency Resolution Process (CIRP) period. The ruling rejects claims challenging the workability of the code and underscores dissenting financial creditors’ statutory right to object to the distribution of proceeds under a resolution plan, thereby safeguarding their entitlement in the insolvency resolution framework.

The matter be, Accordingly placed before the Hon’ble the chief Justice for appropriate orders.

Written by- Komal Goswami

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24 Feb

Supreme Court Balances Justice and Democracy in the Face of Political Conviction

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TITLE: AFJAL ANSARI V. STATE OF UP

CITATION: CRIMINAL APPEAL NO. 3838 OF 2023 (ARISING OUT OF SPECIAL LEAVE TO APPEAL (CRL.) NO. 11129 OF 2023)

DECIDED ON: 14 DECEMBER 2023

CORAM: JUSTICE SURYA KANT, JUSTICE DIPANKAR DATTA, JUSTICE UJJAL BHUYAN

Justice Surya Kant, Justice Dipankar Datta, Justice Ujjal Bhuyan states that “it is the bounden duty of this Court to uphold the rule of law which entails equality before the law and equal subjection of all classes to the ordinary law of the land. No court, much less this Court, should feel chained by misplaced sympathy towards assumed or imagined ramifications on the constituency of the parliamentarian/legislator who has been convicted”.

Brief Facts:

Afjal Ansari, a sitting Member of Parliament from Uttar Pradesh, filed Criminal Appeal No. 3838 of 2023 challenging the High Court’s partial approval of his application for a stay on sentence and conviction under the UP Gangster Act. The conviction posed a substantial threat to Ansari’s political career and his right to represent his constituency. The High Court’s decision had disqualified Ansari partially, raising concerns about the potential irreparable damage to his political standing.

Court’s Observation and Analysis:

The Supreme Court delved into an intricate analysis of the case, primarily focusing on the application of Section 389(1) of the Code of Criminal Procedure (CrPC). This examination involved a thorough consideration of several factors, including the unique circumstances surrounding the case, the absence of conclusive evidence, Ansari’s previous acquittal, and the foreseeable irreparable consequences of upholding the conviction.

The Court, recognizing the urgency inherent in the matter, leaned towards a nuanced approach in favor of partially staying the conviction. This decision was rooted in the Court’s concern for preventing irreversible damage to Ansari’s political career, acknowledging the potential impact on his constitutional right to represent his constituency.

In emphasizing the significance of Section 389(1) of the CrPC, the Court underscored its role in drawing attention to the possible repercussions when appealing a conviction. The provision grants the Court the authority to suspend an order of conviction, subject to evaluating the specific circumstances and imposing necessary conditions.

The constitutional and statutory framework, notably Section 8(3) of the Representation of the People Act, played a pivotal role in shaping the Court’s perspective. The Court recognized the wide-ranging consequences of Section 8(3), clarifying that a stay of conviction would suspend disqualification, preventing undue prejudice. This acknowledgment was crucial in understanding the impact on Ansari’s public life and the electorate’s rights.

Despite differing opinions, the Court’s decision to dismiss the appeal underscored its commitment to upholding the rule of law and ensuring legal accountability. The lack of exceptional circumstances and inadequate pleadings were considered valid grounds for the dismissal, establishing a precedent that prioritizes consistency in the application of the law and maintains the integrity of elected officials. The decision reflects the Court’s careful balance between individual rights and the broader societal and democratic interests at stake.

Written by- Komal Goswami

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24 Feb

Supreme Court Ruling Upholds Fairness: Non-Disclosure in Employment Cases Requires Individualized Assessment and Contextual Evaluation

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TITLE: RAVINDRA KUMAR V. STATE OF U.P. & ORS

CITATION: CIVIL APPEAL NO. 5902 OF 2012

DECIDED ON: 22 FEBRUARY 2024.

CORAM: JUSTICE J.K. MAHESHWARI AND JUSTICE K.V. VISWANATHAN

Justice J.K. Maheshwari, Justice K.V. Viswanathan states that “our opinion on the peculiar facts of the case, we do not think it can be deemed fatal for the appellant. Broad-brushing every non-disclosure as a disqualification will be unjust and the same will tantamount to being completely oblivious to the ground realities obtaining in this great, vast and diverse country. Each case will depend on the facts and circumstances that prevail thereon, and the court will have to take a holistic view, based on objective criteria, with the available precedents serving as a guide. It can never be a one size fits all scenarios.”

Brief Facts:

Ravindra Kumar had applied for the position of Constable, and during the course of his application, became involved in a criminal case. Subsequently, he was acquitted of the charges. However, the central issue arose from his non-disclosure of this criminal case in the verification form. As a result, his employment was cancelled by the authorities. The case presented the question of whether the non-disclosure warranted the cancellation of his employment.

Court’s Observation and Analysis:

The Supreme Court of India conducted a thorough analysis of the case, emphasizing the need for an individualized assessment in such matters. The court highlighted the importance of considering specific factors, including the nature of the office, timing and nature of the criminal case, and the overall character of the candidate. Drawing from precedent, the court cautioned against adopting a one-size-fits-all approach, arguing that non-disclosure should not automatically lead to disqualification. The judgment underscored the significance of a nuanced examination of circumstances.

The court delved into legal principles, placing particular emphasis on the employer’s exercise of power in a reasonable manner and the necessity of a fair and reasonable decision-making procedure. The judgment explored the concept of suppression of material information and stressed the need for a holistic view based on objective criteria. Special circumstances were deemed crucial, with the court urging a comprehensive consideration of all relevant aspects.

Ultimately, the court allowed the appeal, setting aside previous orders and directing the authorities to appoint Ravindra Kumar in the Constable position. The judgment specified entitlement to notional benefits but excluded arrears of salary for the period of non-service. This decision highlighted the court’s commitment to fairness, reasonableness, and a contextualized evaluation of each case, steering away from a rigid application of rules in assessing the impact of non-disclosure on employment.

Written by- Komal Goswami

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23 Feb

The supreme court court overturned the high court’s order to dismiss the contempt application due to noncompliance.

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Case title: Domco Smokeless Fuels Pvt Ltd vs State Of Jharkhand

Case no.: SLP(Civil) No(s). 34194 of 2016

Decided on: 22.02.2024

Quorum: Hon’ble Justice B.R Gavai, Hon’ble Justice Sandeep Mehta

Hon’ble Justices stated that, “the claim of the appellant for refund pertaining to the third period, i.e. 1st January, 2007 till March, 2008 stands concluded with the rejection of SLP(Civil) No. 21019 of 2010 vide order dated 9th September, 2010 passed by this Court. Admittedly, the appellant has not been refunded the amount for the period running from 1st January, 2007 till March, 2008 and, therefore, the learned Single Judge was not justified in discharging the respondents in the contempt case without ensuring payment of the refund amount with interest to the appellant herein.”

BRIEF FACTS:

In an online auction run by the respondent, the appellant alleges to have paid more than the price announced in exchange for the lifting of coal shipments. After the coal was removed, the appellant and other similarly situated companies sought a refund of the amount they paid in excess of the notified price. However, the appellant’s request for a refund was denied, so it filed a Writ Petition in the Jharkhand High Court, claiming a refund of the excess price paid by it over and above the notified price for the respondent Company’s e-auction of lifting coal consignments.

The appellant filed a case for the violation of order passed in Writ Petition by the High Court of Jharkhand, citing non-payment of the amount collected in excess of the notified price as well as interest.

The appellant has approached this Court to challenge the order issued by the Single Judge bench of the High Court of Jharkhand, which dismissed the appellant’s contempt application alleging noncompliance with the court’s order.

COURT ANALYSIS AND CONCLUSION:

The court stated on the high court’s order that the appellant had not received the refund for the period from January 1st, 2007 to March 1st, 2008, and that the learned single judge was therefore not justified in dismissing the respondents in the contempt case without guaranteeing that the appellant would receive the refund amount plus interest.

The court allowed the appeal, ruling that the respondents failed to diligently comply with orders issued by both the Jharkhand High Court and this Court. As a result, it hereby orders that the appellant be entitled to interest at 12% per annum on the refund amount from January 1st, 2005 to December 11th, 2005. The already paid interest of 3.5% per annum will be taken out from the differential amount. The appellant is also entitled to a refund of the excess amount paid from January 1, 2007 to March 1, 2008, with interest at 12% per annum, in the same terms provided by this Court.

Written by – Surya Venkata Sujith

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