7/28/2020 Insolvency And Bankruptcy Code : Quarterly Review Of Landmark Judgments - Insolvency/Bankruptcy/Re-structuring - India

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India: Insolvency And Bankruptcy Code : Quarterly Review Of

Landmark Judgments
23 April 2020

by Vasanth Rajasekaran , Shweta Vashist and Reshma Ravipati

Phoenix Legal

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In the years since introduction of the Insolvency and Bankruptcy Code, 2016 (Code), courts and tribunals have
paved the way for a new insolvency and bankruptcy regime in India through effective interpretation and
enforcement of the Code. Since the Code is still in its nascent stages of implementation, judicial
pronouncements play a very important role in clarifying the legislative intent of provisions of the Code, and
the manner in which they are to be interpreted.

We have summarised and captured hereinbelow some significant judgments that we have come across in the
first quarter of 2020, in relation to the Code.

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M. Ravindranath Reddy vs. G. Kishan & Ors.

Company Appeal (AT) Insolvency No. 331 of 2019; Citation: [2020]154CLA458

National Company Law Appellate Tribunal (NCLAT)

Decided on: 17.01.2020

The question that arose for consideration of the NCLAT was whether grant of lease by a landlord, will be
treated as a service provided to a corporate debtor, thereby making such landlord an operational creditor
within the meaning of Section 5(20) read with Section 5(21) of the Code.

The NCLAT held that the Code recognises two types of debt, on the basis of which creditors may make an
application for initiating insolvency proceedings against the corporate debtor, namely, financial debt and
operational debt. It was stated that if there is a debt, other than a financial debt or an operational debt, the
creditor will not qualify to make an application under Section 7 or Section 9, as the case may be and therefore,
the determination of nature of claim/type of debt is an important step while considering the admission of an
application under the Code.

The NCLAT opined that there is a rationale behind restricting this right to initiate corporate insolvency
resolution process (CIRP) only to operational creditors, apart from financial creditors. It was stated that
default committed in relation to operational creditors, in payment of their debt, connotes that the corporate
debtor is not even in a position to service the regular payments and operational expenses, as required for the
day-to-day functioning of the corporate debtor. This is taken to be a clear indication as to its insolvency,
thereby warranting the resolution process.

It was further observed that since the Code does not define goods or services, one has to rely upon the
general usage of the terms in law, with due regard to the context in which the same have been used. The
NCLAT noted that even though the Bankruptcy Law Reforms Committee recommended the treatment of
lessors/landlords as operational creditors, the same was not included in the Code and only the claims in
respect of goods and services had been retained in the definition of operational creditor and operational debt
under Sections 5(20) and 5(21) of the Code. The NCLAT held that definition of operational creditor does not
give scope to interpret rent dues as operational debt.

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The NCLAT stated that for a debt to be classified as an operational debt under Code, the following conditions
should be satisfied:

i. Firstly, the debt amount should fall within the definition of "claim" as defined under Section 3(6) of the
Code;
ii. Secondly, such a claim should fall within the confines of the definition of a "debt" as defined under
Section 3(11) of the Code, meaning thereby that it should arise out of a liability or an obligation due
from any person; and
iii. Thirdly, such a "debt" should fall strictly within the scope of an "operational debt" as defined under
Section 5(21) of the Code, i.e. the claim should arise either in respect of provision of goods or services
including employment or in respect of the repayment of dues arising under any law for the time being
in force and payable either to the Central Government, any State Government or local authority.

The NCLAT held that only a claim falling within one of the three categories as listed hereinabove can be
categorised as an operational debt. In case the amount claimed does not fall under any of the
abovementioned categories, the claim cannot be categorised as an operational debt.

It was concluded that lease of immovable property cannot be considered as a supply of goods or rendering of
any services and thus, cannot fall within the definition of operational debt.

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Maharasthra Seamless Limited vs. Padmanabhan Venkatesh & Ors.

Civil Appeal No. 4242 of 2019; Citation – 2020 SCC OnLine SC 67

Supreme Court of India

Decided on: 22.01.2020

The first question that arose before the Supreme Court was whether the scheme of the Code contemplates
that the sum forming part of the resolution plan should match the liquidation value of the corporate debtor.
In other words, while approving a resolution plan, whether the adjudicating authority could reassess a
resolution plan approved by the committee of creditors even if the said plan complies with Section 31 of the
Code.

The Supreme Court held that there is no provision in the Code, or regulations which prescribe that the bid of
any resolution applicant has to match the liquidation value arrived at, in the manner provided in Clause 35 of
the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016. It was stated that this point had already been dealt with in the decision of Committee of
Creditors of Essar Steel India Limited vs. Satish Kumar Gupta1.

The Court further opined that the object behind prescribing the valuation process is to assist the committee
of creditors to take a decision on the resolution plan properly; and once the resolution plan has been
approved by the committee of creditors, the statutory mandate on the adjudicating authority under Section
31(1) of the Code is to ascertain that the resolution plan meets the requirements of sub-sections (2) and (4) of
Section 30. The Court held that Section 31(1) of the Code lays down in clear terms that for final approval of a
resolution plan, the adjudicating authority has to be satisfied that the requirement of sub-section (2) of
Section 30 has been complied with. The proviso to Section 31(1) of the Code stipulates the other aspect which
the adjudicating authority must ensure, i.e., that the resolution plan should have provisions for its
implementation.

The second question that arose for consideration of the Supreme Court was whether Section 12A of the Code
is the appropriate route through which a successful resolution applicant can retreat after admission of the
resolution plan.

On the second question, the Supreme Court was of the opinion that the exit route provided in Section 12A of
the Code is not applicable to a resolution applicant, and that the procedure envisaged in Section 12A of the
Code only applies to applicants invoking Section 7, Section 9 and Section 10 of the Code.

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Bijay Kumar Agarwal, Ex-Director of M/s Genegrow Commercial Pvt. Ltd. vs. State Bank of India & Anr.

Company Appeal (AT) Insolvency No. 993 of 2019; Citation: MANU/NL/0032/2020

NCLAT

Decided on: 23.01.2020

The question that arose before the NCLAT was whether a financial creditor is permitted to commence
proceedings under Section 7 of the Code against the principal debtor as well as the guarantor, for the same
set of claims.

The NCLAT clarified that there is no fetter in the Code for simultaneously projecting two applications under
Section 7 of Code against the principal borrower, as well as the corporate guarantor(s). However, for the same
set of claims, if an application filed by the financial creditor is admitted against one of the corporate debtors

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(i.e., principal borrower or corporate guarantor), a second application filed by the same financial creditor for
the same set of claims and default is not to be admitted against the remaining corporate debtor (the principal
borrower or the corporate guarantor, as the case may be).

The NCLAT opined that as per Section 145 of the Indian Contract Act, 1872 in every contract of guarantee,
there is an implied promise by the principal debtor to indemnify the surety and a financial debt includes debt
owed to the creditor by both the principal and the guarantor. It was further held that Section 3(11) of the
Code refers to a sum that is due from any person including a corporate debtor and that even a mere failure of
the guarantor to pay the financial creditor when the principal sum is demanded will come within the purview
of default under Section 3(12) of the Code.

The NCLAT further held that a financial creditor who has a guarantee on the debt in question can commence
proceedings under Section 7 of Code against the guarantor for failure to repay the sum borrowed by the
principal borrower. However, it was clarified that the only rider to this is that a creditor is not permitted to sue
the principal debtor and claim the guarantor's insolvency at the same time.

__________________________________________________________________________________

Flat Buyers Association, Winter Hills – 77, Gurgaon vs. Umang Realtech Pvt. Ltd. and Ors.

Company Appeal (AT) Insolvency No. 926 of 2019; Citation: MANU/NL/0077/2020

NCLAT

Decided on: 04.02.2020

The question that arose before the NCLAT was whether CIRP proceedings initiated by a flat buyer in relation
to one project of a real estate company will affect the other group projects of the company.

The NCLAT held that CIRP against a real estate company is limited to a project as per the resolution plan
approved by the competent authority, and not to other projects which are separate at other places for which
separate resolution plans have been approved. It was stated that if the same real estate company has any
other project, all such projects cannot be clubbed together.

It has further been held that any other allottees, financial institutions/banks, or operational creditors of other
projects cannot file a claim before the resolution professional of another project and such a claim cannot be
entertained.

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Committee of Creditors of Metalyst Forging Ltd. vs. Deccan Value Investors LP

Company Appeal (AT) (Insolvency) Nos. 1276 and 1281 of 2019; Citation: MANU/NL/0093/2020

NCLAT

Decided on: 07.02.2020

The question that arose before the NCLAT was whether the adjudicating authority can compel specific
performance of a resolution plan by an unwilling resolution applicant.

The NCLAT held that in a scenario where a resolution applicant withdraws the resolution plan, the Code does
not confer any power and jurisdiction on the adjudicating authority to compel specific performance of a
resolution plan by an unwilling resolution applicant.

However, the NCLAT did not interfere with the forfeiture of the bid bond furnished by the resolution
applicant.

__________________________________________________________________________________

Arunkant Rai vs. Allahabad Bank & Anr.

Company Appeal (AT)(Insolvency) No. 1251 of 2019

NCLAT

Decided on: 11.02.2020

The question that arose before the NCLAT was whether a bank, that was a part of a consortium, had to seek
the permission of and/or give notice to the lead member of the consortium before filing an application under
Section 7 of the Code.

The NCLAT held that there is no bar in law which prevents a bank that had declared a non-performing asset
from initiating proceedings under Section 7 of the Code, notwithstanding any consortium agreement(s)
between banks.

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Savan Godiwala vs. Mr. Apalla Siva Kumar

Company Appeal (AT)(Insolvency) No. 1229 of 2019; Citation - MANU/NL/0098/2020

NCLAT

Decided on: 11.02.2020

The issue that arose before the NCLAT was that whether a liquidator can be directed to make payment of
gratuity to the employees of the company, in case no fund is created by a company, in violation of the
statutory provision of the Payment of Gratuity Act, 1972 (Gratuity Act).

The NCLAT held that it is a settled position of law that the provident fund, the pension fund and the gratuity
fund, do not come within the purview of 'liquidation estate' for the purpose of distribution of assets under
Section 53 of the Code. The NCLAT stated that the only inference which can be drawn is that pension fund,
gratuity fund and provident fund cannot be utilised, attached or distributed by the liquidator, to satisfy the
claim of other creditors.

The NCLAT further stated that Section 36(2) of the Code provides that the liquidator shall hold the liquidation
estate in fiduciary capacity, for the benefit of all the creditors. It has also held that the liquidator has no
domain to deal with any other property of the corporate debtor, which does not form a part of the liquidation
estate.

The NCLAT opined that even in a case where no fund is created by a company, in violation of the statutory
provision of Section 4 of the Gratuity Act, the liquidator cannot be directed to ensure payment of gratuity to
the employees, since the liquidator does not have the power to deal with properties of the corporate debtor,
which do not form part of the liquidation estate.

__________________________________________________________________________________

Aashish Mohan Gupta vs. Hind Inn and Hotels Ltd. & Anr.

Company Appeal (AT)(Insolvency) No. 1282 of 2019; Citation - MANU/NL/0111/2020

NCLAT

Decided on: 12.02.2020

The question that arose before the NCLAT was whether retention money falls within the definition of
operational debt as defined in Section 5(21) of the Code.

The NCLAT observed that retention money was a part of the main bill which was retained by the corporate
debtor, as per the terms of the work order, and the same was to be released after completion of the work and
issuance of the completion certificate. It further noted that the defect liability period had already ended,
following which the operational creditor had requested the corporate debtor to release the retention money.

Having due regard to these observations, the NCLAT held that retention money falls withing the definition of
operational debt as defined in Section 5(21) of the Code.

__________________________________________________________________________________

Hammond Power Solutions Private Limited vs. Sanjit Kumar Nayak & Ors.

Company Appeal (AT)(Insolvency) No. 606 of 2019; Citation: MANU/NL/0119/2020

NCLAT

Decided on: 14.02.2020

The issue that arose for consideration of the NCLAT was whether a resolution plan providing NIL amount to
operational creditors could have been approved by the adjudicating authority.

The NCLAT held that providing NIL amount to operational creditors in a resolution plan would certainly not
balance the interest of all stakeholders, or maximise the value of assets of the corporate debtor. The NCLAT
further opined that a resolution plan needs to reflect that the interest of all the stakeholders including
operational creditors has to be taken care of and that it has taken into account the fact that the corporate
debtor needs to be kept as a going concern.

he order of the adjudicating authority, whereby it approved a resolution plan which did not allocate any
amount to operational creditors, was therefore set aside by the NCLAT.

_______________________________________________________________________________

JSW Steel Ltd. Vs. Mahender Kumar Khandelwal & Ors.

Company Appeal (AT)(Insolvency) No. 957 of 2019; Citation - MANU/NL/0113/2020

NCLAT

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Decided on: 17.02.2020

The question that arose before the NCLAT was whether after approval of a resolution plan under Section 31
of the Code, it is open to the Directorate of Enforcement to attach the assets of a corporate debtor on the
alleged ground of money laundering by erstwhile promoters of the corporate debtor.

The NCLAT observed that a plain reading of Section 32A (1) and (2) clearly suggests that the Directorate of
Enforcement/ other investigating agencies do not have the powers to attach assets of a corporate debtor,
once the resolution plan stands approved and the criminal investigations against the corporate debtor stands
abated. It was stated that Section 32A of the Code does not in any manner suggest that the benefit provided
thereunder is only for such resolution plans which are yet to be approved.

The NCLAT further held that the requirement set out in Section 32A(1)(b) of the Code is that the investigating
agency must have reason to believe that the resolution applicant had abetted or conspired in commission of
the offence, on the basis of material in its possession as on that date. The phrase "on the basis of material in
its possession" along with the usage of the words "has" and "reason to believe that he had abetted or
conspired.." has to necessarily be construed as, the material in the possession of investigating agency as on
the date when such agency is called to provide its confirmation/ certification with respect to Section 32A (1) (b)
of the Code. It was further specified that if the investigating agency is permitted to keep such confirmation in
abeyance till the investigation is complete in all respects, then the object and purpose of introducing Section
32A (1) (b) will be defeated and no resolution applicant would come forward to implement its resolution plan
for fear of the possibility of assets of the corporate debtor being attached.

The NCLAT held that the intent and purpose behind insertion of Section 32A is to provide certainty to the
resolution applicant that the assets of the corporate debtor, as represented to him, and for which he
proposes to pay value/ consideration in terms of the resolution plan, would be available to him in the same
manner as at the time of submission of the resolution plan.

__________________________________________________________________________________

Rajendra K. Bhutta vs. Maharashtra Housing and Area Development Authority and Anr.

Civil Appeal No. 12248 of 2018; Citation – 2020 SCC OnLine SC 292

Supreme Court of India

Decided on: 19.02.2020

The question that arose before the Court was whether Section 14(1)(d) of the Code will apply to statutorily
freeze occupation that may have been handed over to the corporate debtor under a joint development
agreement.

The Supreme Court answered this question in the affirmative. It was held that Section 14(1)(d) of Code, when
it speaks about recovery of property "occupied", does not refer to rights or interests created in property but
only actual physical occupation of the property.

The Supreme Court held that if there is any clash between the Maharashtra Housing and Area Development
Act, 1976 and the Code, on the plain terms of Section 238 of the Code, the Code must prevail. It was stated
that when a moratorium is spoken of under Section 14 of the Code, the idea is that to alleviate corporate
sickness, a statutory status quo is pronounced under Section 14, the moment a petition is admitted under
Section 7 of the Code. This ensures that the CIRP may be conducted, unhindered by any of the obstacles that
would otherwise arise and are dealt with under Section 14. The Supreme Court opined that the statutory
freeze that has been made by way of Section 14 of the Code, unlike its predecessor in the Sick Industrial
Companies (Special Provisions) Act, 1985 is only a limited one which is expressly limited by Section 31(3) of the
Code, to the date of admission of an insolvency petition up to the date that the adjudicating authority either
allows a resolution plan to come into effect or states that the corporate debtor must go into liquidation. It was
held that for this temporary period, at least, all the things referred to under Section 14 must be strictly
observed so that the corporate debtor may finally be put back on its feet.

__________________________________________________________________________________

Neeraj Jain, Director of M/s Flipkart India Private Limited vs. Cloudwalker Streaming Technologies Private
Limited

Company Appeal (AT)(Insolvency) No. 1354 of 2019; Citation - MANU/NL/0133/2020

NCLAT

Decided on: 24.02.2020

The first question that arose before the NCLAT was whether it is the discretion of the operational creditor, or
the nature of the operational debt that determines the issuance of notice in Form 3 or Form 4 under Section
8(1) of the Code.

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The NCLAT held that Section 8(1) does not provide the operational creditor with a discretion to send the
demand notice in either Form 3 or Form 4, as per its convenience. It clarified that the applicability of Form 3 or
Form 4 depends on whether the invoices were generated during the course of transaction, or not. In case the
operational debt involves transactions where corresponding invoices are generated, then Form 4 would have
to be utilized. However, in all other cases, Form 3 will have to be utilized.

The second question that arose for consideration in this matter was whether submission of a copy of the
invoice is a mandatory requirement for issuance of demand notice under Section 8(1) of the Code, in Form 3
of the Insolvency and Bankruptcy (Adjudicating to Authority) Rules, 2016.

As far as the second question is concerned, the NCLAT held that a copy of the invoice in question is not
mandatory if the demand notice is issued in Form 3 of the Insolvency and Bankruptcy (Adjudicating to
Authority) Rules ,2016, provided that the documents to prove the existence of operational debt and the
amount in default are attached to the application.

The third question that arose before the NCLAT was whether for filing an application under Section 9 of the
Code in Form 5 under Rule 6(1) of the Insolvency and Bankruptcy (Adjudicating to Authority) Rules 2016, the
submission of a copy of the invoice is a mandatory requirement, even though the demand notice is served in
Form 3.

Even in this regard, the NCLAT held that the submission of a copy of the invoice along with the application in
Form 5 is not a mandatory requirement, provided the documents to prove the existence of operational debt
and the amount in default are attached to the application.

__________________________________________________________________________________

Reliance Infra Power Fund, Reliance Capital v. Mr. Raj Kumar Ralhan

Company Appeal (AT)(Insolvency) No. 318 of 2020

NCLAT

Decided on: 24.02.2020

The question that arose before the NCLAT was whether the liquidator is bound to defend each and every suit,
prosecution or any other legal proceedings that has been initiated against a corporate debtor.

The NCLAT held that a duty is cast upon the liquidator to institute or defend any suit, prosecution or other
legal proceedings against a corporate debtor. However, the said duty includes any conscious decision(s) that a
liquidator may take with regard to whether, in the given set of facts, he needs to defend any proceedings.

It has further been held that if a liquidator has decided not to defend the corporate debtor in any particular
proceedings, then a party which has initiated such proceedings against the corporate debtor does not have
any right to force the liquidator to defend the corporate debtor, or surrender to such action.

__________________________________________________________________________________

Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited vs. Axis Bank Limited etc. etc.

Civil Appeal Nos. 8512-8527 Of 2019 With Civil Appeal Nos. 6777-6797 Of 2019
Civil Appeal Nos. 9357-77 Of 2019 (Arising Out of Diary No. 32881 Of 2019); Citation: 2020 SCC OnLine SC
237

Supreme Court of India

Decided on: 26.02.2020

In this case, the Supreme Court laid down the questions that ordinarily have to be examined in a given case, in
order to ascertain whether a transaction of transfer of property or an interest thereof, of the corporate
debtor, falls squarely within the ambit of Section 43 of the Code. The questions are as under:

i. Whether such transfer is for the benefit of a creditor or a surety or a guarantor?

ii. Whether such transfer is for or on account of an antecedent financial debt or operational debt or other
liabilities owed by the corporate debtor?
iii. Whether such transfer has the effect of putting such creditor or surety or guarantor in a beneficial
position than it would have been in the event of distribution of assets being made in accordance with
Section 53?
iv. If such transfer had been for the benefit of a related party (other than an employee), as to whether the
same was made during the period of two years preceding the insolvency commencement date; and if
such transfer had been for the benefit of an unrelated party, as to whether the same was made during
the period of one year preceding the insolvency commencement date?
v. Whether such transfer is not an excluded transaction in terms of sub-section (3) of Section 43?

__________________________________________________________________________________

Punjab National Bank vs. M/s Vindhya Cereals Pvt. Ltd.

Company Appeal (AT) (Insolvency) No. 854 of 2019; Citation - MANU/NL/0147/2020

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NCLAT

Decided on: 26.02.2020

The question that arose before the NCLAT was whether subsequent to initiation of proceedings under the
Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002
(SARFAESI Act), a financial creditor can be precluded from filing an application under Section 7 of the Code.

The NCLAT held that a financial creditor can proceed simultaneously against a corporate debtor under
SARFAESI Act the as well as the Code. The NCLAT opined that Section 238 of Code provides that the provisions
of the Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for
the time being in force or any instrument having effect by virtue of any such law. Therefore, this non-obstante
clause of the Code will prevail over any other law for the time being in force.

__________________________________________________________________________________

Mr. K.C. Sanjeev vs. Mr. Easwara Pillai Kesavan Nair & Ors.

Company Appeal (AT) (Insolvency) No. 1427 of 2019; Citation - MANU/NL/0157/2020

NCLAT

Decided on: 28.02.2020

The issue that arose for consideration of the NCLAT was whether Regulation 30A of the Insolvency Resolution
Process for Corporate Persons) Regulations, 2016 and Rule 11 of the NCLT Rules, 2016 can simultaneously be
resorted to, when an applicant wishes to withdraw an application before the constitution of the committee of
creditors.

The NCLAT, relying upon the decision of the Supreme Court in Swiss Ribbons Pvt. Ltd. vs. Union of India2, held
that when an applicant wishes to withdraw the application before constitution of the committee of creditors,
while resorting to amended Regulation 30A of the (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016, there is no bar on the party to simultaneously move an application for withdrawal before
the adjudicating authority under Rule 11 of the NCLT Rules, 2016.

__________________________________________________________________________________

Ishrat Ali vs. Cosmos Cooperative Bank Ltd. & Anr.

Company Appeal (AT) (Insolvency) No. 1121 of 2019; Citation - MANU/NL/0188/2020

NCLAT

Decided on: 12.03.2020

The NCLAT held that a judgment or a decree passed by a court for recovery of money by civil court/ debt
recovery tribunal cannot shift forward the date of default for the purpose of computing the period for filing an
application under Section 7 of the Code.

It further held that Section 14(2) of the Limitation Act, 1963 (Limitation Act) makes it clear that in computing
the period of limitation for any application, the time during which the applicant has been pursuing another
civil proceeding in relation to the same matter before a court which, from defect of jurisdiction or other cause
of a like nature is unable to entertain it, must be excluded. In order to take advantage of Section 14(2), the
applicant must satisfy the following criteria:

i. the applicant has been prosecuting with due diligence in another civil proceeding, whether in a court of
first instance or of appeal or revision;
ii. against the same party; and
iii. for the same relief.

It was further held that an action taken by the financial creditor under Section 13(2) or Section 13(4) of the
SARFAESI Act cannot be termed to be a civil proceeding before a court of first instance or appeal or revision
before an appellate court and therefore, action taken under Section 13(2) of the SARFAESI Act cannot be
discounted for the purpose of exclusion from calculation of the period of limitation under Section 14(2) of the
Limitation Act.

The NCLAT held that in an application under Section 7 of the Code, relief is sought for resolution of a
corporate debtor or liquidation on failure and therefore, it is not a money claim or suit. It was held that no
benefit can be given to any person under Section 14(2) of the Limitation Act, till it is shown that the application
under Section 7 was prosecuted with due diligence in a court of first instance or of appeal or revision, which
has no jurisdiction.

__________________________________________________________________________________

Rajive Kaul vs. Vinod Kumar Kothari & Ors.

Company Appeal (AT) (Insolvency) Nos. 44, 224 and 1518 of 2020; Citation - MANU/NL/0213/2020

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NCLAT

Decided on: 20.03.2020

The NCLAT held that it is an axiomatic principle in law that a company in liquidation acts through the
liquidator and the liquidator steps into the shoes of the board of directors of the company under liquidation
for the purpose of discharging its statutory duties. It was further held that the liquidator is armed with
requisite powers to remove the nominee directors and is entitled to nominate the directors, and the company
is enjoined to act upon the replacement proposal of the existing nominee directors.

The NCLAT also observed that Section 19 of the Code is similar to Section 284 of the Companies Act, 2013.
Section 19 imposes an obligation on the personnel and promoters of a corporate debtor to extend all
assistance and cooperation that the insolvency resolution professional may require in the management of the
affairs of the corporate debtor. It clarified that the word "personnel" refers to directors, managers, key
managerial personnel, designated partners and employees, if any, of the corporate debtor by means of
Section 5(23) of the Code. It was further held that Section 19(2) empowers a resolution professional to file an
application before the adjudicating authority to seek necessary directions where any personnel does not
assist or cooperate and that the adjudicating authority shall issue directions to such defaulting personnel. If
any personnel of corporate debtor or promoter does not render assistance or cooperation to the resolution
professional, the adjudicating authority is to pass appropriate orders and any instructions/ directions issued
by an adjudicating authority with respect to an application filed under Section 19 (2) of the Code, shall be
binding on such personnel or others, as the case may be.

Footnotes

1 2019 SCC OnLine SC 1478

2 2019 4 SCC 17

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

AUTHOR(S)

Vasanth Shweta Vashist Reshma Ravipati

Rajasekaran Phoenix Legal Phoenix Legal
Phoenix Legal

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