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Corporate Amicus: February 2019

Indemnity clause in Share Purchase Agreement
by Anurag Pareek

Indemnity clauses in share purchase agreements (SPAs) have a wide scope than that provided under Section 124 of the Indian Contract Act, 1872. Considering the significance of indemnity clause in an SPA, the first article in this issue of Corporate Amicus discusses at length the question as to whether indemnity clauses are needed when statutory remedy for damages is available. It draws a distinction between a claim of damages and that of indemnity with respect to, parties to the claim, when losses can be claimed, duty to mitigate damages, and reasonability, foreseeability and remoteness of damages. According to the author, allocation of risks and liabilities by an indemnity clause in an SPA, provides certainty to the transaction as exposure of either party to the transaction is defined…

CIRP under IBC is independent of winding-up proceeding
by Ankit Parhar

The Supreme Court in Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd has held that an Insolvency Petition may be filed against a corporate debtor irrespective of the pendency of a winding-up petition before a High Court. The Supreme Court referred to the amendments to Section 434 of the Companies Act brought into force by Section 255 of the IBC read with the Eleventh Schedule which relate to the transfer of proceedings to the NCLT. The proceedings so transferred shall be dealt with by the NCLT as an application for initiation of CIRP under the IBC. The Supreme Court further referred to Rules 26 and 27 of the Companies (Court) Rules, 1959 which provide for the service of petitions and notice of petitions and the time of service. The Apex Court concluded that proceedings under the IBC are independent proceedings having nothing to do with the transfer of pending winding-up proceedings before a High Court and it is open to any creditor to approach the NCLT under the IBC before a winding-up order is passed…

Notifications and Circulars

  • RBI revises External Commercial Borrowing (ECB) framework – New framework merges the tracks and expands the list of eligible borrowers
  • Companies (Acceptance of Deposits) Rules, 2014 amended to exclude any amount received by a company from Real Estate Investment Trusts, from the definition of “deposits”
  • Specified Companies (Furnishing of information about payment to Micro and Small Enterprise Suppliers) Order, 2019 directs specified companies to submit a half yearly return to the MCA in MSME Form-I
  • Dematerialization of securities by unlisted public companies - Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 amended
  • SEBI (Prohibition of Insider Trading) Regulations, 2015 amended pursuant to a report prepared by the Committee on Fair Market Conduct

News Nuggets

  • Creditor bank blowing hot hotter when also pursuing second remedy
  • Insolvency and Bankruptcy Code is Constitutionally valid: Supreme Court
  • High Court to be more circumspect in blocking investigation carried by DG CCI
  • Company seeking voluntary removal under Section 248(2) be treated sympathetically
  • Insolvency proceeding against guarantor without exhausting debtor
  • Mere delay in passing of award cannot be a ground to appoint new arbitrator

Ratio decidendi

  • Corporate Insolvency Resolution Process cannot be initiated against two separate corporate guarantors for same claim amount - NCLAT
  • Put/buy-back option for equity investments comes within the meaning of 'financial debt' - NCLAT

February, 2019/Issue-89 February, 2019/Issue-89

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