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Clean Slate Principle

 Guiding Principles: IBC & Resolution Process
✅ Separate Legal Personality
 Corporate Debtor (CD) is distinct from its management.
 IBC aims to revive the CD, not the old management.
✅ Section 31 – Binding Nature of Resolution Plan
 If CoC-approved plan meets Sec 30(2) requirements, AA must approve it.
 Binding on: CD, employees, members, creditors (including Govt), guarantors,
stakeholders.
 Ensures finality and prevents new claims post-approval.
✅ Section 32A – Clean Slate Protection
 CD’s liability for past offences ceases after resolution plan approval if:
o New management is not a promoter, related party, or abettor.
 Prosecution continues against:
o Old management, directors, or officers involved in offences.
 Ensures fresh start for new management.

 Case Laws on Clean Slate Principle

✔ Essar Steel v. Satish Gupta (2020)
 No undecided claims can pop up post-approval.
 Protects resolution applicant from unexpected liabilities.
✔ Ghanashyam Mishra v. Edelweiss ARC (2021)
 Surprise debts not allowed post-resolution plan.
 Resolution applicant starts with clean slate (Paras 93–94, SCC 657).
✔ Electrosteel v. Jharkhand – Black Sheep
("Black Sheep" refers to rare or exceptional cases where courts have deviated from the
usual principles like:
 Clean Slate Doctrine (Sec 32A),
 Finality of Resolution Plans (Sec 31), or
 Binding nature of CoC-approved plans.)

 RP failed to notify some creditors → plan not binding on them.

 Overruled by SC in Edelweiss – confirmed RP followed Reg 6.
✔ Ebix Singapore v. CoC of Educomp (2022)
 Resolution plan is not a typical contract.
 Binding due to IBC structure, not mutual consent.
 Even non-consenting stakeholders are bound.
✔ Ajay Goenka v. Tourism Finance Corp
 Filing claim under IBC = involuntary act; plan binds all.
 Clean Slate applies only to CD, not management.
 Sec 138 NI Act prosecution ends only for CD, not signatories.

 IBC vs PMLA – Jurisdiction Clash

✅ General Principle:
 PMLA attachment ceases post-liquidation approval under Sec 32A IBC.
 IBC takes precedence to enable value maximization.
✔ Satyendra Khorania v. ED (2022) – NCLT Jaipur
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 After liquidation order, ED cannot attach CD’s assets.

 Attachment to be lifted under Sec 32A.
 Liquidator may auction assets using Swiss Challenge method.
✔ Welspun Steel v. UOI – Gujarat HC (2023)
 If ED can attach post-liquidation, it will discourage bidders.
 Only assets derived from crime can be attached.
 "Reason to Believe" must be based on concrete material, not suspicion.
✔ Rajiv Chakraborty v. ED – Delhi HC (2023)
 Advocated harmonized application of IBC & PMLA.
 IBC = special law for insolvency → takes precedence.

 Other Key Provisions & Points

 Reg 6 & 6A – CIRP Public Announcement
 RP must communicate to all creditors as per last available accounts.
 If communication not possible, publication = deemed communication.
 Reg 16 – CoC with Only Operational Creditors
 Applicable when CD has no financial debt or all FIs are related parties.
 Property Attachment (PMLA)
 ED’s power to attach suspended during liquidation, after NCLT approves sale
method.
 Until then, ED may retain attachment rights.

Fast Track Corporate Insolvency Resolution Process

(FT-CIRP)
Why Introduced?
- Recommended by Bankruptcy Law Reforms Committee for faster resolution.
- Standard CIRP: 180 days → FT-CIRP: 90 days (extendable by 45 days).
- Targets small companies, startups, and specified entities to reduce financial strain.

Governing Law
- Sections 55-58, IBC 2016 (Chapter IV, Part II).
- IBBI (Fast Track CIRP) Regulations, 2017.

Eligible Entities (Notified by MCA, 2017)

1. Small Companies (Sec 2(85), Companies Act 2013):
- Paid-up capital ≤ ₹4 Cr (max ₹10 Cr).
- Turnover ≤ ₹40 Cr (max ₹100 Cr).
- Excludes holding/subsidiary/Sec 8/Special Act companies.

2. Startups (DPIIT Notification, 2017):

- Pvt Ltd/LLP, ≤7 years old (≤10 for biotech).
- Turnover ≤ ₹25 Cr.
- Focus: Innovation/scalability.
- Excludes splits/reconstructions/partnerships.
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3. Unlisted companies with assets ≤ ₹1 Cr (prev. FY).

Steps in FT-CIRP
1. Initiation:
- Creditor/debtor files application (NCLT) with proof of default.

2. IRP Appointment:
- NCLT appoints IRP (as per CIRP Regulations).

3. Public Announcement:
- Within 3 days of IRP appointment.
- Published in 2 newspapers (English + regional) + debtor’s website.

4. Claims Submission & Verification:

- Deadline: 10 days from IRP appointment.
- IRP verifies claims in 7 days.

5. Committee of Creditors (CoC):

- IRP files constitution report within 21 days.
- First meeting: Within 7 days of report submission.
- CoC can approve conversion to standard CIRP if ineligible.

6. Valuation:
- 1 valuer appointed (vs. 2 in standard CIRP) within 7 days.

7. Resolution Plan:
- IM submitted to CoC electronically in 2 weeks.
- No EoI stage → Direct RFRP (Form G).
- Minimum 15 days for plan submission.

8. Timeline & Extension:

- 90 days (vs. 180 in CIRP).
- 1 extension of 45 days (CoC approval: 75% majority).

Key Differences from Standard CIRP

- Shorter timelines (90 + 45 days).
- Single valuer.
- No EoI stage → Direct RFRP.
- CoC can convert to standard CIRP if complexity arises.

Conclusion
- Expedites insolvency for MSMEs/startups.
- Reduces litigation costs and operational disruptions.
- Balances speed with creditor rights.

Voluntary Liquidation
- Process by which company voluntarily decides to close its operations.
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Ease of doing Business also includes Ease of Exit- Bcz of 1. Personal Reasons 2. Technology.
3.Merger of Subsidiaries

Menthods-
1. IBC – Sec 59
2. Through ROC Sec 248(2)

Voluntary Liquidation Process (Section 248(2), Companies Act 2013)

Extinguishing all the liabilities + Special Resolution75% of paid upshare capital terms + No
pending litigation
Step 1: Board Resolution
 Hold a board meeting to:
o Approve closure of bank accounts.
o Settle all liabilities.
o Prepare final financial statements.
Step 2: File STK-2 with RoC
 Submit Form STK-2 along with:
o Indemnity bond (directors).
o Affidavit (no dues/litigation, certified by CA/CS).
Step 3: RoC Public Notice
 RoC publishes notice for 30 days in:
o MCA website.
o Official Gazette.
o Two newspapers (English + local language).
Step 4: Strike-off & Dissolution
 If no objections, RoC strikes off the company.
 Final notice published in the Official Gazette.

Key Problems & Fixes

Issue Solution

Delays (54% take 1+ year) Enforce 60-day deadline for RoC.

Costly newspaper ads Replace with digital-only notices.

Document rejections Standardize affidavit formats.

Voluntary Liquidation under IBC (Section 59)

1. Applicability
- For solvent corporate persons (no default).
- Governed by IBC, 2016 (Section 59) + IBBI (Voluntary Liquidation) Regulations, 2017.

2. Key Statistics (as of March 2021)

- 907 cases filed.
- 226 dissolved, 400 final reports submitted, 500 ongoing.

3. Process Steps
Step 1: Board Resolution & Solvency Declaration
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- Majority directors declare:

- Company is solvent.
- Liquidation is not fraudulent.
- Submit:
- Audited financials (last 2 years).
- Asset valuation report (by Registered Valuer).

Step 2: Shareholders’ Approval

- Pass special resolution (75% majority).
- Creditors’ approval (2/3 in value) within 7 days.
- Appoint Insolvency Professional (IP) as Liquidator.

Step 3: Notify IBBI & ROC

- File resolution with IBBI & ROC within 7 days.
- Public announcement (newspapers) for claims (30-day window).

Step 4: Bank Account Management

- Open designated liquidation account.
- Transfer funds; close existing accounts.

Step 5: Obtain NOCs

- From tax authorities (CBDT, CBIC), EPFO, and sectoral regulators (implied requirement).

Step 6: Distribute Funds

- Pay shareholders.
- Deposit withholding taxes.
- Close bank account.

Step 7: Final Report Submission

- Submit to shareholders, ROC, IBBI, NCLT.

Step 8: NCLT Dissolution Order

- Tribunal approves dissolution.

Step 9: ROC Compliance

- File Form INC-28 with ROC for strike-off.

4. Key Takeaways
- Timeline: ~6-12 months.
- Critical Compliance: Director solvency declaration, creditor approval, NOCs.
- Challenges: Pending NCLT orders (only 226 dissolved out of 907 filed).

5. Simplified Liquidation
- Fast-track for small companies (reduced formalities).

Cross-Border Insolvency

Pre-IBC Framework
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Section 13 CPC - Foreign Judgment Enforcement

Foreign judgment not conclusive if:
 Court lacked competent jurisdiction
 Not decided on merits
 Based on incorrect international law view
 Opposed to natural justice
 Obtained by fraud
 Sustains claim breaching Indian law
First Case: Macfadyen & Co. (1908) - Anglo-Indian partnership liquidation with London-
Madras trustee cooperation
UNCITRAL Model Law (1997)
Key Features:
 Access: Foreign creditors/officials can participate in domestic proceedings
 Recognition: Foreign court proceedings recognized with relief
 Coordination: Multiple jurisdiction proceedings coordinated
 Cooperation: Direct court-to-court cooperation encouraged
 Public Policy: Domestic courts can reject conflicting foreign proceedings
IBC Provisions
Sections 234-235:
 Section 234: Central Government may enter bilateral agreements for overseas assets
 Section 235: Indian courts can send letters requesting foreign court assistance
 Limitation: Ineffective due to lack of reciprocal agreements
Case Studies
Jet Airways - Cross-Border Issues
Netherlands Proceedings:
 Dutch court declared Jet Airways bankrupt, seized Boeing 777 in Amsterdam
 Aircraft sold to IAGCAS 777, LLC
 Proceeds used to close Dutch insolvency process
 Balance funds repatriated to India for IBC handling
Protocol Agreement: Formalized cooperation framework between jurisdictions
Supreme Court Order (Nov 2024):
 Liquidation ordered after 2-year deadlock between creditors and Jalan Kalrock
consortium
Assets for Liquidation:
 Aircraft: 11 planes at Mumbai (6), Delhi (3), Hyderabad (2)
 Other Assets: Engines, APUs, spares, ground equipment
 Real Estate: Half floor in Mumbai BKC (₹245 crore value)
 Cash: ₹100 crore in bank accounts + ₹350 crore consortium deposit
 Guarantees: ₹150 crore performance guarantee + ₹200 crore escrow forfeiture
Re Compuage Infocom Ltd. [2025] SGHC 49
Historic First: Singapore High Court recognized Indian CIRP under UNCITRAL Model Law
Facts:
 Section 7 application admitted against Compuage Infocom Limited (Indian IT
company)
 CIL had assets in Singapore
 Resolution Professional sought recognition to control Singaporean assets
Legal Questions Examined:
1. Whether CIRP qualified as "foreign proceeding"
2. Whether NCLT was "foreign court"
3. Whether RP was "foreign representative"
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4. Whether CIL's COMI was in India (making it "foreign main proceeding")

5. Whether reliefs should be granted
Singapore Court Ruling:
 Recognized CIRP as foreign main proceeding
 NCLT qualified as foreign court (adjudicative body)
 IBC satisfied insolvency law requirements
 CIRP met criteria for reorganization/liquidation purpose
Key Definitions
Foreign Representative
Individual/body authorized to manage foreign insolvency proceeding, representing foreign
court/proceeding
Centre of Main Interest (COMI)
Location of debtor's main activities/administrative functions, determines primary jurisdiction
for insolvency
COMI Manipulation: Companies may relocate COMI for favorable jurisdiction (e.g.,
German companies moving to England for flexible schemes)
US Advantage: Low eligibility threshold - foreign companies need only "place of business"
or "property" in US for Chapter 11 filing
Group Companies: Each entity has individual COMI based on own circumstances, not parent
company's COMI
Reliefs Granted (Article 20)
Upon recognizing foreign main proceeding:
 Stay of individual legal actions against debtor
 Stay of enforcement actions against assets
 Restriction on asset transfer/disposal
Singapore Court Decision:
 Allowed: RP to manage CIL's Singapore assets
 Denied: Immediate asset repatriation to India
 Required: Singapore creditors notification and objection opportunity
Current Challenge
Key Issue: How will India ensure fair treatment of Singaporean creditors in CIRP when India
lacks:
 Cross-border insolvency law
 Reciprocal agreement with Singapore for IBC enforcement
Court's Position: Asset repatriation possible if local creditors get fair treatment and reasonable
participation opportunity in foreign insolvency process

Group Insolvency

Basic Concept
 Companies are separate legal entities, but groups operate with economic dependencies
 Group insolvency occurs when multiple related companies default
 IBC doesn't explicitly provide for group insolvency, but courts have handled such cases
Key Examples
Videocon, Era Infrastructure, Lanco, Educomp, Amtek, Jaypee, Adel Landmarks
Regulatory Framework Development
 Working Group (WG): Led by U.K. Sinha to recommend group insolvency
framework
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 CrossBorder Insolvency Committee (CBIRC): Led by Dr. K.P. Krishnan to analyze

UNCITRAL Model Law
Framework Considerations
 Broad definition of 'group' based on control and ownership
 Apply only to companies already in CIRP/liquidation (not solvent members)
 Same Adjudicating Authority and common Resolution Professional
 Mandatory cooperation between CoCs and IPs
 Group CoC formation with representation from all members
 Substantive consolidation (pooling assets/liabilities) considered for future
Current Status
Courts use "sui-generis mechanism" (case-by-case approach) due to absence of codified
framework
Case Studies
Videocon Group
Facts:
 13 out of 15 companies consolidated by NCLT Mumbai
 Complex interdependence through inter-corporate guarantees
 Individual CIRP failed to attract bids
NCLT Decision:
 Applied doctrine of substantial consolidation
 14 factors tested: common control, directors, assets, liabilities, interdependence, etc.
 Excluded 2 companies (KAIL Ltd., Trend Electronics) - no operational dependency
Issues with Consolidation:
 Creditors who lent to individual entities forced into common pool
 Reduced voting shares in CoC
 Operational creditors disadvantaged
NCLAT Appeal:
 Vedanta's Rs. 2,962 crore bid approved by NCLT (June 2021)
 Bank of Maharashtra & IFCI challenged - bid below liquidation value
 Key Issues:
o Breach of confidentiality (liquidation value leaked to bidders)
o Substantial haircut (95.85% - only 4.15% recovery on Rs. 64,838 crore claims)
 Result: NCLAT sent resolution plan back to CoC for modification
Current Status: Supreme Court refused Venugopal Dhoot's plea to halt lenders from dealing
with foreign assets (Sep 2024)
Jaypee Group
Facts:
 Flagship firm admitted for insolvency (June 2024)
 ICICI Bank moved against JAL for Rs. 1,269 crore default
 Owes 31 creditors including SBI, PNB, IDBI
NCLT Decision:
 Ordered single resolution plan for entire group
 Rejected company-wise insolvency proposal
Current Status:
 JSW, Jindal Power, Dalmia Bharat, Vedanta submitted EOIs
 Group valued at Rs. 17,300 crore
 Assets: 10 million tonnes cement capacity, EPC ventures
Other Cases
 Amrapali Group: 40 firms treated as singularly insolvent by Supreme Court
(homebuyer petition)
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 Lavasa Corporation, Sachet Infrastructure: Similar consolidation approach

Roles & Responsibilities of IRP/RP under IBC

1. Definitions (Section 3)
 Claim (Section 3(6))
o (a) A right to payment, whether:
 Reduced to judgment or not
 Fixed, disputed, undisputed, legal, or equitable
 Secured or unsecured
(b) A right to remedy for breach of contract (if it results in payment), whether:
 Reduced to judgment or not
 Matured or unmatured
 Disputed, undisputed, secured, or unsecured
2. Duties of IRP (Section 18)
 (1)(b) Receive and collate all claims submitted by creditors after public announcement
(Sections 13 & 15).
3. Duties of RP (Section 25)
 (1) Preserve and protect the assets of the corporate debtor (CD), including continuing
business operations.
 (2)(e) Maintain an updated list of claims.
4. Verification & Determination of Claims (IBBI Regulations, 2016)
 Regulation 13: Verification of Claims
o IRP/RP must verify claims within 7 days from the last date of receipt.
o Maintain a list of creditors with:
 Names of creditors
 Amount claimed vs. admitted
 Security interest (if any)
o Update the list regularly.
 Regulation 14: Determination of Claim Amount
o If the claim amount is uncertain, IRP/RP must make a best estimate based on
available information.
o Revise admitted claims if new information warrants a change.
5. Judicial Interpretations
(A) Swiss Ribbons Pvt Ltd. v. Union of India (2019) – SC
 RP has no adjudicatory powers (only administrative).
 Liquidator has quasi-judicial powers (can admit/reject claims, appealable).
 RP acts as a facilitator, subject to CoC and NCLT oversight.
(B) Rakesh Kumar Jain (RP) vs. Jagdish Singh Nain (2022) – NCLAT
 Section 14(1)(a) (Moratorium):
o Bars new suits/proceedings but does not prevent NCLT from passing
orders against RP/suspended directors.
 Section 66 (Fraudulent Trading):
o NCLT can pass orders if directors/RP engage in fraud during CIRP.
(C) IDBI Bank vs. Degee Cotsyn (2021) – NCLT
 RP must verify claims properly and cannot act as a "rubber stamp."
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 If claims lack documentary proof, RP must reject them.

 RP’s duty: Apply mind, verify documents, and justify decisions.
(D) Rakesh Gupta v. Mahesh Bansal (2023) – NCLAT
 NCLT cannot impose fines (only Special Court can under Sections 70 & 236).
 NCLT can impose costs, but fine = penalty = beyond its jurisdiction.

Preferential Transactions Under IBC - Comprehensive

Short Notes
1. Definition (Sec 43)
- Transactions favoring specific creditors before insolvency, disrupting fair asset distribution

2. Key Features
- Look-back period : 2 yrs (unrelated)/1 yr (related parties)
- Test : Objective impact (no intent required)
- Effect : Creditor gains advantage over liquidation hierarchy (Sec 53)

3. Examples
- Repaying unsecured loans to group companies
- Asset transfers to relatives pre-insolvency

4. Consequences
- Reversible under Sec 44
- Creditor must return benefits

5. Exceptions
- Ordinary course business transactions
- Simultaneous exchange of equal value

6. Case Laws
- Anuj Jain (2020) : Strict scrutiny of related-party deals
- Reliance Telecom (2024) :
- ₹3,125Cr repaid to group company pre-CIRP
- NCLT dismissed case as:
- Both parties in CIRP
- Resolution plans excluded related-party claims
- No practical benefit in reversal

7. Significance
- Prevents last-minute asset diversion
- Ensures fair creditor treatment
- Balances technical compliance with practical outcomes

Exam Tips
- Always link to Sec 43/44/53
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- Contrast Anuj Jain (strict) vs Reliance Telecom (practical) approaches

- For 5-mark answers: Definition + Conditions + Examples + Case Laws + Significance

One-Sentence Principle
Preferential transactions unfairly benefit certain creditors pre-insolvency but may not be
reversed if doing so serves no practical purpose in resolution.

 Put creditors ahead unfairly

 Avoidable under IBC
 Insolvency look-back period
 Disrupts Section 53 waterfall

Personal Guarantor
A personal guarantee is a promise to repay a debt on behalf of a debtor (borrower) to the creditor
(lender) if the borrower fails to repay the debt.

1. No Early Court Role – Initial stages (Sections 95-99) are administrative (fact-
collection), not judicial.
2. RP’s Limited Power – Resolution Professional only recommends (accept/reject);
final call rests with Adjudicating Authority (AA).
3. No Pre-Hearing Needed – AA cannot decide on "jurisdictional facts" at RP
appointment stage (Section 97(5)).
4. Fair Process – Debtor gets chance to participate; AA must hear both sides only at final
decision stage (Section 100).
5. Automatic Protection – Interim moratorium (Section 96) freezes legal actions against
debtor during process.
6. Constitutionally Valid – Process does not violate fundamental rights (Articles 14/21).

Anil Ambani vs. SBI - IBC Challenge Summary

Case Background
 Parties: Anil Ambani vs. State Bank of India (SBI)
 Context: SBI initiated insolvency against Ambani as personal guarantor for RCom's
₹1,200 crore debt
 Challenge: Ambani contested IBC provisions (Sections 95-100)
Ambani's Arguments
1. Sections 95-96 (interim moratorium) and Section 99 (RP's non-transparent report)
violated fundamental rights
2. Due Process Violation: No opportunity for personal guarantor to be heard before:
o Accepting insolvency petition by creditor
o Appointing Resolution Professional (RP)
o Violates fundamental right to natural justice
3. Unchecked Power: RP had authority to freeze assets without judicial oversight
NCLT Decision (2020)
 Upheld SBI's action
 Allowed: Asset moratorium and RP appointment before resolution plan approval
 Reasoning: Aligned with administrative nature of initial IBC stages
Supreme Court Position
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Referenced Case: Lalit Kumar Jain (2021)

Key Principles:
1. Administrative vs. Judicial Stages:
o Sections 95-99: Administrative (fact-finding by RP)
o Section 100: Judicial (final AA decision)
2. Natural Justice Application:
o Not Required: During initial administrative stages
o Required: Only at final Adjudicating Authority decision (Section 100)
3. Interim Moratorium (Section 96):
o Purpose: Protect creditors' interests during process
o Justification: Prevents asset dissipation
Legal Tension
Courts' Priority:
 Insolvency efficiency over pre-decision hearings
 Creditor recovery protection
Guarantors' Concern:
 Demand for stricter due process
 Guarantor rights protection
Conclusion
Ongoing Tension: Balance between creditor recovery efficiency and guarantor
fundamental rights remains unresolved in personal guarantee insolvency cases.

1. Section 95: Creditor/debtor can file insolvency application against personal guarantor.
2. Section 96: Automatic interim moratorium on guarantor’s assets upon application
filing.
3. Section 97: NCLT appoints Resolution Professional (RP) to examine the application.
4. Section 99: RP submits recommendation (accept/reject) to NCLT without debtor’s
input.
5. Section 100: NCLT makes final decision (admits/rejects) after hearing both sides.
SC in Mahendra Kumar Jajodia vs SBI (2022) held that personal guarantors can be
proceeded against under S.95 IBC even without CIRP/liquidation of corporate debtor, as
per S.60(1).

1. Jajodia vs. SBI (2022) → Banks can sue guarantors even if the company isn’t in
insolvency.
2. Lalit Kumar Jain (2021) → Guarantor’s debt doesn’t end just because the company’s
debt is cleared.
3. BoB vs. Divya Jalan (2022) → If guarantor dies, case closes—no action against
family.
4. UBI vs. Dheeraj Wadhawan (2022) → Banks can send notices to home address (no
need for personal delivery).

SARFAESI ACT
Definition of "Default" – Sec 2(1)(j)
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1. Default means:
o (i) Non-payment of debt leading to NPA classification by secured creditor.
o (ii) Non-payment of debt securities post 90 days’ notice by debenture trustee.

Section 13 – Enforcement of Security Interest

Sec 13(1)
 Secured creditor can enforce security without court intervention.
Sec 13(2)
 If borrower defaults and account is NPA, a 60-day notice is given to repay.
 Exception: For debt securities, NPA classification not needed; debenture trustee can
enforce.
Sec 13(3)
 Notice must mention dues + secured assets intended to be enforced.
Sec 13(3A)
 Borrower can object/respond to notice.
 Secured creditor must reply with reasons within 15 days.
 No right to appeal just because reasons are communicated.
Sec 13(4) – Measures Available to Secured Creditor:
1. (a) Take possession of secured asset; lease/sell it.
2. (b) Take over management of borrower’s business if it’s held as security.
3. (c) Appoint manager to manage secured assets.
4. (d) Require payment from anyone who owes money to the borrower.

Security Interest (Enforcement) Rules, 2002 – Rule 8 (Immovable Property)

1. Possession Notice:
o Serve to borrower + affix on property.
o Publish in 2 newspapers (1 vernacular).
o Can be sent via electronic mode too.
2. Custody:
o Authorized officer or representative keeps property safe like an ordinary
prudent owner.
3. Preservation:
o Secured assets to be protected/insured till sold.
4. Valuation & Reserve Price:
o Obtain valuation from approved valuer.
o Fix reserve price with secured creditor's consultation.
5. Modes of Sale:
o (a) Quotations
o (b) Tenders
o (c) Public auction or e-auction
o (d) Private treaty
6. 30-Day Sale Notice:
o Mandatory to send before sale.
o For auction/tender: Public notice in 2 newspapers + website upload.
7. Sale Terms:
o Include property description, encumbrances, debt amount, reserve price,
auction time/place, earnest money, etc.
8. Private Sale:
o On written terms agreed between secured creditor and buyer.
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Case: Indian Overseas Bank v. M/S RCM Infrastructure Ltd. (2021)

 Facts:
o RCM defaulted on loan.
o Bank initiated SARFAESI proceedings.
o Asset sold via e-auction.
o Sale challenged due to procedural issues.
 Key Issues:
o Whether borrower was given proper notice.
o Whether mandatory procedural safeguards were followed.
 SC Judgment:
o Sale was valid.
o Borrower had opportunity to object but did not act timely.
o Emphasized strict compliance with Rule 8, but borrower’s delay weakened
the challenge.
It confirmed that SARFAESI action can't proceed during a moratorium under IBC.

Competition Law & IBC

 De Minimis Target Exemption (M&A Filing Exemption)
India:
 Target Co. Asset: ≤ ₹350 crores
 Target Co. Turnover: ≤ ₹1000 crores
Parties Test (India):
 Combined Asset: ≥ ₹2000 crores
 Combined Turnover: ≥ ₹6000 crores
Group Test (India):
 Combined Asset: ≥ ₹8000 crores
 Turnover: ≥ ₹24000 crores
Parties Test (Worldwide):
 Assets ≥ USD 1B (with ≥ ₹1000 cr in India)
 Turnover ≥ USD 3B (with ≥ ₹3000 cr in India)
Group Test (Worldwide):
 Assets ≥ USD 4B (with ≥ ₹1000 cr in India)
 Turnover ≥ USD 12B (with ≥ ₹3000 cr in India)

 Section 31, IBC – Approval of Resolution Plan

1. Sec 31(1):
o If CoC-approved plan meets Sec 30(2), NCLT must approve it.
o Binding on all: CD, employees, members, creditors (including Govt/statutory
dues), guarantors, stakeholders.
2. Sec 31(2):
o If plan doesn't meet requirements, NCLT can reject.
3. Sec 31(3):
o On approval:
 Moratorium (Sec 14) ends
 RP submits CIRP records to IBBI
4. Sec 31(4):
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o RA must obtain all necessary legal approvals within 1 year of NCLT approval
or as per law.
o If plan involves combination (merger), CCI approval required before CoC
approval.

 Key Issues under Sec 31(4)

 When does combination filing trigger – on submission or approval of resolution
plan?
 In Vedanta–Electrosteel, CCI approval taken after CoC approval.

 Is Sec 31(4) Directory or Mandatory?

 Case: ArcelorMittal India Pvt. Ltd. v. Abhijeet Guhathakurta (2019) – NCLAT
considered the issue of compliance and timing.

 Challenges Under Sec 30(4)

 Multiple resolution applicants (RAs) = multiple CCI filings
 High application fee burden
 Possible duplication of efforts if only one RA is selected

 Key Case Examples

 Binani Cement:
o Dalmia’s bid rejected (0–5% market share)
o UltraTech approved (20–25% share) – showed CoC's commercial preference
 Bhushan Power & Steel:
o Tata Steel vs. JSW Steel
o CoC preferred higher bidder (JSW)
o Competition-law and CoC preference clash

 Suspensory Regime Challenge

 Should RP wait for CCI approval before NCLT filing?
 What if NCLT approves but CCI hasn't? (e.g., Vedanta–Electrosteel)

 Solution: Green Channel + Failing Firm Defence

 Sec 20(4)(k) of Competition Act allows failing firm defence
 No need for suspensory regime in such cases
 Green Channel route eases approvals for combinations with no overlap

 Recent Global Developments

 Facebook fined £50.5M by UK CMA for non-compliance during Giphy acquisition
review.
 FTC blocked P&G’s acquisition of Billie Inc.
 US DOJ opposed AT&T–Time Warner merger – CNN issue raised political concerns.

Relation Between the Competition Act, 2002 and the Insolvency and Bankruptcy Code,
2016 (IBC)
The Competition Act and the IBC are two key economic legislations that intersect when it
comes to mergers, acquisitions, and resolution plans during insolvency. Here's how they
relate:
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 1. Merger Control under Competition Act during Insolvency

 Under IBC, when a resolution applicant (RA) proposes to acquire a distressed
company, it may trigger a combination (merger/acquisition).
 Such combinations require prior approval from the Competition Commission of
India (CCI) under Section 5 & 6 of the Competition Act.

 2. Section 31(4) of IBC

 It mandates that if a resolution plan involves a combination, the RA must obtain CCI
approval before CoC (Committee of Creditors) approval.
 Ensures that anti-competitive combinations are avoided during insolvency resolution.

 3. Regulatory Coordination
 The NCLT (under IBC) and CCI (under Competition Act) both play roles:
o NCLT approves resolution plans.
o CCI checks if the combination causes an Appreciable Adverse Effect on
Competition (AAEC).

 4. Green Channel & Failing Firm Defence

 CCI may adopt a “green channel” approach to fast-track combinations involving
failing firms under IBC.
 Section 20(4)(k) of the Competition Act allows CCI to consider the failure of the
business as a factor in clearing the combination.

De Minimis Target Exemption (Filing Exemption – CCI)

 If the target company's:
o Assets in India ≤ ₹350 crores OR
o Turnover in India ≤ ₹1000 crores
→ Then no need to notify CCI before merger/acquisition.

In M/s Energy System Consultants v. Inox Green Energy Services Ltd. (NCLT Ahmedabad,
2024), the Tribunal held that a Section 9 IBC application is not maintainable when the arbitral
award forming the basis of the claim is under challenge and stayed by a civil court. Relying on
Mobilox and K. Kishan, it reiterated that a pre-existing dispute under Section 8(2)(a) bars
admission. The application was rejected under Section 9(5)(ii)(d) of the IBC.

waterfall mechanism. Sec. 53

 First, payment of insolvency resolution process costs and liquidation expenses
 Second, dues to secured creditors (unless they choose to relinquish security)
 Third, dues to workmen and employees (up to 24 months)
 Fourth, operational creditors (suppliers, service providers)
 Fifth, unsecured creditors and government dues (like taxes, electricity bills)
 Finally, any remaining amount goes to the equity shareholders
State Tax Officer v. Rainbow Papers Ltd – SC reaffirmed the section 53.
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Essential Goods & Services under IBC

1. Section 14(2) & Regulation 32 (Essential Supplies)

 Definition: Essential goods/services include:
o Electricity
o Water
o Telecom
o IT services
o Exclusion: Not applicable if directly used in production (e.g., water for
hydroelectricity).
 Moratorium Protection: Suppliers cannot terminate essential supplies during
CIRP, unless:
o Corporate debtor fails to pay dues during moratorium.
o Other specified exceptions apply.
2. Judicial Interpretations
 Canara Bank v. Deccan Chronicle (NCLT, 2017):
o Printing materials (ink, plates, solvents) not considered essential under
S.14(2).
 Uttarakhand Power Corp v. ANG Industries (NCLAT, 2017):
o Pre-CIRP disconnection: Outstanding dues must be paid to restore supply.
o Post-CIRP charges: Payable monthly during moratorium.
3. Section 14(2A) – Critical Supplies
 IRP/RP’s Discretion: Can classify non-essential goods/services (e.g., raw materials)
as critical if vital for going concern.
 Case: Sandeep Khaitan RP v. JSVM Plywood – RP’s decision guided by IBC
objectives.

Section 19 – Cooperation with RP

Key Obligations
 Who Must Cooperate:
o Ex-management (directors, promoters, personnel).
o Statutory auditors (must provide audited accounts).
 Non-Compliance Penalty: Punishable under S.70 (fines/imprisonment).
Judicial Rulings
 Educomp Infra (NCLT):
o Even retired directors must provide records of their tenure.
 Om Parkash Khurana (NCLAT):
o Independent Directors: Not exempt; must cooperate unless proven non-
involvement.
o Burden of Proof: Directors must show records are inaccessible (e.g., bank
possession).
 Ashish Chaturvedi (NCLAT):
o Penalty under IBC (not Companies Act) for non-cooperation.

Employee Dues & Liquidation

Sunil Kumar Jain v. Sundaresh Bhatt (SC, 2022)
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 CIRP Period Wages:

o Payable as CIRP cost (S.53(1)(a)) if work done during CIRP.
 Provident Fund/Gratuity:
o Excluded from liquidation estate (S.36(4)(iii)).
o Must be paid outside liquidation process.

Related Parties in CoC – Phoenix Arc v. Spade (SC, 2021)

Key Issue
 Whether creditors formerly related to corporate debtor can join CoC.
SC Ruling
 Test: Relationship at time of debt creation matters.
 Exclusion if:
o Creditor was related party when debt arose and
o Severed ties fraudulently to influence CoC.
 Held: Spade & AAA (collusive transactions) barred from CoC.

Section 20 – IRP’s Powers

 Contracts During CIRP: IRP must seek CoC approval (e.g., insurance contracts).

Anjali Rathi v. Today Homes (NCLT)

 Homebuyers’ Rights:
o Treated as financial creditors under IBC.
o Can initiate CIRP for delayed possession.

Exam Takeaways
1. Essential Supplies: Moratorium protects only defined essentials; RP can expand list.
2. Cooperation with RP: Mandatory for ex-management; penalties apply.
3. Employee Dues: CIRP wages > liquidation hierarchy; PF/gratuity excluded.
4. Related Parties: CoC exclusion based on debt-time relationship, not just current
status.
5. Judicial Trends: Strict compliance with IBC objectives; purposive interpretation.

Authorised Representative (AR) under IBC

1. Role & Appointment (S.21(6), 21(6A), 25A)

 Who Can Be AR:
o Trustee/Agent for consortium/syndicated debt (S.21(6)).
o Insolvency Professional (IP) for creditors in securities/deposits
(S.21(6A)(a)).
o IP appointed by NCLT for creditors exceeding specified number
(S.21(6A)(b)).
o Guardian/Executor for incapacitated creditors (S.21(6A)(c)).
 Duties:
o Vote as per creditors’ instructions (S.25A(1)).
o Abstain if no instructions received (S.25A(3)).
o For class creditors (S.21(6A)): Vote as per >50% voting share (S.25A(3A)).
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2. Exclusions
 Related Party FCs: Cannot vote/participate in CoC (S.21(2) proviso).
3. Judicial Precedents
 Fort-Gloster Case (NCLAT):
o Workmen may (not mandatory) choose AR for claims (Regulation 9(2)).
 Bhusan Shringarpure Case (NCLAT):
o RP must notify all operational creditors (OCs) if debt ≥10% (S.24(3)(c)).

Resolution Applicant (RA) – Eligibility & Duties

1. Eligibility Criteria (S.29A)
 Disqualifications:
o Wilful defaulter (RBI guidelines).
o NPA accounts (unless cleared dues pre-submission).
o Conviction under specified laws (e.g., PMLA, FEMA) (Twelfth Schedule).
o Promoter of CD with fraudulent transactions (S.29A(g)).
o Personal guarantor if guarantee invoked (S.29A(h)) (Exception: Bank of
Baroda v MFL Infra).
 Exceptions:
o MSMEs: Exempt from S.29A(c) & (h) (S.240A).
o Financial entities (e.g., banks, ARCs) exempt if not related parties.
2. Duties of RA
 Submit affidavit confirming eligibility (S.30(1)).
 Access information memorandum under confidentiality (S.29(2)).
3. Judicial Precedents
 ArcelorMittal v Satish Gupta (SC):
o RA ineligible if related to CD with NPA; allowed cure via dues payment.
 Dr. Govinarajula Case (NCLT):
o RPlan rejected for non-compliance with PBG requirement (Regulation
36B(4A)).

Resolution Plan (RPlan) – Approval & Challenges

1. Approval Process
 CoC Decision: Approved by 66% voting share (S.30(4)).
 NCLT’s Role:
o Limited scrutiny (S.30(2)): Ensure compliance with IBC, no modification
allowed.
o Cannot question CoC’s commercial wisdom (K. Sashidhar v IOB).
2. Grounds for Rejection
 Non-compliance with S.30(2) (e.g., unfair treatment of dissenting FCs).
 Material irregularities by RP (e.g., Kotak Investment case).
3. Judicial Precedents
 Jaypee Kensington (SC):
o NCLT cannot modify RPlan; must return to CoC for reconsideration.
 Edelweiss ARC v Anuj Jain (NCLAT):
o Security interest of FCs can be extinguished in RPlan (S.52 exception).

Liquidation & MSMEs

 Liquidator’s Duty (S.35):
o Sell assets only to eligible buyers (S.29A applies).
o Disclose material facts (e.g., land restrictions) (Abhishek Agarwal Case).
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 MSME Protection (S.240A):

o Exempt from NPA-related disqualifications (S.29A(c) & (h)).

Exam Takeaways
1. AR’s Role: Bound by creditors’ instructions; related parties barred from CoC.
2. RA Eligibility: Strict criteria under S.29A; exceptions for MSMEs/financial entities.
3. RPlan Approval: CoC’s commercial wisdom paramount; NCLT’s review limited.
4. Liquidation: S.29A applies to buyers; liquidator must ensure transparency.

IBC & NIA (National Insolvency Agenda)

1. Section 29A – Eligibility of Resolution Applicants (RA)

 Purpose: Bars certain persons (e.g., wilful defaulters, promoters of NPAs, fraudsters)
from submitting resolution plans.
 Key Clauses:
o S.29A(c): RA with NPAs (unless dues cleared).
o S.29A(h): Personal guarantors (if guarantee invoked).
o MSME Exemption (S.240A): MSMEs exempt from S.29A(c) & (h).
 Current Issue:
o Related Party Loopholes: SC in Phoenix Arc v Spade held former related
parties can be barred if debt was collusive.
2. Section 7 (Financial Creditor Initiation)
 Process: FC (banks, NBFCs) can file for CIRP on default (min. ₹1 crore).
 Trend: Banks dominate filings; delays due to NCLT backlogs.
3. Section 8 (Demand Notice by Operational Creditor)
 Process: OC must issue demand notice (10-day repayment window).
 Current Issue: Misuse by OCs for recovery pressure; NCLT strict on evidence of
default.
4. Section 9 (OC Initiation)
 Hurdle: High rejection rates due to disputed claims or pre-existing suits.
5. Section 13 (Moratorium Declaration)
 Scope: Stops lawsuits, asset transfers, and recovery actions against CD.
 Exception: Essential supplies (S.14(2)) cannot be cut off.
6. Section 14 (Moratorium Effects)
 Key Protections:
o S.14(1): Suspends debt enforcement.
o S.14(2): Essential supplies (power, water, telecom) continue.
 Current Issue: Disputes over "essential" goods (e.g., Canara Bank v Deccan
Chronicle excluded printing materials).
7. Section 18 (IRP Duties)
 Key Tasks: Collect claims, manage CD operations, form CoC.
 Challenge: Delays in information handover by ex-management (S.19 non-compliance
penalties).
8. Section 22 (CoC Formation & Voting)
 Composition: FCs with >66% vote share decide RPlan.
 Issue: Exclusion of related parties (S.21(2)) – SC in Phoenix Arc emphasized "debt-
time relationship."

NIA (National Insolvency Agenda) Updates

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1. Pre-Packs for MSMEs (2021): Faster resolution via debtor-in-possession model.

2. Cross-Border Insolvency (Proposed): Align with UNCITRAL Model Law for
global cases.
3. Digital NCLT: E-filing and virtual hearings to reduce delays.