26 Nov

INSOLVENCY LAWS AOUND THE WORLD

Articles #bankruptcy, #CCD, #insolvency, #NCLAT, #NCLT, #UNCITRAL

Introduction

Though the terms “insolvency” and “bankruptcy” are frequently used interchangeably in everyday speech, they have distinct meanings. Insolvency and Bankruptcy are not the same thing. The term “insolvency” refers to a person’s situation in which their assets are insufficient to cover their debts or their overall incapacity to do so. In a narrow sense, the term “bankruptcy” refers to a party’s inability to pay his obligations when they fall due during normal business operations.

A decade ago, the idea of India being a premier commercial location appeared far-fetched. In India, one had to go through difficult procedures in order to launch a business. In addition, once the companies were up and running, unfavorable circumstances made it look difficult to wind down operations in India, which diminished investor trust[1].

he IBC, enacted in 2016, is a comprehensive legislation that addresses the insolvency and bankruptcy resolution process in India. It streamlines the resolution process for distressed entities, promotes a time-bound and transparent mechanism for dealing with insolvency, and aims to maximize the value of assets. The IBC has significantly improved the ease of doing business in India by providing a structured framework for the resolution of stressed assets, reducing the burden on the traditional legal system. The code has been instrumental in promoting a creditor-friendly environment, fostering investor confidence, and contributing to the overall efficiency of the Indian financial system. Following a settlement agreement between Coffee Day Global Ltd (CDGL) and its financial creditor IndusInd Bank, the NCLAT has revoked the insolvency decision against the business that owns and runs the coffee chain Cafe Coffee Day.

UNCITRAL and Insolvency Laws

The General Assembly of the United Nations has given the United Nations Commission on International Trade Law (UNCITRAL) the authority to harmonies and standardize international trade law. The commission created a Model Law on Cross-Border Insolvency (“the Model-Law”) as part of its project of harmonization. The United Nations (UN) General Assembly founded the UNCITRAL in 1966. The General Assembly acknowledged that disparities in national laws governing trade were obstacles to the efficient flow of commerce. UNCITRAL was established to forward plans for the harmonization and unification of international trade laws. The development and harmonization of bankruptcy rules on a worldwide basis are greatly aided by the work of the United Nations Commission on International Trade Law (UNCITRAL). The inability of a debtor to pay its debts, or insolvency, is a complex problem that impacts people, companies, and economies all over the world. In order to ease cross-border bankruptcy processes, safeguard creditors’ interests, and advance economic stability, there is an increasing need for international collaboration and insolvency law harmonization. This article examines UNCITRAL’s importance in the area of insolvency legislation, its goals, and how they have influenced the development of the global insolvency landscape.[2].

A lack of international coordination in insolvency matters can frequently result in office holders or relevant authorities being unable to deal with assets effectively, leading to the concealment or removal of assets and, in some cases, a reduced return to creditors or, as the case may be, a reduced chance of saving a failing business. If there is no legal framework permitting cooperation in the state where an insolvent has an interest, it may be difficult to effectively advance matters relating to cross-border insolvency due to the need to follow complicated and unfamiliar procedural and judicial systems.

Objectives of UNCITRAL

One of the key purposes of UNCITRAL is to simplify and improve cross-border insolvency processes. Businesses with assets, creditors, and activities in numerous countries are increasingly common as a result of globalization. The Model Law establishes a legal framework for cross-border recognition and coordination of insolvency cases, resulting in a more expedient resolution procedure.

By setting clear principles for the handling of creditors’ claims in bankruptcy proceedings, UNCITRAL tries to defend the interests of creditors, both domestic and international. This serves to level the playing field for creditors and stimulates foreign investment by increasing the certainty of their rights’ execution.

UNCITRAL helps to economic stability by aiding nations in implementing efficient bankruptcy systems. Insolvency rules that are effective can assist reduce systemic risks connected with financial crisis, eventually encouraging economic growth.

UNCITRAL provides technical support and capacity-building programmes to nations in order to assist them in implementing the Model Law and improving their insolvency systems. This assistance is especially beneficial to emerging economies seeking to modernize their insolvency procedures.

Impact of UNCITRAL

The Model Law has been accepted in over 50 nations, and its concepts have been integrated in various forms into national bankruptcy legislation. This harmonization has sped up cross-border insolvency processes, lowering legal complications and expenses.

The use of UNCITRAL standards has increased the efficiency and efficacy of insolvency systems. Cases involving various jurisdictions are now concluded faster and with fewer legal squabbles.

Creditor confidence in foreign transactions has increased as a result of UNCITRAL’s efforts to defend creditors’ interests. This has benefited both investment and global trade.

UNCITRAL’s technical assistance programmes have helped a number of nations build bankruptcy frameworks that are in line with international best practices.

Comparison of Insolvency Laws

Insolvency Framework in United Kingdom[3]

The Insolvency Act of 1986 and the Insolvency Rules of 1986 govern the United Kingdom’s insolvency structure. The Cork Review Committee Report on Insolvency Law and Practise (1982) provided the basis for the 1986 Insolvency Act. Prior to the enactment of the Insolvency Act, 1986, insolvency law in the United Kingdom was fragmented and was contained in the Bankruptcy Act, 1914, the Deeds of Arrangement Act, 1914, the Companies Act, 1948, and elements of the Country Code Act, 1959. They were reinforced by common law and equity concepts.

The Insolvency Act, 1986, which deals with insolvency of both people and businesses, is broken down into the three categories below. Group I addresses Corporate Insolvency Group II focuses on personal insolvency and Group III handles many issues relating to both corporate and individual insolvency. The following additional processes were implemented by the Insolvency Act of 1986 in an effort to determine if it was possible to revive a burdened firm as a functioning concern. This provision of the UK Insolvency Act, 1986 is an effort to imitate the “rescue Culture,” a trait of the US business sector.

CVAs (Company Voluntary Agreements)
Administration
Administrative Receivership

Insolvency Framework in USA

In the United States of America, bankruptcy is governed by a federal statute known as the “Bankruptcy Code”. All bankruptcies in America are governed by the same federal statute. Title 11 of the United States Code contains the Bankruptcy Code, which was established in 1978 by Section 101 of the Bankruptcy Reform Act. The Federal Rules of Bankruptcy Procedure (Bankruptcy Rules) regulate the procedural components of the bankruptcy procedure. The Bankruptcy Code specifies six fundamental categories of bankruptcy cases. “Liquidation” is the chapter 7 title. In Chapter 7 bankruptcy, non-exempt property is taken over by a court-appointed trustee or administrator, who subsequently sells it and distributes the money to creditors.[4]

Chapter 9 deals with “Adjustment of Debts of a Municipality”. Municipalities have the option of reorganization under Chapter 9 bankruptcy proceedings. Municipalities (which include cities, towns, villages, counties, taxing districts, municipal utilities, and school districts) are protected from creditors in Chapter 9 Bankruptcy proceedings and are able to repay debt through an approved payment plan.

Chapter 11 deals with “Reorganization”. As contrast to contrast to Chapter 7, when the company shuts down and a trustee sells everything, under Chapter 11 the debtor maintains control over its business activities while simultaneously repaying creditors through a court-approved reorganization plan. 1986 saw the addition of Chapter 12 to the Bankruptcy Code. It enables a small-scale farmer or fisherman to keep running their company while the plan is implemented.

Insolvency Framework in INDIA

A specifically created “Bankruptcy Law Reforms Committee” (BLRC) under the Ministry of Finance prepared the Insolvency and Bankruptcy Code Bill. On December 21, 2015, the Insolvency and Bankruptcy Code was presented in the Lok Sabha and then submitted to a Joint Committee of Parliament. The Committee presented its recommendations, and on May 5, 2016, the Lok Sabha approved the revised Code. The Code was approved by the Rajya Sabha on May 11, 2016, and on May 28, 2016, the president gave his assent to it.

India as a whole is covered under the Insolvency and Bankruptcy Code, 2016. According to Section 1 of the Code, the Central Government may designate several dates for the implementation of the Code’s various provisions, and any reference to the beginning of the Code in a particular provision should be understood to relate to that provision’s implementation of that provision. The Insolvency and Bankruptcy Code, 2016, unifies the existing framework by combining insolvency and bankruptcy under a single piece of legislation. Companies, partnerships, limited liability partnerships, individuals, and any other entity that the central government may define are subject to the Code’s provisions.

The Insolvency and Bankruptcy Code, 2016, unifies the existing framework by combining insolvency and bankruptcy under a single piece of legislation. Companies, partnerships, limited liability partnerships, individuals, and any other entity that the central government may define are subject to the Code’s provisions.

According to Section 2 of the Insolvency and Bankruptcy Code, 2016 as amended by the Insolvency and Bankruptcy Code (Amendment) Act, 2018, the provisions of the Code shall apply to: any company incorporated under the Companies Act, 2013 or under any prior company law; any other company subject to any special Act currently in effect; any Limited Liability Partnership incorporated under the Immediate Liability Partnership Act, 2008; Such other body incorporated under any other company law; and any other person.

Landmark Cross Border Insolvency Cases

Case: State Bank of India vs. Jet Airways (India)[5]

The case starts with the opening of corporate bankruptcy proceedings against Jet Airways and continues with NCLT’s ultimate approval of a resolution plan for its turnaround over a period of two years in three distinct courts. Due to a large amount of unpaid debt, three petitions to begin Corporate Insolvency Proceedings (CIRP) were filed against Jet Airways, the corporate debtor in this case. The NCLT bench was informed at the first hearing that a Dutch district court had initiated bankruptcy proceedings against Jet Airways a month earlier. In this regard, the Council determined that concurrent procedures on the same matter would cause delays and skew the course of this case’s proceedings.

The justification offered is that the Code on Recognition of Orders of Foreign Jurisdictions’ Sections 234 and 235 specify the conditions under which the Government of India may enter into reciprocal agreements with other nations. The Court concluded that, in this instance, no common understanding had been formed with the Dutch authorities. Additionally, the Bench thought NCLT had the required jurisdiction because Jet Airways has its registered office and significant assets in India. By ruling dated June 20, 2019, the Bench nullified and voided the District Court of Netherlands proceedings. The NCLT approved the beginning of corporate bankruptcy proceedings against Jet Airways in India. Insolvency procedures involving Jet Airways were ongoing simultaneously in India and the Netherlands.The Dutch Trustees appealed NCLAT decisions issued by the NCLT Benchmark about non-approved parts of the Dutch procedure. After reviewing the appeal, NCLAT requested that the “Resolution Professional” hired by Jet Airways work with the Dutch Trustee to determine whether a joint “Corporate Insolvency Resolution Process” was feasible. Following this request, the RP and the Dutch trustee came to an agreement to speed up the settlement process using a “proposed model of co-operation.” The suggested model was finally agreed upon by the parties and presented to NCLAT for approval. On order dated September 26th, NCLAT subsequently accepted the model. Dutch court representatives were permitted by Bank to attend talks with Jet Airways.[6]

According to the protocol, “The Parties recognize that the Company is an Indian company with its Centre of Main Interest in India, the Indian Proceedings are the main insolvency proceedings, and the Dutch Proceedings are the non-main insolvency proceedings,” meaning that Indian laws apply to foreign assets located in the Netherlands. NCLAT gave the Dutch government permission to participate in the creditors’ committee, but without voting privileges. In order to pursue the bankruptcy procedures jointly, the Resolution Professionals and the creditor’s committee were given instructions to work with the Dutch trustees and to sign into such cooperation agreements. Both parties had complied with the NCLAT’s directive and joined the “cross-border insolvency protocol.”

The Insolvency Professional and Dutch Trustees might combine the claim within their authority in accordance with this protocol, and depending on the information collected, they could also evaluate alternative procedures. A request for the NCLT Mumbai Bench’s final approval of the resolution plan was made. By ruling dated June 22, 2021, Bench accepted the majority of the “windup plan” and given the consortium 90 days to get the required regulatory clearances. Bench also ordered the creation of a Monitoring board to monitor the entire process and approval from the Directorate General of Civil Aviation (DGCA). The bankruptcy and Bankruptcy Code’s first cross-border bankruptcy in India for 2016 came to an end with this.

Case: M/S Shilpi Cable Technologies Ltd. v. Macquarie Bank Ltd[7]

In M/S Shilpi Cable Technologies Ltd. v. Macquarie Bank Ltd., the court provided an interpretation of numerous clauses included in Section 8 of the 2016 Insolvency and Bankruptcy Code. Section 9 of the law also addresses how to apply the Act’s requirements for the Operational Creditor to initiate the insolvency proceedings against a corporate debtor.

Hamera International Private Limited and Macquarie Bank Limited, Singapore entered a contract under which the appellant bought the rights, titles, and interests of the original supplier under a supply agreement in favour of Shilpi Cable Technologies Ltd. Hereafter referred to as “Respondent.”[8]

The respondent was served with two invoices from the appellant demanding payment of the outstanding balance, with a 150-day payment period beginning on the date of the bills of lading. The appellant issued an email requesting payment of the sums as soon as they were due. When the appellant received a denial of any such payment default, it sent the respondent a statutory notice according to Sections 433 and 434 of the Companies Act of 1956 to collect the unpaid balance. Additionally, the appellant sent a demand notice under Section 8 of the Insolvency and Bankruptcy Code 2016 at the respondent’s registered office, requesting that it pay the unpaid balance. In response, the opposing respondent claimed that they owed the appellant nothing and further questioned the legality of the purchase agreement in the appellant’s favour. As a result, the Appellant started the insolvency process by submitting a petition in accordance with Section 9 of the Code.

After hearing from both parties, the court ruled that Section 9(3) is not mandatory and will not be interpreted as a prerequisite in the current case. Instead, the operational creditor may designate a lawyer as an authorized agent under Section 8 of the code to deliver the demand notice. As a result, the Indian Supreme Court annulled the NCLAT’s ruling.

Conclusion

Since the Code is not properly governed, the cross-border insolvency process is seriously problematic. Although the Insolvency Law Committee has suggested a draught, a Bill must first be drafted in order for it to be put into effect. However, a change made in accordance with the Code will make it easier for creditors to do business and improve their business climate. The effectiveness of the legal system also affects how often people file for bankruptcy. More bankruptcy filings are linked to higher judicial efficiency, but more creditor rights combined with higher judicial efficiency results in less filings, indicating some trade-off between creditor rights and judicial efficiency. Greater creditor rights and effective judicial procedures in bankruptcy systems encourage less risky behavior and more out-of-court settlements. They also contend that in order to make up for inadequate legal enforcement, robust creditor rights are especially crucial in nations with weak judicial systems.

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Written by- Hargunn Kaur Makhija

[1] STIJN CLAESSENS and LEORA KLAPPER (no date) Insolvency laws around the world – a statistical analysis. Available at: https://www.ifo.de/DocDL/dicereport106-forum2.pdf (Accessed: 23 September 2023).

[2] Haywood, G. (2008) UNCITRAL model law on cross-border insolvency, GOV.UK. Available at: https://www.insolvencydirect.bis.gov.uk/freedomofinformationtechnical/technicalmanual/ch37-48/chapter42/part%202/PART%202.htm (Accessed: 23 September 2023).

[3] CS Kajal, C.K.G. (2020) Insolvency and bankruptcy law in various countries, TaxGuru. Available at: https://taxguru.in/chartered-accountant/insolvency-bankruptcy-law-countries.html#:~:text=It%20is%20a%20legal%20status,creditors%20in%20accordance%20with%20Law. (Accessed: 23 September 2023).

[4] CS Kajal, C.K.G. (2020) Insolvency and bankruptcy law in various countries, TaxGuru. Available at: https://taxguru.in/chartered-accountant/insolvency-bankruptcy-law-countries.html#:~:text=It%20is%20a%20legal%20status,creditors%20in%20accordance%20with%20Law. (Accessed: 23 September 2023).

[5] 2019 SCC Online NCLAT 1216

[6] Rakhi Nargolkar (2022) Cross border insolvency- State Bank V. Jet Airways (india) ltd.., IJCLP. Available at: https://ijclp.com/cross-border-insolvency-state-bank-of-india-v-jet-airways-india-ltd/ (Accessed: 23 September 2023).

[7] (2018) 2 SCC 674

[8] Rao, P. (2018) Macquarie Bank Limited vs. Shilpi Cable Technologies – corporate and Company Law – India, Macquarie Bank Limited vs. Shilpi Cable Technologies – Corporate and Company Law – India. Available at: https://www.mondaq.com/india/corporate-and-company-law/664032/macquarie-bank-limited-vs-shilpi-cable-technologies (Accessed: 23 September 2023).

8 Jul

Secured Creditors and the Rainbow Impact on IBC

Prime Legal

Articles # government, # Supreme Court, #CIRP, #committeeofcreditors, #IBC, #incometax, #insolvency, #operationalDebt, #primelegal, #securedcreditor, Prime Legal

Abstract

This article is based on the decision given by the hon’ble supreme court on STATE TAX OFFICER ( 1 ) VERSUS RAINBOW PAPERS LIMITED LNIND 2022 SC 596 and it will further dissect the legal question raised in this case along with the previous precedents of the hon’ble SC in similar cases.

The Verdict in this case basically held that the resolution plan proposed by the Committee of Creditors (COC) wouldn’t pass the scrutiny of law if the debtor fails to pay off the tax dues owed by him to the relevant tax authority, in such a case the Debtor is bound to liquidate its assets under section 53 of the IBC.

It goes without saying that the aforementioned judgement has raised worries within the insolvency sector, and as a result, the stakeholders have been considering what has to be done in order to comply with the aforementioned ruling.

Introduction

The controversy brought up in the judgement was outstanding taxes under the Gujarat Value Added Tax Act of 2003 (the “GVAT”) and how they conflicted with the waterfall system under Section 53 of the IBC. The waterfall mechanism, which is covered by Section 53 of the IBC, was only implemented as a legal tool to establish a hierarchy for prioritising the payment of obligations at the time of the corporate debtor’s liquidation. In essence, the dispute in the case is around outstanding claims from governmental bodies and privately secured debts. It is essential to review the ruling at this time and comprehend how it affects the IBC’s goal. Section 48 of the Gujarat Value Added Tax Act, 2003 (“GVAT Act”), according to the Supreme Court (“SC”), is not in conflict with or in contravention of Section 53 of the Insolvency and Bankruptcy Code, 2016 (“the Code”).

Analysis of the Court

In reaching the aforementioned conclusion, the Court made an important ruling by concluding that because the State Government has first charge over the property and is considered a “secured creditor” under the Gujarat Value Added Tax, 1974, it will also be treated as such under Section 53 (1) (b) (ii) of the IBC for liquidation purposes.

The State’s claim has been ruled to be untimely by the adjudicating authority (NCLT) and the appellate authority (NCLAT). Regulation 12 of the 2016 Regulations addresses the deadline for submitting a claim and supporting documentation, which is outlined in the public notification made according to Section 15 of the IBC. However, the time period is merely a guide and not required.

It also observed in the case of Vishal Saxena & Anr. v. Swami Deen Gupta where NCLT held that the time limit under Regulation 12 for submitting a claim is directory and not necessary in the matter of Resolution Professional. In its ruling and decision of June 10, 2021 in Assistant Commissioner of Customs v. Mathur Sabhapathy Vishwanathan, the NCLT adopted a similar stance. Thus, State’s claim cannot be rejected without violating the law.

The Adjudicating Authority may only approve the Resolution Plan, as approved by the Committee of Creditors (CoC), if the Adjudicating Authority is satisfied that the Resolution Plan complies with Section 30(2) of the IBC. This is made clear by Section 31 of the IBC, which governs the approval of a Resolution Plan by the Adjudicating Authority. The Resolution Plan cannot be authorised if it does not adhere to Section 30(2)’s standards.

The hon’ble court also took note of, Ghanshyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.,

“A simple reading of Section 31 of the I&B Code would also make it abundantly clear that the corporate debtor, as well as its employees, members, creditors, guarantors, and other stakeholders, are bound by the resolution plan once it has been approved by the adjudicating authority and it has determined that the resolution plan as approved by CoC satisfies the requirements referred to in Subsection (2) of Section 30. Such a clause is necessary since one of the main goals of the I&B Code is to revive the corporate debtor and turn it into an operating business.”[1]

“The resolution plan submitted by the successful resolution applicant must include a number of provisions, including a payment provision for the costs of the insolvency resolution process and a payment provision for operational creditors’ debts, which must not be less than the amount that would be paid to those creditors in the event that the corporate debtor was liquidated in accordance with Section 53, or the amount that would have been paid had the amount to be distributed under that section been less. The resolution plan must also include provisions for paying the obligations of financial creditors who reject the resolution plan, which also must not be less than the sum paid to those creditors in accordance with Section 53, subsection (1), in the event that the corporate debtor is liquidated. To dispel confusion, Explanation 1 to Clause (b) of Subsection (2) of Section 30 of the I&B Code specifies that a distribution made in line with the terms of the aforementioned clause must be just and equitable to such creditors. The resolution plan must also include provisions for the administration of the corporate debtor’s affairs following approval, as well as for the execution and oversight of the resolution plan, Clause a(e) of sub-section (2) of Section 30 of the I&B Code also casts a duty on RP to examine that the resolution plan does not contravene any of the provisions of the law for the time being in force.”[2]

A resolution plan approved by the Committee of Creditors in accordance with Subsection (4) of Section 30 of the IBC may, under Section 31 of the IBC, only be approved by the Adjudicating Authority if the Adjudicating Authority is satisfied that the resolution plan meets the conditions outlined in Subsection (2) of Section 30 of the IBC. The fulfilment of Sub-Section (2) of Section 30 of the IBC criteria is a prerequisite for the approval of a resolution plan.

The Central Government, any State Government, any statutory or other authority, any financial creditor, or any other creditor to whom a debt in respect of dues arising under any law currently in effect is owed would be bound by a resolution plan that is valid and complies with Sub-Section (2) of Section 30 of the IBC. When there are still unpaid statutory obligations owed by a corporate debtor, such a resolution plan would not be binding on the State.

It also held that a company must be liquidated and its assets sold and distributed in accordance with Section 53 of the IBC if it is unable to pay its debts, which should include any statutory obligations to the government and/or other authorities, and there is no plan that envisages dissipation of those debts in a phased manner, uniform proportional reduction.

In the opinion of the court, the Committee of Creditors—which may include financial institutions and other financial creditors—cannot secure its own obligations at the expense of any other obligations, including statutory obligations to any government or governmental authority. Section 48 of the GVAT Act is not in conflict with Section 53 of the IBC or any other IBC requirements. According to Section 53(1)(b)(ii), debts payable to a secured creditor—which, under the GVAT Act, would include the State—rank equally with other specified obligations, including debts related to workman’s compensation for the 24 months prior to the liquidation beginning date. the GVAT Act designates the State as a secured creditor. A creditor to whom a security interest is credited is referred to as a secured creditor in Section 3(30) of the IBC. Such a security interest might be established legally. Any government or governmental authority is not excluded from the IBC’s definition of secured creditor.

Thus, the Court allowed the appeal of the appellant and set aside the order of the tribunal.

Claims Countering the verdict

The legal position is quite poles apart from this verdict, as the apex court had already stated in its verdict in “PR Commissioner of Income Tax v. Monnet Ispat and Energy Limited”, where it categorically held that “IBC has overriding effect on the every existing law inconsistent to it including the Income tax law. Further, the Apex Court also took a note that because Income Tax debts are in the nature of Crown Debts, they do not take precedence even over secured creditors who are private individuals, citing the case of Dena Bank vs. Bhikhabhai Prabhudas Parekh and Co., reported in 2000 (5) SCC 694 [LNIND 2000 SC 721].”[3]

The Bombay High Court recently held that secured debt shall take priority over “Government” dues/tax dues in the case of M/s Edelweiss Asset Reconstruction v. M/s Tax Recovery Officer, 5 dated July 28, 2021. The court based this decision on the fact that the Income Tax Act makes no reference to the obligations of the Income Tax Department taking precedence over secured debt. The Revenue was not permitted to impede the petitioner’s rights as a secured creditor. The order for attachment was invalid.

“The tax dues, being an input to the Consolidated Fund of India and of the States, clearly come within the ambit of section 53(1)(e) of the Code. If the Legislature, in its wisdom, assigned the fifth position in the order of priority to such dues, it is not for this Court to delve into or belittle the rationale underlying the same”[4]

A secured creditor often falls under the category of financial creditors. However, there may be circumstances in which even an operating debtor qualifies as a “secured creditor.” For instance, the National Company Law Appellate Tribunal recognised an operational creditor as a secured creditor in the Concast Steel & Power Ltd. v. MSTC Limited case because of a pledge agreement that had been made with the corporate debtor.

Conclusion

Thus it is advised that the Supreme Court must review the current ruling and clarify the law in light of this. It is obvious that if the existing legal situation is allowed to continue, it would harm the goal that the Code is meant to accomplish. As a result, the added responsibility of paying current or potential government and legislative dues is likely to deter any prospective resolution application. In the end, it could lead to fewer settlement requests, lower asset valuations, and higher haircuts for creditors.

[1] Para 65 Ghanshyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.

[2] Para 66 Ghanshyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.

[3] Para 4, PR Commissioner of Income Tax v. Monnet Ispat and Energy Limited

[4] Leo Edibles & Fats Limited v. Tax Recovery Officer, Writ Petition No. 8560 of 2018.

Written By – Shreyanshu Gupta