By Pooja J. Punjabi, Chartered Accountant
4.
(2018) 142 CLA 78 (NCLT – New Delhi)
Axis Bank Ltd. vs. Edu Smart Services Pvt.
Ltd.
Date of Order: 27th October, 2017
Regulations 12 and 13 of Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016 – Corporate guarantee provided by Corporate debtor matured
after the commencement of insolvency resolution process – claim to accept the
invocation could not be accepted as the insolvency resolution process had
commenced prior to crystallization of liability
FACTS
E Ltd. had
provided A Ltd. a
corporate guarantee of Rs. 396.76 crore in respect of loan
advanced by A Ltd. to group concern of E Ltd. A Ltd. filed a claim before the
Insolvency Resolution Professional (“IRP”) which was turned down by it. A Ltd.
filed an application before the National Company Law Tribunal (“NCLT” or the
“Tribunal”) in order to invoke a corporate guarantee after the date of
commencement of Corporate Insolvency Resolution Process (“CIRP”). The date of
commencement of the insolvency process was 27.06.2017 whereas the corporate
guarantee was invoked on 21.07.2017. E Ltd. sent a letter stating that
corporate guarantee could not be invoked as CIRP had been initiated and
moratorium was in force.
The loan agreement provides that in the
event of default by the Borrower the guarantor shall be liable to pay the
amounts payable by the Borrower. Accordingly, A Ltd. invoked the guarantee
which was not accepted by the IRP owing to the fact that date of invocation of
guarantee was much after the date of commencement of CIRP.
IRP argued that Regulations 12 and 13 of
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 (“the Regulations”) which deal with
submission of proof of claims and verification of claims clearly postulate that
IRP is required to verify only those claims which are existing as on the
insolvency commencement date. Accordingly, any claims which have not matured as
on the date of commencement of CIRP cannot be accepted.
IRP further pointed out that A Ltd. had
separately filed for recovery against the Borrower in a separate insolvency
proceeding and which claim has been accepted in the application filed before
NCLT.
HELD
The limited issue before the Tribunal was
whether A Ltd. was entitled to make a claim against E Ltd. by invoking the
corporate guarantee after the date of commencement of the insolvency process.
The Tribunal perused the terms of the loan
documents, as well as Regulations 12 and 13. It held that in order to qualify
as a ‘debt’, the provisions of the corporate guarantee must be satisfied by
raising a demand which is expressed by invoking the corporate guarantee and the
date of its invocation has to precede the insolvency commencement date. In the
present case, although CIRP commenced on 27.06.2017, the corporate guarantee
was only invoked on 21.07.2017. IRP would not be in a position to verify the
claim as it will not be reflected in the books of accounts which are supposed
to be updated as on 27.06.2017. In the absence of any record to verify the
claim, it would be impossible for the IRP to accept any such claim which became
a debt after 27.06.2017.
The Tribunal further examined the provisions
of section 3(6), 3(8), 3(10), 3(11) and 3(12) of Insolvency and Bankruptcy
Code, 2016 which defined the terms claim, corporate debtor, creditor, debt and
default in order to conclude that a debt did not exist on the date insolvency
process commenced.
A Ltd. argued that liability of guarantor
under the Indian Contract Act, 1872 is joint and several and accordingly it had
a right to enforce the liability against E Ltd. However, Tribunal held that
liability only crystallised after the commencement of CIRP and the argument put
forth had no merit. A Ltd. further urged that there is no provision in the Code
declaring the insolvency commencement date as the date to determine the claims
of the parties. The Tribunal however observed that invocation of corporate
guarantee against E Ltd. would result in enforcing of security interest and it
would thus, be in violation of the moratorium provision of section 14(1)(c) of
the Code.
The Tribunal also observed that A Ltd. had
already filed separate proceedings against the borrower and its claim was
accepted in such separate proceedings.
The Tribunal therefore, dismissed the
application filed by A Ltd.
5.
(2018) 1 CompLJ 36 (NCLAT – Kol)
Surojit Kumar vs. ROC
Date of Order: 08th March, 2017
Section 128(6) of Companies Act, 2013 – The
provision comes into effect from 01.04.2014 – Accordingly, penalty stipulated
therein cannot apply to offences committed up to 31.03.2014
FACTS
S and 2 other directors (for sake of brevity
referred to as S) filed an application u/s. 621A of the Companies Act, 1956
(“1956 Act”) for compounding offence for violating section 209 of the Companies
Act, 1956 during the year ending between 31.03.2011 to 31.03.2014 (“Petition
1”).
Another application was filed u/s. 621A of
1956 Act for compounding of offence for violation of section 217(2) of
Companies Act, 1956 during the year ending between 31.03.2011 to 31.03.2014
(“Petition 2”).
Petition 1 was admitted and NCLT compounded
the offence by levying a fee of Rs. 5,000 whereas Petition 2 was admitted by
NCLT and the compounding fees levied were Rs. 10,000.
S had no objections under both the petitions
in respect of financial years ending on 31.03.2011 to 31.03.2013. However, in
so far as financial year 31.03.2014 was concerned, NCLT levied the penalty
taking into consideration provisions of section 128(6) of the Companies Act,
2013. S thus, filed the present appeal to challenge the application of
Companies Act, 2013 in respect of financial year ended on 31.03.2014 by the
NCLT.
HELD
ROC before the Appellate Tribunal (NCLAT)
submitted that company regularised the mistake in the financial year ended
31.03.2015. However, NCLAT proceeded to hold that prospective regularisation
cannot be used as an excuse to apply the provisions of Companies Act, 2013
retrospectively in respect of offences which were committed prior to its coming
into force.
NCLAT held that 128(6) could not be applied
in respect of violation of section 209 committed during the financial year ended
31.03.2014. It thus set aside the order of NCLT to that extent and imposed a
fee similar to what had been laid down in respect of earlier years.
The appeal filed by S was thus accepted.
Order in matter of Insider Trading in the
Scrip Of Deep Industries Limited in respect of Rupeshbhai Kantilal Savla; Sujay
Ajitkumar Hamlai and V-Techweb India Private Limited
6.
SEBI/WTM/MPB/IVD/ID–6/162/2018
Date of Order: 16th April, 2018
SEBI (Prohibition of Insider Trading)
Regulations, 2015 – Persons who are friends on Facebook can be regarded as
connected persons – Likes and other activity on the social media platform can
be looked into for the purpose of determining whether such persons are
“connected persons” or not
FACTS
D Ltd was engaged in the business of oil
exploration and allied activities and its shares were listed on National Stock
Exchange (NSE) as well as Bombay Stock Exchange (BSE). Between 17.07.2015 to
14.10.2015 (“Investigation period”) D Ltd. was awarded three contracts from
ONGC for hiring of mobile drilling rigs spanning across a period of several
months.
Some details in respect of these contracts
are as follows:
First contract: The bid for the same was
opened on 17.07.2015 and D Ltd. was declared as L1 bidder.
Second contract: The bid for the same was
opened on 01.07.2015. However, D Ltd. was not declared to be L1 bidder. ONGC
subsequently requested D Ltd. to match the evaluated day rate of L1 bidder on
17.08.2015. D ltd. submitted this bid on 18.08.2015.
Third contract: The bid for the same was
opened on 27.07.2015 and D Ltd. was declared as L1 bidder.
The stage at which the company was declared
as L1 bidder was the stage at which process of tendering got completed and what
remained pending was merely award of contract.
The receipt of these contracts was notified
to the stock exchanges after D Ltd. received the notification of award of
contract. The dates were 03.09.2015 for first and second contract and
14.10.2015 for third contract. Pursuant to these corporate announcements, there
was a rise in the price at which these scrips were being traded on the
exchanges.
HELD
Issues before SEBI and their disposal is as
follows:
SEBI observed that value of the two
contracts for which the announcement was made on 03.09.2015, constituted a substantial
52.47% of the annual turnover of the company for the FY 2015-16 and 87.65% of
the annual turnover for the FY 2014-15 i.e. immediately preceding financial
year. Similarly, the value of the single contract for which announcement was
made on 14.10.2015 constituted 53.40% of the annual turnover of the company for
the FY 2015-16 and 89.21% of the annual turnover for the FY 2014-15 i.e.
immediately preceding financial year. Considering the magnitude of the value of
the three contracts, the information relating to bagging of these orders by D
Ltd. constituted price sensitive information and the same was likely to
materially affect the share price of the company, once published.
UPSI periods were the periods where the
information was available with company regarding receipt of contracts and
ceased to exist on the day the same was notified to the exchanges. Accordingly, period between 17.07.2015 and
14.10.2015 was determined as the UPSI period.
On the basis of the investigations conducted
by SEBI, R, V Ltd. and A were identified as insiders for the Investigation
period as per the Regulations.
R being the Managing director of D Ltd. was
held to be an insider as well as a connected person.
S and directors of V Ltd. were regarded as
connected persons on the basis of their being friends on social media platform
“Facebook” with R and his wife. Wife of S was also friends with wife of R. SEBI
also observed instances where they had “liked” each other’s pictures posted on
the platform. Thus, S and V Ltd. were held to be insiders and connected persons
owing to their social relationship.
SEBI observed that insiders had traded in or
brought shares of D Ltd. during the Investigation period and SEBI proceeded to
compute the gains and ordered that such gains be impounded from the insiders.
