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August 2019

Corporate Amicus: June 2019


Recovery proceedings for debt for period prior to approval of resolution plan
by Ankit Parhar


In the event of liquidation of a corporate debtor, operational creditors being unsecured do not get any part of the liquidation estate. However, in the case of Prasad Gempex v. Star Agro Marine Exports Pvt. Ltd. NCLAT has granted the appellant, an operational creditor, liberty to initiate appropriate recovery proceedings against the corporate debtor for recovery of its operational debt pertaining to a period prior to the date of approval of the resolution plan. Relying on Section 60(5) of the IBC, the NCLAT held that it is open to a party to initiate appropriate proceedings against the corporate debtor after completion of the moratorium. This decision of NCLAT disturbs the understanding prevailing since the enactment of the IBC that a resolution applicant takes over the management and affairs of corporate debtor with a clean slate. Operational creditors who are not ‘taken care of’ in resolution plans can now initiate recovery proceedings against a corporate debtor if and when a resolution plan is approved. It remains to be seen whether the interpretation by the NCLAT will be upheld by the Supreme Court…


Effect of an unstamped agreement containing an arbitration clause
by Siddharth Agrawal and Himanshu Setia


The second article in this issue of Corporate Amicus discusses that ean arbitration clause in an agreement would not exist if the agreement is not stamped as it is not enforceable by law. The Supreme Court in the recent case of Garware Wall Ropes Ltd. v. Coastal Marine Constructions decided the effect of an arbitration clause contained in a contract which was required to be stamped. The Court observed that the agreement as a whole has to be acted upon. It was of the view that the Indian Stamp Act applies to the agreement as a whole and therefore, it is not possible to bifurcate the arbitration clause. In so far as Section 11(13) is concerned, the Supreme Court held that appropriate stamp duty should be paid on an instrument before it is acted upon by any authority. While the Supreme Court did not go into the question of whether an application under Section 9 for interim relief is maintainable in an arbitration that emanates out of an unstamped agreement, in view of the ratio in the Garware Wall Ropes it seems that such applications may not be maintainable…


Class Action Suits under Companies Law – A Reality?
by Manasa Tantravahi


With the notification of the thresholds for filing class action suits, one can now look forward to class action as preferred form of litigation against various acts of oppression/ mismanagement or general misconduct by various parties. More importantly, minority investors are to be assured on having their interests thoroughly protected through the weapon of class action, with low thresholds for bringing action under Section 245 of the Companies Act. NCLT identifies class at the time of admitting a class action petition and the member(s)/ depositor(s) who are a part of the class are automatically a part of the suit, provided they choose to not opt-out.. In the absence of specific laws providing for class action, there is always a remedy under CPC which allows for the filing of ‘representative suits’. Discussing interpretation of Section 245 and class action provisions the author of the third article in this issue of Corporate Amicus is of the view that what is left to be seen is whether the Government resolves the gaps within the class action law over time…

Notifications

  • Default in filing of e-form ACTIVE - DIN of directors to be marked as “Director of ACTIVE non- compliant company”
  • Determination of company’s name - MCA amends Rule 8 of Companies (Incorporation) Rules, 2014
  • Criteria to be fulfilled for filing an application under Section 245(1) of Companies Act, 2013 - MCA amends Rule 84 of National Company Law Tribunal Rules, 2016.

Ratio Decidendi

  • Claim under Section 70 of Indian Contract Act, 1872 cannot be raised when parties have entered into a binding contract - Supreme Court
  • Amendment to Section 148 of Negotiable Instruments Act has retrospective application - Supreme Court

News Nuggets

  • International Arbitration Centre – Delhi High Court vacates its stay order
  • High Court to reappoint arbitrator if the one appointed earlier under Section 11(6) withdraws
  • Arbitration – Section 34 amendments in 2015 are prospective
  • Arbitration – International commercial arbitration – Jurisdictional error
  • Arbitration award upholding unilateral alteration to contract, wrong
  • Arbitration – Section 2(1)(e) Court can have territorial jurisdiction for enforcement
  • Landing of notice even in junk folder of email is service of notice
  • Insolvency – Computation of 270 days – Exclusion of time for change of Resolution Professional
  • Insolvency – Taking over of assets – DRAT not powerless to modify its own order

June, 2019/Issue-93 June, 2019/Issue-93

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