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September 2017

Corporate Amicus: July 2017

Article

Disputing a dispute under Insolvency and Bankruptcy Code, 2016

Various benches of NCLT have been pronouncing conflicting orders giving rise to inconsistency in interpretation of Insolvency and Bankruptcy Code (IBC) provisions. One such issue is the interpretation of the term ‘dispute’ under the IBC. However, recently NCLAT has held that the term ‘dispute’ has to be given a wider meaning provided it is relatable to the existence of the amount of debt, quality of goods or service, or breach of representation or warranty. It was also held that it is necessary to determine the circumstances in which the dispute has been raised by the corporate debtor, and that the dispute should be a genuine dispute and not one that was raised with malafides to stall the insolvency resolution process. According to the author, though the Order mandates analyzing circumstances while deciding upon the existence of a bona fide dispute, it would have been better if the Appellate Tribunal had laid down clear principles of determining a dispute. It is opined that Parties should also consider the issue while drafting their dispute resolution clauses where they agree to a settlement period prior to raising formal process such as arbitration or a court process.

 

Notifications & Circulars

  • Exemptions to Private Companies – MCA relaxes various compliance provisions under Companies Act, 2013, for private companies
  • Foreign Investment Promotion Board Abolished – Ministry of Finance outlines proposal for abolition of FIPB and transfer of files to concerned Ministries
  • Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017 stipulating procedure for inspection of records of insolvency professional agencies, insolvency professionals, insolvency professional entities and information utilities, for ensuring compliance with the Insolvency and Bankruptcy Code, notified
  • Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 specifying a maximum 90-day period, for the insolvency resolution process to be completed, notified

 

Ratio decidendi

  • Mismanagement by a Director leads to removal from directorship in a Company – NCLT, Chennai
  • New legislative provision affecting substantive rights is prospective unless made retrospective either expressly or by necessary intendment - NCLT provides clarity in respect of transfer of pending applications
  • Amalgamation when form for Board resolution and annual returns not filed – NCLT, New Delhi

 

July, 2017/Issue-70 July, 2017/Issue-70

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