This commercial law newsletter provides a brief summary of the latest developments and updates in the month of August, 2023 through judgments, notifications, circulars, and other updates in the commercial sector in India including Arbitration, Taxation, Insolvency & Bankruptcy, etc.
Resolution Professional responsible to conduct due diligence under Section 29A of the Insolvency & Bankruptcy Code, 2015 (“IBC”); Adequate due diligence on the prospective Resolution Applicants and its connected persons needs to be conducted
The National Company Law Tribunal (NCLT), Mumbai held that the Resolution Professional has the responsibility to conduct Section 29A due diligence and should seek clarifications or additional information or document from the prospective Resolution Applicants, if needed for conducting the due diligence.
[M/s Blue Frog Media Private Limited CP (IB) No. 4360/MB/C-I/2018]
Petition under Section 9 of IBC is not Maintainable Against Claim For Compensation Penalty Under A Contract
National Company Law Appellate Tribunal (NCLAT), Delhi held that for crystallization of a compensation penalty adjudication under a contract is required by a Competent Court and Adjudicating Authority has rightly not admitted Section 9 application. NCLAT further held that it is always open for the Appellant to take a remedy as available as per the contract in accordance with law.
[Chandrashekhar Exports Pvt. Ltd. v Babanraoji Shinde Sugar & Allied Industries Ltd. Company Appeal (AT) (Insolvency) No. 1032 of 2023]
Related-party agreements can be accepted or terminated by a Resolution Professional (“RP”) with the consent of the Committee of Creditors (“CoC”)
NCLAT Delhi held that in terms of Section 28(1)(f) read with Section 28(3) of IBC 2016, the “related party transactions” cannot be undertaken by the RP without the approval of the CoC with 66% of the votes. In the instant case, the CoC instead of giving approval to continue with “the related party transactions in terms of Lease Deed and Service Agreements” has given its consent to terminate those related party agreements, in its commercial wisdom. Hence, the NCLAT found no illegality committed by the RP in terminating those related party agreements.
The Tribunal further reiterated that the Related Party Contract/Agreement can be sought to be terminated via the relevant Clauses in the Resolution Plan.
[India SME Asset Reconstruction Co. Ltd. vs. Medirad Tech India Ltd. Company Petition No. (IB)-1243(ND)/2018]
NCLT issued a pre-requisite outline on formatting, signatures, etc. for filing
The NCLT has issued a Circular dated 29.08.2023, requesting the Litigants/Advocates/Parties to follow the ‘Mandatory Pre-Requisite’ on formatting, book marking of pleadings, use of electronic signatures, retention of originals etc., at the time of filing. The ‘Mandatory Pre Requisite’ is effective from 04.09.2023.
The PDF version of documents are mandatory for filing, followed by electronic signature using Digital Signature Certificate (DSC) issued by Certifying Authority. The provision of e-sign based on Aadhaar authentication shall be made available as an alternative to DSC in the due course.
The Order/Circular dated 29.08.2023 can be accessed here.
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