SUPPLEMENT

PROFESSIONAL PROGRAMME
INSOLVENCY-LAW AND PRACTICE
(FOR DECEMBER, 2024 EXAMINATION)

MODULE 3

PAPER 9. 5

Disclaimer: This document has been prepared purely for academic

purposes only and it does not necessarily reflect the views of ICSI. Any
person wishing to act on the basis of this document should do so only
after cross checking with the original source.
 CONTENTS
Lesson Lesson Name Page
No. No.

3 Corporate Insolvency Resolution Process 1

7 Liquidation of Corporate Person 5

8 Voluntary Liquidation of Companies 7

17 Professional and Ethical Practices for 10

Insolvency Practitioners

Case Laws 22
 LESSON 3
CORPORATE INSOLVENCY RESOLUTION PROCESS

Replacement of Authorised Representative

Regulation 16A(3A) of the IBBI(CIRP) Regulations 2016 provides that the financial
creditors in the class, representing not less than ten per cent. voting share may seek
replacement of the authorised representative with an insolvency professional of their
choice by making a request to the interim resolution professional or resolution
professional who shall circulate such request to the creditors in that class and announce
a voting window open for at least twenty-four hours.
Fees Payable to Authorised Representative
The authorised representative of creditors in a class shall be entitled to receive fee for
every meeting of the committee attended by him in the following manner, namely: -

Number of creditors in the class Fee per meeting of the committee (Rs.)
10-100 30,000
101-1000 40,000
More than 1000 50,000

The authorised representative shall be entitled to receive fee for every meeting of the
class of creditors convened by him in the following manner, namely: -
Number of creditors in the class Fee per meeting of creditors in class with
authorised representative (Rs.)
10-100 10,000
101-1000 12,000
More than 1000 15,000

Fee of AR to be part of IRP cost: The payment of fee to authorised representative shall be
part of insolvency resolution process cost in respect of two meeting with the creditors he
represents corresponding to a meeting of the committee of creditors.

Approval of fee of AR: The fee for any additional meeting beyond two meetings
corresponding to a meeting of the committee of creditors shall be part of insolvency
resolution process cost subject to approval of committee of creditors.

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Duties of Authorised Representative
The Duties of Authorised Representative shall: -
(a) assist the creditors in a class he represents in understanding the discussions
and considerations of the committee meetings and facilitate informed decision-
making;
(b) review the contents of minutes prepared by the resolution professional and
provide his comments to the resolution professional, if any;
(c) help the creditors in a class he represents during the consultations made by
the resolution professional to prepare a strategy for marketing of the assets of the
corporate debtor in terms of sub-regulation (1) of regulation 36C
(d) work in collaboration with the creditors in a class he represents to enhance
the marketability of the assets of the corporate debtor in terms of sub-regulation
(3) of regulation 36C;
(e) assist the creditors in a class he represents in evaluating the resolution plans
submitted by resolution applicants;
(f) ensure that the creditors in a class he represents have access to any
information or documents required to form an opinion on issues discussed in the
committee meetings;
(g) update regularly the creditors in a class he represents on the progress of the
corporate insolvency resolution process;
(h) make suggestions for modifications of the resolution plan as may be required
by the creditors in class he represents;
(i) record proceedings and prepare the minutes of the meeting with the creditors
in a class he represents; (The provisions regarding minutes of meetings in this
regulation shall apply mutatis mutandis to class meetings) and
(j) act as a representative for the creditors in a class he represents in
representations before the Adjudicating Authority, National Company Law
Appellate Tribunal, and other regulatory authorities.
The creditors in a class may propose any additional responsibility upon the authorised
representative in relation to the representation of their interest in the committee.
Regulatory Fee
Regulation 31A of the IBBI (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016 provides that a regulatory fee calculated at the rate of 0.25 per cent of
the realisable value to creditors under the resolution plan approved under section 31,
shall be payable to the Board, where such realisable value is more than the liquidation
value: Provided that this sub-regulation shall be applicable where resolution plan is
approved under section 31, on or after 1st October 2022.

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Explanation: For removal of doubts, it is hereby clarified that the regulatory fee under
this sub-regulation, shall not be payable in cases where the approved resolution plan in
respect of insolvency resolution of a real estate project is from an association or group of
allottees in such real estate project.
A regulatory fee calculated at the rate of one per cent of the cost being booked in
insolvency resolution process costs in respect of hiring any professional or other services
by the interim resolution professional or resolution professional, as the case may be, for
assistance in a corporate insolvency resolution process, shall be payable to the Board, in
the manner as specified in regulation (7)(2) (cb) of Insolvency and Bankruptcy Board of
India (Insolvency Professionals) Regulations, 2016.

Approval of Committee for Insolvency Resolution Process Costs

Regulation 31B of the IBBI (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016 states that the insolvency professional shall place in each meeting of
the committee, the operational status of the corporate debtor and shall seek its approval
for all costs, which are part of insolvency resolution process costs.

Fee to be paid to Interim Resolution Professional and Resolution Professional

Regulation 34B of the IBBI (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016 states that the fee of interim resolution professional or resolution
professional, under regulation 33 and 34, shall be decided by the applicant or committee
in accordance with this regulation.
The fee of the interim resolution professional or the resolution professional, appointed
on or after 1st October 2022, shall not be less than the fee specified in clause 1 for the
period specified in clause 2 of Schedule-II of IBBI (Insolvency Resolution Process for
Corporate Persons) Regulations.
Provided that the applicant or the committee may decide to fix higher amount of fee for
the reasons to be recorded, taking into consideration market factors such as size and scale
of business operations of corporate debtor, business sector in which corporate debtor
operates, level of operating economic activity of corporate debtor and complexity related
to process.
After the expiry of period mentioned in clause 2 of Schedule-II, the fee of the interim
resolution professional or resolution professional shall be as decided by the applicant or
committee, as the case may be.
For the resolution plan approved by the committee on or after 1st October 2022, the
committee may decide, in its discretion, to pay performance-linked incentive fee, not
exceeding five crore rupees, in accordance with clause 3 and clause 4 of Schedule-II or
may extend any other performance-linked incentive structure as it deems necessary.

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The fee under this regulation may be paid from the funds, available with the corporate
debtor, contributed by the applicant or members of the committee and/or raised by way
of interim finance and shall be included in the insolvency resolution process cost.
Issue of Information Memorandum, Evaluation Matrix and a Request for Resolution Plans
Regulation 36B (1) of the IBBI(CIRP) Regulations provides that the resolution
professional shall, within five days of the date of issue of the final list under regulation
36A (12), issue the information memorandum, evaluation matrix and a request for
resolution plans to every resolution applicant in the final list:
Provided that where such documents are available, the same may also be provided to
every prospective resolution applicant in the provisional list.
Strategy for Marketing of Assets of the Corporate Debtor
According to Regulation 36C of the IBBI (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016, the resolution professional shall prepare a strategy for
marketing of the assets of the corporate debtor in consultation with the committee,
where the total assets as per the last available financial statements exceed one hundred
crore rupees and may prepare such strategy in other cases.
Decision of implementing such strategy along with its cost shall be subject to the approval
of the committee. The member(s) of committee may also take measures for marketing of
the assets of the corporate debtor.
Assessment of Compromise or Arrangement.
Regulation 39BA(1) of the IBBI (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016 states that while deciding to liquidate the corporate debtor under
section 33, the committee shall examine whether to explore compromise or arrangement
as referred to under sub - regulation (1) of regulation 2B of the Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulation, 2016 and the resolution
professional shall submit the committee’s recommendation to the Adjudicating Authority
while filing application under section 33
Where a recommendation has been made under sub-regulation (1), the resolution
professional and the committee shall keep exploring the possibility of compromise or
arrangement during the period the application to liquidate the corporate debtor is
pending before the Adjudicating Authority.

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4
 LESSON 7
LIQUIDATION OF CORPORATE PERSON

Time for Completion of Compromise or Arrangement

Regulation 2B of the IBBI (Liquidation Process) Regulations 2016 provides that where a
compromise or arrangement is proposed under section 230 of the Companies Act, 2013,
it shall be completed within ninety days of the order of liquidation under section 33.
It is provided that a person, who is not eligible under the Code to submit a resolution plan
for insolvency resolution of the corporate debtor, shall not be a party in any manner to
such compromise or arrangement. It is provided further that the liquidator shall file the
proposal of compromise or arrangement only in cases where such recommendation has
been made by the committee under regulation 39BA of the Insolvency and Bankruptcy
Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
Provided further that the liquidator shall not file such proposal after expiry of thirty days
from the liquidation commencement date.
The time taken on compromise or arrangement, not exceeding ninety days, shall not be
included in the liquidation period.

Stakeholders’ Consultation Committee

Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016 mandates
constitution of Stakeholders’ Consultation Committee by the Liquidator, comprising of all
creditors of the corporate debtor, within sixty days from the liquidation commencement
date, based on the list of stakeholders prepared under regulation 31, to advise him on
matters
(a) remuneration of professionals appointed under regulation 7;
(b) sale under regulation 32, including manner of sale, pre-bid qualifications, reserve
price, marketing strategy and auction process.;
(c) fees of the liquidator;
(d) valuation under sub- regulation (2) of regulation 35;
(e) the manner in which proceedings in respect of preferential transactions, undervalued
transaction, extortionate credit transaction or fraudulent or wrongful trading, if any, shall
be pursued after closure of liquidation proceedings and the manner in which the
proceeds, if any, from these proceedings shall be distributed;

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(f) review of marketing strategy in case of failure of sale of corporate debtor as a going
concern;
(g) continuation or institution of any suits or legal proceedings by or against the
corporate debtor;
(h) extension of payment of balance sale consideration as provided in clause (12) of Para
1 of Schedule I, beyond ninety days, to be disclosed in the auction notice.

Exclusion of Certain Assets from the Liquidation Estate

Regulation 46A of the IBBI (Liquidation Process) Regulations, 2016, provides for
exclusion of certain assets from the liquidation estate. It specifies that wherever the
corporate debtor has given possession to an allottee in a real estate project, such asset
shall not form a part of the liquidation estate of the corporate debtor for the purposes of
clause (e) of sub-section (4) of section 36.

Early Dissolution
Regulation 14 of the IBBI (Liquidation) Process Regulations, 2016, provides that any time
after the preparation of the Preliminary Report, if it appears to the liquidator that-
(a) the realizable properties of the corporate debtor are insufficient to cover the cost of
the liquidation process; and
(b) the affairs of the corporate debtor do not require any further investigation;
he shall consult the consultation committee and if it advises for early dissolution, he may
apply, along with a detailed report incorporating the views of the consultation committee,
to the Adjudicating Authority for early dissolution of the corporate debtor and for
necessary directions in respect of such dissolution.

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 Lesson 8
VOLUNTARY LIQUIDATION OF COMPANIES
IBBI (Voluntary Liquidation Process) Regulations, 2017 apply to the voluntary
liquidation of corporate persons under Chapter V of Part II of the Insolvency and
Bankruptcy Code, 2016.

Initiation of Liquidation

Regulation 3(1) of the IBBI (Voluntary Liquidation Process) Regulations provides that
without prejudice to section 59(2), liquidation proceedings of a corporate person shall
meet the following conditions, namely: —

(a) a declaration from majority of

(i) the designated partners, if a corporate person is a limited liability partnership,

(ii) individuals constituting the governing body in case of other corporate persons, as the
case may be, verified by an affidavit stating that-

(i) they have made a full inquiry into the affairs of the corporate person and they have
formed an opinion that either the corporate person has no debt or that it will be able to
pay its debts in full from the proceeds of assets to be sold in the liquidation;

(ii) the corporate person is not being liquidated to defraud any person; and

(iii) the corporate person has made sufficient provision to meet the obligations arising
on account of pending matters mentioned in sub-clause (iii) of clause (b).

(b) the declaration under sub-clause (a) shall be accompanied with the following
documents, namely: —

(i) audited financial statements and record of business operations of the corporate
person for the previous two years or for the period since its incorporation, whichever is
later;

(ii) a report of the valuation of the assets of the corporate person, if any prepared by a
registered valuer; and

(iii) disclosure about pending proceedings or assessments before statutory authorities,

and pending litigations, in respect of the corporate person.

(c) within four weeks of a declaration under sub-clause (a), there shall be-

(i) a resolution passed by a special majority of the partners or contributories, as the case
may be, of the corporate person requiring the corporate person to be liquidated and
appointing an insolvency professional to act as the liquidator; or

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 (ii) a resolution of the partners or contributories, as the case may be, requiring the
corporate person to be liquidated as a result of expiry of the period of its duration, if any,
fixed by its constitutional documents or on the occurrence of any event in respect of
which the constitutional documents provide that the corporate person shall be dissolved,
as the case may be, and appointing an insolvency professional to act as the liquidator.

It may be noted that the corporate person owes any debt to any person, creditors
representing two-thirds in value of the debt of the corporate person shall approve the
resolution passed under sub-clause (c) within seven days of such resolution.

As per Regulation3(2), the corporate person shall notify the Registrar and the Board
about the resolution under sub-regulation (1) to liquidate the corporate person within
seven days of such resolution or the subsequent approval by the creditors, as the case
may be.

Subject to approval of the creditors under sub-regulation (1), the liquidation proceedings
in respect of a corporate person shall be deemed to have commenced from the date of
passing of the resolution under sub-clause (c) of sub-regulation (1).

Reporting

According to Regulation 8(1), the liquidator shall prepare and submit-

(a) Preliminary Report;

(b) Status Report;

(c) Minutes of consultations with stakeholders; and

(d) Final Report in the manner specified under these Regulations.

Completion of Liquidation (Regulation 37)

(1) The liquidator shall endeavour to complete the liquidation process of the corporate
person and submit the Final Report under regulation 38 within: -

(a) two hundred and seventy days from the liquidation commencement date where the
creditors have approved the resolution under clause (c) of subsection (3) of section 59
or clause (c) of sub-regulation (1) of regulation 3, and

(b) ninety days from the liquidation commencement date in all other cases.

(2) In the event of the liquidation process continuing for more than the period stipulated
in sub-regulation (1), the liquidator shall

(a) hold a meeting of the contributories of the corporate person within fifteen days –

(i) from the end of two hundred and seventy days or ninety days, as the case may be, and
(ii) thereafter at the end of every succeeding two hundred and seventy days or ninety
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days, as the case may be, as stipulated in sub-regulation (1), till submission of application
for dissolution of the corporate person; and

(b) shall present Status Report(s)indicating progress in liquidation, including-

(i) settlement of list of stakeholders,

(ii) details of any assets that remains to be sold and realized,

(iii) distribution made to the stakeholders,

(iv) distribution of unsold assets made to the stakeholders;

(v) developments in any material litigation, by or against the corporate person;

(vi) filing of, and developments in applications for avoidance of transactions in

accordance with Chapter III of Part II of the Code; and

(vii) the reasons for not completing the process within stipulated time period and the
additional time required for completing the process.

(3) The Status Report shall enclose the audited accounts of the liquidation showing the
receipts and payments pertaining to liquidation since the liquidation commencement
date.

(4) The liquidator shall file the Status Report with the Board within seven days of the
meeting of contributories.

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 LESSON 17
PROFESSIONAL AND ETHICAL PRACTICES FOR
INSOLVENCY PRACTITIONERS

Duties of Resolution Professional

Regulation 3A of the IBBI (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016 provides for assistance and cooperation by the personnel of the
corporate debtor as follows:
(1) Duty to take custody and control: The interim resolution professional or
resolution professional, as the case may be, shall take custody and control as
specified under this regulation from the personnel of the corporate debtor,its
promoters or any other person associated with the management of the corporate
debtor as the case may be, of the following:-
(a) the records of information relating to the assets, finances and operations
of the corporate debtor referred in clause (a) of section 18 and such other
information required under regulation 36;
(b) the assets recorded in the balance sheet of the corporate debtor or in any
other records referred in clause (f) of section 18.
(2) Obligation of personnel/promoter etc. to provide list of assets and records while
handing over their custody and control: The personnel of the corporate debtor, its
promoters or any other person associated with the management of the corporate
debtor shall provide to the interim resolution professional or resolution
professional, as the case may be, a list of assets and records while handing over
their custody and control, and the interim resolution professional or resolution
professional may, after taking such custody and control, if deemed necessary,
identify person(s) in whose possession these assets and records will be held.
(3) Duty of IRP/RP to prepare list of assets and records: Where any asset or record has
not been handed over or the list has not been provided under sub-regulation (2),
the interim resolution professional or resolution professional, as the case may be,
shall himself prepare a list of assets and records while taking custody and control of
assets and records, and the interim resolution professional or resolution
professional may, after taking such custody and control, if deemed necessary,
identify person(s) in whose possession these assets and records will be held.
(4) Signing of list of assets and records: Each list of assets and records under sub-
regulation (2) and (3) shall be signed by the parties present and by at least two
individuals who have witnessed the act of taking control and custody of such assets
and records.
(5) Requisition by IRP/RP for information required under the Code but not handed
over: The interim resolution professional or resolution professional, as the case may

10
 be, shall requisition from the personnel of the corporate debtor, its promoters or
any other person associated with the management of the corporate debtor as the
case maybe, the information relating to the assets, finances and operations of the
corporate debtor referred in clause (a) of section 18 and such information required
under regulation 36 which were required to be maintained by the corporate debtor
but have not yet been handed over.
(6) Requisition by IRP/RP for assets in records but not handed over: The interim
resolution professional or resolution professional, as the case may be, shall
requisition from the personnel of the corporate debtor, its promoters or any other
person associated with the management of the corporate debtor as the case maybe,
the assets which are recorded in the balance sheet or in any other records referred
in clause (f) of section 18 and whose custody has not been handed over.
(7) An application made under sub-section (2) of section 19 in respect of failure to
provide any asset or record as requisitioned under the Code and this regulation,
shall show presence of such asset or record in the notice of requisition and absence
of such asset or record in the list of assets and records taken in control and custody
under sub-regulation (2) and (3).

Eligibility for Registration of Insolvency Professionals

Regulation 4(1) of the IBBI (Insolvency Professionals) Regulations, 2016 provides that
no individual shall be eligible to be registered as an insolvency professional if he-
(a) is a minor;
(b) is not a person resident in India;
(c) does not have the qualification and experience specified in Regulation 5 or Regulation
9, as the case may be;
(d) has been convicted by any competent court for an offence punishable with
imprisonment for a term exceeding six months or for an offence involving moral
turpitude, and a period of five years has not elapsed from the date of expiry of the
sentence:
Provided that if a person has been convicted of any offence and sentenced in respect
thereof to imprisonment for a period of seven years or more, he shall not be eligible to be
registered;
(e) he is an undischarged insolvent, or has applied to be adjudicated as an insolvent;
(f) he has been declared to be of unsound mind; or
(g) he is not a fit and proper person; Explanation:
For determining whether an individual is fit and proper under these Regulations, the
Board may take account of any consideration as it deems fit, including but not limited to
the following criteria-
(i) integrity, reputation and character,
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(ii) absence of convictions and restraint orders, and
(iii) competence, including financial solvency and net worth.
No insolvency professional entity, recognised by the Board under regulation 13, shall be
eligible to be registered as an insolvency professional, if the entity and/or any of its
partner or director, as the case may be, is not fit and proper person under clause (g)(i).

Operating separate bank account for each real estate project

According to Regulation 4D, where the corporate debtor has any real estate project, the
interim resolution professional or the resolution professional, as the case may be, shall
operate a separate bank account for each real estate project.

Application for Certificate of Registration

According to Regulation 6(1) an individual enrolled with an insolvency professional
agency as a professional member may make an application to the Board through the
insolvency professional agency of which he is a member, in Part – II of Form A of the
Second Schedule to these Regulations, along with a nonrefundable application fee of
twenty thousand rupees to the Board.
(1A) An insolvency professional entity eligible for registration as an insolvency
professional under sub-regulation (2) of regulation 4 may make an application to the
Board through the insolvency professional agency of which it is a member, in Part – II of
Form AA of Second Schedule to these Regulations, along with a non-refundable
application fee of two lakh rupees to the Board. The insolvency professional agency shall
acknowledge an application made under this Regulation within seven days of its receipt.
(2A) The insolvency professional agency shall verify and forward the application to the
Board within thirty days from the date of payment of fee under sub-regulations (1) or
(1A), as the case may be, excluding the time given by the insolvency professional agency
to the professional member for submitting additional documents, information, or
clarification, as the case may be.
(3) The Board may require the applicant to submit, within reasonable time, additional
documents, information or clarification that it deems fit.
(4) The Board may require the applicant to appear, within reasonable time, before the
Board in person, or through its authorised representative for clarifications required for
processing the application.
Surrender of Certificate of Registration.
Regulation 10A provides that an insolvency professional may surrender its certificate of
registration by making a request to the Board, in writing along with the certificate of
registration in original.

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If the Board is satisfied, it may accept the request for surrender of certificate of
registration within thirty days of its receipt and upon acceptance, the registration of such
insolvency professional shall stand cancelled.
On and from the date of cancellation of certificate of registration, the concerned person
shall not represent itself to be a holder of the certificate for carrying out the activity for
which such certificate had been granted.
Special Procedure for Action on Surrender, Expulsion, etc.
According to Regulation 10A (1), while disposing of the matter under this regulation, the
Board shall not be bound by the procedure specified in regulation 11.
(2) On receipt of information under clause (e) and (f) of sub-regulation (1) of regulation
10, the Board may issue a notice, if required, to such professional member, calling upon
it to explain as to why the certificate of registration, granted under the regulations, should
not be cancelled.
(3) The professional member may make written submission(s), if any, within a period
not exceeding twenty-one days from the date of service of notice.
(4) On being satisfied with the submission(s) made under sub-regulation (3), the Board
may decide to cancel the registration or issue directions to complete the ongoing
assignments, make pending compliances including payment of fee, etc.
(5) The Board shall communicate its decision under sub-regulation (4) within thirty days
from date of receipt of written submissions under sub-regulation (3).
(6) On receipt of information under clause (g) of sub-regulation (1) of regulation 10, the
registration of such insolvency professional with the Board shall be deemed to have been
cancelled from the date of demise or winding up or dissolution, as the case may be.
(7) On and from the date of cancellation of the certificate of registration, under this
regulation, the legal heirs or assignee of the insolvency professional shall take steps for
delivery of any record(s) or document(s) or assets that may be in its custody or control,
within the time period and in the manner, as may be required under the relevant
regulations or as may be directed by the Board.

Recognition of Insolvency Professional Entities

Regulation 12 of the IBBI (Insolvency Professionals) Regulations, 2016 states that a
company, a registered partnership firm or a limited liability partnership may be
recognised as an insolvency professional entity, if –
(a) its objective is to provide support services to insolvency professionals or to carry on
the activities of an insolvency professional or both.
(b) it has a net worth of not less than one crore rupees;

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(c) majority of its equity shares and voting rights are held by insolvency professionals,
who are its directors, in case it is a company,
(d) majority of capital contribution is made by insolvency professionals, who are its
partners, in case it is a limited liability partnership firm or a registered partnership firm;
(e) majority of its partners or directors, as the case may be, are insolvency professionals;
(f) majority of its whole-time directors are insolvency professionals; in case it is a
company; and
(g) none of its partners or directors is a partner or a director of another insolvency
professional entity.
It may be noted that ‘net worth’ means- (i) the net worth as defined under section 2(57)
of the Companies Act, 2013 in case of a company; (ii) sum of partners’ contribution in the
capital account and their undistributed profits net of accumulated losses, if any, in case
of a registered partnership firm or limited liability partnership.

Code of Conduct for Insolvency Professional

Integrity and Objectivity
1. An insolvency professional must maintain integrity by being honest,
straightforward, and forthright in all professional relationships.
2. An insolvency professional must not misrepresent any facts or situations and
should refrain from being involved in any action that would bring disrepute to the
profession.
3. An insolvency professional must act with objectivity in his professional dealings
by ensuring that his decisions are made without the presence of any bias, conflict
of interest, coercion, or undue influence of any party, whether directly connected
to the insolvency proceedings or not.
3A. An insolvency professional must disclose the details of any conflict of interests
to the stakeholders, whenever he comes across such conflict of interest during an
assignment.
4. An insolvency professional appointed as an interim resolution professional,
resolution professional, liquidator, or bankruptcy trustee should not himself
acquire, directly or indirectly, any of the assets of the debtor, nor knowingly
permit any relative to do so.

Independence and Impartiality

5. An insolvency professional must maintain complete independence in his
professional relationships and should conduct the insolvency resolution,
liquidation or bankruptcy process, as the case may be, independent of external
influences.
6. In cases where the insolvency professional is dealing with assets of a debtor
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 during liquidation or bankruptcy process, he must ensure that he or his relatives
do not knowingly acquire any such assets, whether directly or indirectly unless it
is shown that there was no impairment of objectivity, independence or
impartiality in the liquidation or bankruptcy process and the approval of the
Board has been obtained in the matter.
7. An insolvency professional shall not take up an assignment under the Code if he,
any of his relatives, any of the partners or directors of the insolvency professional
entity of which he is a partner or director, or the insolvency professional entity
of which he is a partner or director is not independent, in terms of the regulations
related to the processes under the Code, in relation to the corporate person/
debtor and its related parties.
8. An insolvency professional shall disclose the existence of any pecuniary or
personal relationship with any of the stakeholders entitled to distribution
under
sections 53 or 178 of the Code, and the concerned corporate person/ debtor
as soon as he becomes aware of it, by making a declaration of the same to the
applicant, committee of creditors, and the person proposing appointment, as
applicable.
8A. An insolvency professional shall disclose as to whether he was an employee of or
has been in the panel of any financial creditor of the corporate debtor, to the
committee of creditors and to the insolvency professional agency of which he is
a professional member and the agency shall publish such disclosure on its
website.
8B. An insolvency professional shall disclose its relationship, if any, with the
corporate debtor, other professionals engaged by it, financial creditors, interim
finance providers, and prospective resolution applicants to the insolvency
professional agency of which he is a member, within the time specified
hereunder:

Relationship of the insolvency Disclosure to be made within three

professional with days of
(1) (2)
Corporate debtor his appointment.
Registered valuers / accountants/ appointment of the professionals.
legal professionals/ other
professionals appointed by him
Financial creditors the constitution of committee of
creditors.
Interim finance providers the agreement with the interim
finance provider.
Prospective resolution applicant the supply of information
memorandum to the prospective
resolution applicant.
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 If relationship with any of the above, of such notice or arising.
comes to notice or arises
subsequently

8C. An insolvency professional shall ensure disclosure of the relationship, if any, of

the other professionals engaged by it with itself, the corporate debtor, the
financial creditor, the interim finance provider, if any, and the prospective
resolution applicant, to the insolvency professional agency of which he is a
member, within the time specified as under:

Explanation: For the purposes of clause 8B and 8C above, ‘relationship’ shall mean
any one or more of the following four kinds of relationships at any time or during the
three years preceding the appointment of other professionals:

16
 8D. An insolvency professional shall ensure timely and correct disclosures by it, and
other professionals appointed by it and shall provide a confirmation to the
insolvency professional agency of which he is a professional member to the
effect that the appointment, if any, of every other professional has been made at
arms’ length relationship.
9. An insolvency professional shall not influence the decision or the work of the
committee of creditors or debtor, or other stakeholders under the Code, so as to
make any undue or unlawful gains for itself or its related parties, or cause any
undue preference for any other persons for undue or unlawful gains and shall not
adopt any illegal or improper means to achieve any mala fide objectives.
Professional Competence
10. An insolvency professional must maintain and upgrade his professional
knowledge and skills to render competent professional service.
Representation of Correct Facts and Correcting Misapprehensions
11. An insolvency professional must inform such persons under the Code as may be
required, of a misapprehension or wrongful consideration of a fact of which he
becomes aware, as soon as may be practicable.
12. An insolvency professional must not conceal any material information or
knowingly make a misleading statement to the Board, the adjudicating authority
or any stakeholder, as applicable.

Timeliness
13. An insolvency professional must adhere to the time limits prescribed in the Code
and the rules, regulations and guidelines thereunder for insolvency resolution,
17
 liquidation or bankruptcy process, as the case may be, and must carefully plan
its actions, and promptly communicate with all stakeholders involved for the
timely discharge of its duties.
14. An insolvency professional must not act with mala fide or be negligent while
performing its functions and duties under the Code.
Information Management
15. An insolvency professional must make efforts to ensure that all communication
to the stakeholders, whether in the form of notices, reports, updates, directions, or
clarifications, is made well in advance and in a manner which is simple, clear, and
easily understood by the recipients.
15A. An insolvency professional shall prominently state in all its communications to
a stakeholder, its name, address, e-mail, registration number and validity of
authorisation for assignment, if any, issued by the insolvency professional agency of
which he is a member.
15. An insolvency professional must ensure that he maintains written
contemporaneous records for any decision taken, the reasons for taking the
decision, and the information and evidence in support of such decision. this shall
be maintained so as to sufficiently enable a reasonable person to take a view on
the appropriateness of its decisions and actions.
16. An insolvency professional must not make any private communication with any
of the stakeholders unless required by the Code, rules, regulations and
guidelines thereunder, or orders of the adjudicating authority.
17. An insolvency professional must appear, co-operate and be available for
inspections and investigations carried out by the Board, any person authorised
by the Board or the insolvency professional agency with which he is enrolled.
18. An insolvency professional must provide all information and records as may be
required by the Board or the insolvency professional agency with which he is
enrolled.
19. An insolvency professional must be available and provide information for any
periodic study, research and audit conducted by the Board.

Confidentiality
20. An insolvency professional must ensure that confidentiality of the information
relating to the insolvency resolution process, liquidation or bankruptcy process,
as the case may be, is maintained at all times. However, this shall not prevent it
from disclosing any information with the consent of the relevant parties or
required by law.
Occupation, Employability and Restrictions
21. An insolvency professional must refrain from accepting too many assignments,
if he is unlikely to be able to devote adequate time to each of his assignments.

18
 Clarification: An insolvency professional may, at any point of time, not have more
than ten assignments as resolution professional in corporate insolvency resolution
process, of which not more than three shall have admitted claims exceeding one
thousand crore rupees each.
22A. Resignation by an Insolvency Professional: An insolvency professional may resign
from the assignment, subject to the recommendation of the committee of creditors
in a corporate insolvency resolution process, consultation committee in
liquidation process, the debtor or the creditor in the insolvency resolution process
of personal guarantor to the corporate debtor, as the case may be, and the
approval of the Adjudicating Authority. It is further explained that the insolvency
professional shall continue to discharge his duties, functions and responsibilities
till the approval of resignation by the Adjudicating Authority.

22. An insolvency professional must not engage in any employment when he holds a
valid authorisation for assignment or when he is undertaking an assignment.
23A. Where an insolvency professional has conducted a corporate insolvency
resolution process, he and his relatives shall not accept any employment, other
than an employment secured through open competitive recruitment, with, or
render professional services, other than services under the Code, to a creditor
having more than ten percent voting power, the successful resolution applicant,
the corporate debtor or any of their related parties, until a period of one year has
elapsed from the date of his cessation from such process.
23B. An insolvency professional shall not engage or appoint any of his relatives or
related parties, for or in connection with any work relating to any of his
assignment.

For the purposes of this clause, the insolvency professional which is an insolvency
professional entity may engage or appoint its partners or directors, as the case may
be, for or in connection with any work relating to any of its assignment other than
work related to valuation and audit of the debtor.

23C. An insolvency professional shall not provide any service for or in connection
with the assignment which is being undertaken by any of his relatives or related
parties.

Explanation - For the purpose of clauses 23A to 23C, “related party” shall have
the same meaning as assigned to it in clause (24a) of section 5, but does not
include an insolvency professional entity of which the insolvency professional is
a partner or director.

For the purposes of this clause, the insolvency professional which is an insolvency
professional entity may provide any service, other than service related to

19
 valuation and audit, for or in connection with the assignment which is being
undertaken by any of its partners or directors, as the case may be.

23. An insolvency professional must not conduct business which in the opinion of the
Board is inconsistent with the reputation of the profession.

Remuneration and Costs

24. An insolvency professional must provide services for remuneration which is
charged in a transparent manner, is a reasonable reflection of the work
necessarily and properly undertaken, and is not inconsistent with the applicable
regulations.
25A. An insolvency professional shall disclose the fee payable to him, the fee payable
to the insolvency professional entity, and the fee payable to professionals
engaged by him to the insolvency professional agency of which he is a
professional member and the agency shall publish such disclosure on its
website.
25B. An insolvency professional shall raise bills or invoices in its name towards its
fees, and such fees shall be paid to 86 it through banking channel.
25C. An insolvency professional shall ensure that the insolvency professional entity
or the professional engaged by it raises bills or invoices in their own name
towards their fees, and such fees shall be paid to them through banking channel.
25. An insolvency professional shall not accept any fees or charges other than those
which are disclosed to and approved by the persons fixing his remuneration.
26A. An insolvency professional shall not accept /share any fees or charges from any
professional and/or support service provider who are appointed under the
processes.
26. An insolvency professional shall disclose all costs towards the insolvency
resolution process costs, liquidation costs, or costs of the bankruptcy process, as
applicable, to all relevant stakeholders, and must endeavour to ensure that such
costs are not unreasonable.

27A. An insolvency professional shall, while undertaking assignment or conducting

processes, exercise reasonable care and diligence and take all necessary steps to
ensure that the corporate person complies with the applicable laws.
27B. An insolvency professional shall not include any amount towards any loss,
including penalty, if any, in the insolvency resolution process cost or liquidation cost,
incurred on account of non-compliance of any provision of the laws applicable on the
corporate person while conducting the insolvency resolution process, fast track
insolvency resolution process, liquidation process or voluntary liquidation process,
under the Code.
Gifts and Hospitality
27. An insolvency professional, or his relative must not accept gifts or hospitality

20
 which undermines or affects his independence as an insolvency professional.
28. An insolvency professional shall not offer gifts or hospitality or a financial or any
other advantage to a public servant or any other person, intending to obtain or
retain work for himself, or to obtain or retain an advantage in the conduct of
profession for himself.

In the case of Pooja Menghani vs. Insolvency and Bankruptcy Board of India & Anr,
judgement dated November 20, 2023, Hon’ble High Court of Delhi inter alia observed that
an Insolvency Professional performs very important functions in the insolvency
resolution process of a company. An Insolvency Professional virtually takes over the
company during the period it goes through the insolvency resolution process. An
Insolvency Professional in fact becomes the heart and brain of the company under the
insolvency resolution process and a person having slightest of disqualification cannot be
permitted to be appointed as an Insolvency Professional otherwise the entire purpose of
the IBC will get vitiated.

****

21
 CASE LAWS

1. In the case of Ramkrishna Forgings Limited (Appellant) Vs. Ravindra Loonkar,

Resolution Professional of ACIL Limited & Anr.( Respondents), Civil Appeal No.1527 of
2022 judgement November 21, 2023, Hon’ble Supreme Court inter alia observed that
having considered the matter in depth, the Court is unable to uphold the decisions
rendered by the Adjudicating Authority-NCLT as also the NCLAT. The moot question
involved is the extent of the jurisdiction and powers of the Adjudicating Authority to go
on the issue of revaluation in the background of the admitted and undisputed factual
position that no objection was raised by any quarter with regard to any
deficiency/irregularity, either by the RP or the appellant or the CoC, in finally approving
the Resolution Plan which was sent to the Adjudicating Authority-NCLT for approval.
Further, the statutory requirement of the RP involving two approved valuers for giving
reports apropos fair market value and liquidation value was duly complied with and the
figures in both reports were not at great variance. Significantly, the same were then put
up before the CoC, which is the decision-maker and in the driver’s seat, so to say, of the
Corporate Debtor. K Sashidhar (supra) and Committee of Creditors of Essar Steel India
Ltd. (supra) are clear authorities that the CoC’s decision is not to be subjected to
unnecessary judicial scrutiny and intervention. This came to be reiterated in Maharashtra
Seamless Limited (supra), which also emphasised that the CoC’s commercial analysis
ought not to be qualitatively examined and the direction therein of the NCLAT to direct
the successful Resolution Applicant to enhance its fund flow was disapproved of by this
Court. Thus, if the CoC, including the FC(s) to whom money is due from the Corporate
Debtor, had undertaken repeated negotiations with the appellant with regard to the
Resolution Plan and thereafter, with a majority of 88.56% votes, approved the final
negotiated Resolution Plan of the appellant, which the RP, in turn, presented to the
Adjudicating Authority-NCLT for approval, unless the same was failing the tests of the
provisions of the Code, especially Sections 30 & 31, no interference was warranted. In
Kalpraj Dharamshi v Kotak Investment Advisors Limited, (2021) 10 SCC 401, the Court
concluded that ‘… in view of the paramount importance given to the decision of CoC,
which is to be taken on the basis of “commercial wisdom”, NCLAT was not correct in law
in interfering with the commercial decision taken by CoC by a thumping majority of
84.36%.’ (Para 27)
2. In the case of Mr. Shiv Charan & Ors vs. Adjudicating Authority under the Prevention
of Money Laundering Act, 2002 & Ors, Writ Petition (L) No.9943 of 2023 along With Writ
Petition (L) No.29111 of 2023 judgement dated March 01, 2024, Hon’ble Bombay High
Court inter alia observed that Section 32A (2) of the IBC, 2016 protects the property of
the corporate debtor from any attachment and restraint in proceedings connected to the
offense committed prior to the commencement of the CIRP. Once a resolution plan is
approved under Section 31 and a change in control and management is effected under
the resolution plan (the same ingredients as set out in Section 32A (1) are stipulated here
too), the property of the corporate debtor would get immunity from further prosecution
of proceedings. Clause (i) in the Explanation to Section 32A (2) removes all doubt about
22
what the assets are given immunity from. The provision explicitly stipulates that an
“action against the property” of the corporate debtor, from which immunity would be
available, “shall include the attachment, seizure, retention or confiscation of such
property under such law” as applicable. The reference being to any action against the
property under any law would evidently bring within its compass, attachments made
under the PMLA, 2002. (Para 18)
Further the Hon’ble High Court in its summary of conclusions inter alia held that the NCLT
in its capacity as the Adjudicating Authority under the IBC, 2016 has only interpreted the
provisions of Section 32A and applied them to the facts at hand, to declare that the
attachment of the Attached Properties by the ED must come to an end. It is possible that
in a given case, the application of Section 32A of the IBC, 2016 may have an effect on
existing and intended attachments and prosecution by enforcement agencies operating
under laws such as the PMLA, 2002. However, since both Section 32A and Section 60(5)
are non-obstante provisions, they would prevail, with no room for concern, real or
imagined, about any conflict between legislations...…………………. {Para 52(viii)}

3. In the case of Greater Noida Industrial Development Authority Vs. Prabhjit Singh Soni
& Anr Civil Appeal Nos.7590-7591 OF 2023 (Arising out of Diary No.3628 of 2023)
judgement dated February 12, 2024 Hon’ble Supreme Court of India inter alia observed
that ……… a Court or a Tribunal, in absence of any provision to the contrary, has inherent
power to recall an order to secure the ends of justice and/or to prevent abuse of the
process of the Court. Neither the IBC nor the Regulations framed thereunder, in any way,
prohibit, exercise of such inherent power. Rather, Section 60(5)(c) of the IBC, which
opens with a non-obstante clause, empowers the NCLT (the Adjudicating Authority) to
entertain or dispose of any question of priorities or any question of law or facts, arising
out of or in relation to the insolvency resolution or liquidation proceedings of the
corporate debtor or corporate person under the IBC. Further, Rule 11 of the NCLT Rules,
2016 preserves the inherent power of the Tribunal. Therefore, even in absence of a
specific provision empowering the Tribunal to recall its order, the Tribunal has power to
recall its order. However, such power is to be exercised sparingly, and not as a tool to re-
hear the matter. Ordinarily, an application for recall of an order is maintainable on limited
grounds, inter alia, where (a) the order is without jurisdiction; (b) the party aggrieved
with the order is not served with notice of the proceedings in which the order under recall
has been passed; and (c) the order has been obtained by misrepresentation of facts or by
playing fraud upon the Court /Tribunal resulting in gross failure of justice.

In a recent decision (i.e., Union Bank of India vs. Dinakar T. Vekatasubramanian & Ors.),
a five-member Full Bench of NCLAT held that though the power to review is not conferred
upon the Tribunal but power to recall its judgment is inherent in the Tribunal and is
preserved by Rule 11 of the NCLT Rules, 2016. It was held that power of recall of a
judgment can be exercised when any procedural error is committed in delivering the
earlier judgment; for example, necessary party has not been served or necessary party
23
was not before the Tribunal when judgment was delivered adverse to a party. It was
observed that there may be other grounds for recall of a judgment one of them being
where fraud is played on the Court in obtaining a judgment. This decision of NCLAT was
upheld by a two-Judge Bench of Supreme Court vide order dated 31.07.2023 in Civil
Appeal No.4620 of 2023 (Union Bank of India vs. Financial Creditors of M/s Amtek Auto
Ltd. & Ors.).

4. In the case of Dilip B Jiwrajka{Petitioner(s)} Vs. Union of India & Ors {Respondent(s)},
Supreme Court of India, Writ Petition (Civil) No 1281 of 2021 judgement dated
November 09, 2023, Hon’ble Supreme Court while upholding the constitution validity of
Section 95-100 of the Insolvency and Bankruptcy Code (IBC), held that (i) No judicial
adjudication is involved at the stages envisaged in Sections 95 to Section 99 of the IBC;
(ii) The resolution professional appointed under Section 97 serves a facilitative role of
collating all the facts relevant to the examination of the application for the
commencement of the insolvency resolution process which has been preferred under
Section 94 or Section 95. The report to be submitted to the adjudicatory authority is
recommendatory in nature on whether to accept or reject the application; (iii) The
submission that a hearing should be conducted by the adjudicatory authority for the
purpose of determining ‘jurisdictional facts’ at the stage when it appoints a resolution
professional under Section 97(5) of the IBC is rejected. No such adjudicatory function is
contemplated at that stage. To read in such a requirement at that stage would be to
rewrite the statute which is impermissible in the exercise of judicial review; (iv) The
resolution professional may exercise the powers vested under Section 99(4) of the IBC
for the purpose of examining the application for insolvency resolution and to seek
information on matters relevant to the application in order to facilitate the submission of
the report recommending the acceptance or rejection of the application; (v) There is no
violation of natural justice under Section 95 to Section 100 of the IBC as the debtor is not
deprived of an opportunity to participate in the process of the examination of the
application by the resolution professional; (vi) No judicial determination takes place until
the adjudicating authority decides under Section 100 whether to accept or reject the
application. The report of the resolution professional is only recommendatory in nature
and hence does not bind the adjudicatory authority when it exercises its jurisdiction
under Section 100; (vii) The adjudicatory authority must observe the principles of
natural justice when it exercises jurisdiction under Section 100 for the purpose of
determining whether to accept or reject the application; (viii) The purpose of the interim-
moratorium under Section 96 is to protect the debtor from further legal proceedings; and
(ix) The provisions of Section 95 to Section 100 of the IBC are not unconstitutional as
they do not violate Article 14 and Article 21 of the Constitution.
5. in the case of Sunil Kumar Agrawal (Appellant)vs. New Okhla Industrial Development
Authority (Respondent) 12th January, 2023, National Company Law Appellate Tribunal,
Principal Bench, New Delhi Company Appeal (AT) (Ins.) No. 622 of 2022. Hon’ble
National Company Law Appellate Tribunal inter-alia observed that Section 14 of the Code
deals with the moratorium and Section 14(1)(d) of the Code says that there would be a
prohibition from the recovery of any property by an owner or lessor where such property
24
is occupied by or in the possession of the Corporate Debtor. However, explanation
appended to Section 14(1) (d) says that with the prohibition of recovery of any property
by an owner or lessor, a license, permit, registration, quota, concession, clearance or a
similar grant or right either given by the Central Govt., State Govt. local authority, sectoral
regulator or any other authority constituted under any other law for the time being in
force, shall not be suspended or terminated on the grounds of insolvency but there would
be a condition for its continuation if there is no default in payment of the dues of such
license, permit, registration, quota, concession, clearance or a similar grant or right
during the moratorium period. The similar grant or right has to be read in respect of the
licence, permit, registration, quota, concession, clearance but it cannot be read as the
premium amount or lease rent which has been so ordered by the Adjudicating Authority
to be paid by the Appellant to the Respondent.

6. In the case of Shri Guru Containers(Appellant)vs. Jitendra Palande (Respondent),

National Company Law Tribunal, Mumbai Bench Company Appeal (AT) (Insolvency)
No.106 of 2023 judgement dated 22/02/2023 Hon’ble National Company Law Tribunal
inter alia observed that though the scope of CIRP related work became limited and
restricted by the fact that progress got stonewalled due to lack of flow of information and
lack of claims, diligence on the part of the IRP in proceeding with the CIRP cannot be
found to be wanting. Shifting the entire blame on the IRP on grounds of non-performance
of duty and making him the scapegoat does not appear to be justified. It is equally
important for the creditors to play a catalytic role in the insolvency resolution process
given the present regime of creditor-driven IBC. The rigours of similar standards of
discipline should also apply on the creditors. This is clearly a case where the CIRP process
was being hindered due to want of cooperation and participation from the creditors. The
conduct of the Operational Creditor in the present case is deprecatory in that once the
CIRP process had commenced, the Operational Creditor went into a sleeping mode. This
position has been further aggravated by the fact that it was the Appellant/Operational
Creditor who had triggered this judicial process and then abdicated himself from all
responsibilities. That the Operational Creditor did not seem interested in resolution of
the Corporate Debtor is evident from the fact that till date no claim has been filed with
the IRP.

7. In the matter of Vallal RCK Vs. M/s Siva Industries and Holdings Limited and Ors. [Civil
Appeal Nos. 1811-1812 of 2022] the Hon’ble Supreme Court in its judgment dated 3rd
June, 2022 observed that Section 12A was brought on the basis of the Insolvency Law
Committee’s Report. Though by the Amendment Act No. 26 of 2018, the voting share of
75% of CoC for approval of the resolution plan was brought down to 66%, section 12A of
the Insolvency and Bankruptcy Code, 2016 (Code) which was brought by the same
amendment, requires the voting share of 90% of CoC for approval of withdrawal of
corporate insolvency resolution process (CIRP).

The provisions under section 12A of the Code have been made more stringent as
compared to Section 30(4) of the Code. Whereas under section 30(4) of the Code, the
voting share of CoC for approving the resolution plan is 66%, the requirement under
section 12A of the Code for withdrawal of CIRP is 90%.

25
When 90% and more of the creditors, in their wisdom after due deliberations, find that it
will be in the interest of all the stake-holders to permit settlement and withdraw CIRP,
the adjudicating authority or the appellate authority cannot sit in an appeal over the
commercial wisdom of CoC.

This Court has consistently held that the commercial wisdom of the CoC has been given
paramount status without any judicial intervention for ensuring completion of the stated
processes within the timelines prescribed by the IBC. It has been held that there is an
intrinsic assumption, that financial creditors are fully informed about the viability of the
corporate debtor and feasibility of the proposed resolution plan. They act on the basis of
thorough examination of the proposed resolution plan and assessment made by their
team of experts.

The interference would be warranted only when the adjudicating authority or the
appellate authority finds the decision of the CoC to be wholly capricious, arbitrary, and
irrational and de hors (outside) the provisions of the statute or the Rules.

8. In the case of NOIDA vs. Anand Sonbhadra [Civil Appeal No. 2222, 2367-2369 of 2021]
Judgement dated 17th May, 2022, Hon’ble Supreme Court inter-alia observed that a debt
is a liability or an obligation in respect of a right to payment. Irrespective of whether there
is adjudication of the breach, if there is a breach of contract, it may give rise to a debt. In
the context of section 5(8), disbursement has been understood as money, which has been
paid. In the context of the transaction involved in such real estate projects, the
homebuyers advance sums to the builder, who would then utilise the amount towards
the construction in the real estate project.
What is relevant is to attract section 5(8), on its plain terms, is disbursement. While, it
may be true that the word ‘transaction’ includes transfer of assets, funds or goods and
services from or to the corporate debtor, in the context of the principal provisions of
section 5(8) of the Code, to import the definition of ‘transaction’ in section 2(33),
involving the need to expand the word ‘disbursement’, to include a promise to pay money
by a debtor to the creditor, will be uncalled for straining of the provisions.

‘Debt’ means a liability or obligation, which relates to a claim. The claim or right to
payment or remedy for breach of contract occasioning a right to payment must be due
from any person.

In the lease in question, there has been no disbursement of any debt (loan) or any sums
by the NOIDA to the lessee.
The subject matter of section 5(8)(d) is a lease or a hire-purchase contract. It is not any
lease or a hire purchase contract, which would entitle the lessor to be treated as the
financial creditor. There must be a lease or hire-purchase contract, which is deemed as a
finance or capital lease. The law giver has not left the courts free to place, its
interpretation on the words ‘finance or capital lease’. The legislature has contemplated
the finance or a capital lease, which is deemed as such a lease under the Indian Accounting
Standards.

26
The Appellant is not the financial lessor under section 5(8)(d) of the Code. Needless to
say, there is always power to amend the provisions which essentially consist of the Indian
Accounting Standards in the absence of any rules prescribed under section 5(8)(d) of the
Code by the Central Government.

Section 5(8)(f) is a residuary and catch all provision. A lease, which is not a finance or a
capital lease under section 5(8)(d), may create a financial debt within the meaning of
section 5(8)(f), if, on its terms, the Court concludes that it is a transaction, under which,
any amount is raised, having the commercial effect of the borrowing.

The lease in question does not fall within the ambit of section 5(8)(f). This is for the
reason that the lessee has not raised any amount from the Appellant under the lease,
which is a transaction. The raising of the amount, which, according to the Appellant,
constitutes the financial debt, has not taken place in the form of any flow of funds from
the Appellant/Lessor, in any manner, to the lessee. The mere permission or facility of
moratorium, followed by staggered payment in easy instalments, cannot lead to the
conclusion that any amount has been raised, under the lease, from the Appellant, which
is the most important consideration.

The appeal failed, Supreme Court held that the Appellant is not a Financial Creditor.
However, the Apex court indicated that the Centre can bring a prospective amendment to
classify NOIDA as a financial creditor. Hon’ble Justice K.M. Joseph in his initial remark
noted that hardly six years old, the Insolvency and Bankruptcy Code (hereinafter referred
to as the ‘IBC”) continues to be a fertile ground to spawn 2 litigation.

9. In the case of Sunil Kumar Agrawal (Appellant)vs. New Okhla Industrial Development
Authority (Respondent) 12th January, 2023, National Company Law Appellate Tribunal,
Principal Bench, New Delhi Company Appeal (AT) (Ins.) No. 622 of 2022, Hon’ble
National Company Law Appellate Tribunal inter-alia observed that Section 14 of the Code
deals with the moratorium and Section 14(1)(d) of the Code says that there would be a
prohibition from the recovery of any property by an owner or lessor where such property
is occupied by or in the possession of the Corporate Debtor. However, explanation
appended to Section 14(1) (d) says that with the prohibition of recovery of any property
by an owner or lessor, a license, permit, registration, quota, concession, clearance or a
similar grant or right either given by the Central Govt., State Govt. local authority, sectoral
regulator or any other authority constituted under any other law for the time being in
force, shall not be suspended or terminated on the grounds of insolvency but there would
be a condition for its continuation if there is no default in payment of the dues of such
license, permit, registration, quota, concession, clearance or a similar grant or right
during the moratorium period. The similar grant or right has to be read in respect of the
licence, permit, registration, quota, concession, clearance but it cannot be read as the
premium amount or lease rent which has been so ordered by the Adjudicating Authority
to be paid by the Appellant to the Respondent.
27
10. In the matter of Ms. Ashish Ispat Private Limited Vs Primuss Pipes & Tubes Ltd. ,
NCLAT held that when a withdrawal application u/s 12A of the Code is filed prior to
constitution of CoC, the requirement of 90% vote of CoC is not applicable, and the
Adjudicating Authority has to consider the application without requiring any approval
from CoC. Approval of 90% shall be applicable only when Committee of Creditors is
constituted and withdrawal application u/s 12A of IBC has been filed post that.

11. Supreme Court in the matter of Jaypee Kensington Boulevard Apartments Welfare
Association & Ors. Vs. NBCC (India) Ltd. & Ors. held that:
➢ The AA has limited jurisdiction in the matter of approval of a resolution plan. In
the adjudicatory process concerning a resolution plan under IBC, NCLT does not have
scope for interference with the commercial aspects of the decision of the CoC; and there
is no scope for substituting any commercial term of the resolution plan approved by CoC.
➢ There is no scope for the NCLT or the NCLAT to proceed on basis of perceptions
or to assess the resolution plan on the basis of quantitative analysis. Thus, the treatment
of any debt or asset is essentially required to be left to the collective commercial wisdom
of the financial creditors.
➢ There is no prohibition in the scheme of IBC and CIRP Regulations, that CoC cannot
simultaneously consider and vote upon more than one resolution plan at the same time
for electing one of the available plans. i.e. CoC can vote upon multiple resolution plans at
the same time.
12. The Supreme Court in the matter of Lalit Kumar Jain Vs. Union of India & Ors. upheld
the validity of notification dated November 15, 2019 enforcing the provisions related to
personal guarantor to corporate debtor under the Code. Approval of resolution plan of a
corporate debtor undergoing CIRP does not per se operate as a discharge to its
surety/guarantor of their liabilities under the contract of guarantee. The nature and
extent of liability would depend upon the terms of guarantee.
13. In the matter of Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset
Reconstruction Company Limited and Others, Supreme Court held that:
➢ Any debt due to government (Central/State/Local Authority) including statutory
dues is covered under the term “Creditor” and in any other case by the term “Other
Stakeholders” as provided u/s 31(1) of IBC,2016 and hence an approved resolution plan
is also binding on government.
➢ After the approval of Resolution Plan no surprise claim should flung upon the
successful resolution applicant. Once a resolution plan is approved by an Adjudicating
Authority, the claim forming part of Resolution Plan stands frozen and claims not
forming part of Resolution Plan stands extinguished and no one would be entitled to
initiate or continue any proceeding in respect of the claim which is not part of the
approved Resolution Plan.
➢ An approved Resolution Plan is binding upon the Corporate Debtor, its employees,
members, creditors, government (Central/State/Local Authority) and any other
stakeholder.

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14. In the case of Vbuiltfine Properties Private Ltd(Appellant) vs. Registrar of Companies,
Mumbai (Respondent) Company Appeal (AT) No.27 of 2023, the appellant’s name was
struck of from the register of companies and an appeal for restoration of the name was
filed by the Appellant before the NCLT. By the impugned order under challenge, NCLT
directed the ROC Mumbai to restore the name of the company i.e., Vbuiltfine Properties
Pvt Ltd, to the register of Registrar of Companies with imposition of cost of Rs. 5,00,000/-
Appellant challenged the imposition of this huge cost.
National Company Law Appellate Tribunal in its judgement dated August 18, 2023 inter
alia observed that ongoing through the aforesaid order it is difficult to infer as to under
what circumstances the company petition was allowed and direction was issued for
restoration of the name of the company along with imposition of costs.
It is evident from the impugned order that the company petition was preferred under
Section 252(1) of the Companies Act, 2013. However, since the date of striking off the
name of the company is not mentioned. It is difficult to infer as to whether the petition
was filed within three years from the striking off the name of the company or not. The
order does not reflect any plausible reason for passing an order for restoration. Similarly,
nothing has been indicated as to under what circumstances the cost of Rs.5 lakhs was
imposed.
On examination of aforesaid provision, it is evident that from the date of striking off the
name of the company from the register of Registrar of Companies, one can prefer an
appeal within a period of three years from the date of striking off the name of the
company. In the order impugned date of striking off under Section 248(5) of Companies
Act, 2013 has not been mentioned. On examination of the impugned order, it is evident
that though date of striking off was not mentioned, the appeal was preferred after four
years. The order on this issue appears to be completely vague. Moreover, if the NCLT was
exercising its jurisdiction under Section 252(3) of the Companies Act, 2013, in such
situation the appellant was required to satisfy the NCLT that on the date of striking off
the company, the company was carrying on business or in operation. There was third
condition for passing of the restoration order in case it was otherwise just for restoring
the name of the company.
The order does not meet either of the three criteria under Section 252(3) of the Act.
Moreover, since the appeal was preferred under Section 252(1) of the Companies Act,
2013 the learned NCLT was required to examine the appeal strictly in accordance with
the provision under Section 252(1) of the Companies Act, 2013. In absence of exact date
of striking off it would be difficult to approve the impugned order. Moreover, learned
NCLT has imposed cost of Rs. 5 lakhs but no plausible reason has been given for imposing
such cost. In such view of the matter, we are left with no option but to set aside the order
and remit back the matter to the NCLT for passing order afresh after affording
opportunity to both the parties i.e., Appellant and ROC.

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