Vigneshwar Corporate Solutions LLP

07/10/2023

The Ministry of Finance recently reported a significant achievement in the realm of tax compliance. More than 30.75 lakh audit reports, encompassing approximately 29.5 lakh Tax Audit Reports (TARs), have been successfully filed for the assessment year 2023-24. These filings were made on the Income Tax Department’s e-filing portal, and they were completed by the due date of September 30, 2023. This remarkable feat reflects the commitment of taxpayers and tax professionals to adhere to regulatory requirements and deadlines

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More than 30.75 lakh audit reports, including 29.5 lakh Tax Audit Reports, were filed for AY 2023-24 by the September 30 deadline, ensuring timely compliance.

07/10/2023

Compliance : Company Law
ORAGEM EXIM PRIVATE LIMITED recently found itself in hot water due to its failure to maintain a minute
book of general meetings, as required by Section 119 of the Companies Act, 2013. This article provides a
comprehensive analysis of the violation, the adjudication process, and the penalties imposed by the Registrar of
Companies, Rajasthan, Jaipur.
The case revolves around the discovery made by the office of the Registrar of Companies, Rajasthan, during a
visit to the company’s registered office. It was found that the registered office of ORAGEM EXIM PRIVATE
LIMITED did not exist, and more importantly, the books of accounts, including the minute book of general
meetings, were not maintained at the recorded registered office address. This non-compliance was a clear
violation of the provisions of Section 119 of the Companies Act, 2013.
Section 119 of the Companies Act, 2013 mandates that the books containing the minutes of the proceedings of
any general meeting of a company or of a resolution by postal ballot must be kept at the registered office of the
company. Furthermore, these books should be open for inspection by any member during business hours,
without any charge, subject to reasonable restrictions as may be imposed by the company through its articles or
in a general meeting. However, at least two hours in each business day must be allowed for inspection.
In response to this violation, an adjudication notice dated August 26, 2022, was issued to the company and its
officers in default. This notice provided an opportunity for them to present their case and be heard on September
13, 2022, at 11 A.M. at the office of the Registrar of Companies in Jaipur.
However, on the scheduled hearing date, no representative from the company or its directors appeared, and the
default was not rectified. Consequently, it was determined that every director of the company was in default.
After a careful examination of the facts, the Registrar of Companies concluded that ORAGEM EXIM PRIVATE
LIMITED and its directors had indeed failed to comply with the provisions of Section 119 of the Companies
Act, 2013.
The total penalty amounted to Rs. 20,000/-. It was specified that the company should pay Rs. 12,500/-, and each
of the three directors in default should pay Rs. 2,500/-. These penalties were imposed for the violation of Section
119 of the Companies Act, 2013.
The matter was subsequently disposed of with this order, signed on September 22, 2022.
Conclusion:
The case of ORAGEM EXIM PRIVATE LIMITED serves as a cautionary tale highlighting the importance of
adhering to statutory requirements, such as maintaining minute books of general meetings as stipulated by the
Companies Act, 2013. Failure to comply with such requirements can lead to financial penalties, as evidenced by
the penalties imposed in this case. It underscores the necessity for companies to ensure strict compliance with all
regulatory obligations to avoid legal consequences.
*****

21/11/2020

*The remuneration payable to the liquidator which in the light of the recommendation of the CoC with the requisite percentage brings it within the ambit of Regulation 39D & it is immaterial which provision of the IBC squarely governs the passage of order of liquidation*

Case Citation: (2020) ibclaw.in 334 NCLAT

The Adjudicating Authority (NCLT), Chandigarh Bench, Chandigarh was of the view that Regulation 39D provides for fixation of the fees separately by the Committee of Creditors for the three periods given in Section 39D and the fees in the instant case was not governed by Section 39D as the order of liquidation came to be passed under Section 33(1) (a) of the IBC. Be that as it may, the order of liquidation has been passed and the Corporate Debtor is undergoing liquidation process. NCLAT held that it is immaterial which provision of the IBC squarely governs the passage of order of liquidation. The fact remains that the Committee of Creditors has taken a decision in regard to the liquidation costs, expenses and the remuneration payable to the liquidator which in the light of the recommendation of the Committee of Creditors with the requisite percentage brings it within the ambit of Regulation 39D. Therefore, it is not permissible to take resort to any other provision which would be attracted only if the action of the Committee of Creditors would fall beyond the purview of Regulation 39D. The remuneration of liquidator falling within the realm of the Committee of Creditors in terms of Regulation 39D, we find that the impugned order cannot be sustained. The impugned order is accordingly set aside to the limited extent of remuneration of the liquidator and it is directed that the liquidator’s remuneration will be governed in accordance with the recommendation of the Committee of Creditors.

( IBC Law Publication)

The Adjudicating Authority (NCLT), Chandigarh Bench, Chandigarh was of the view that Regulation 39D provides for fixation of the fees separately by the Committee of Creditors for the three periods given in Section 39D and the fees in the instant case was not governed by Section 39D as the order of l...

20/11/2020

*In an agreement for compulsory buyback the apartments, Allottee is a speculative investor & not a person who is genuinely interested in purchasing the apartments & he cannot be termed as an allottee as per the explanation attached to Section 5(8)(f) of the IBC - Shubha Sharma, Suspended Board of Director Vs. Mansi Brar Fernandes - NCLAT New Delhi*

Case Citation: (2020) ibclaw.in 338 NCLAT

Following issues arise for consideration: -

i. Whether in view of the I&B Code (Amendment)Ordinance 2019/Amendment Act, 2020, the Application under Section 7 of the I&B Code by one allottee is not maintainable?

ii. Whether MOU dated 06.04.2016 is an agreement for sale the apartments or an agreement for buyback the apartments?

Following issues arise for consideration: - i. Whether in view of the I&B Code (Amendment)Ordinance 2019/Amendment Act, 2020, the Application under Section 7 of the I&B Code by one allottee is not maintainable? ii. Whether MOU dated 06.04.2016 is an agreement for sale the apartments or an agreement....

19/11/2020

Ker HC | Can demand notices issued under S. 13(2) of SARFAESI Act be challenged invoking writ jurisdiction of High Courts?

Kerala High Court: A.M. Badar, J., while addressing the instant matter held that, demand notices under Section 13(2) of the SARFAESI Act can be challenged before the Debt Recovery Tribunal (DRT).

The instant petition was filed by four Cashew Processing Units.

Petitioners were impugning demand notices issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) to petitioners 1 to 3 directing them to repay to the secured creditor the outstanding amount of loan within the prescribed statutory period.

Petitioners Counsel argued that as Cashew Processing Units in the State were in crisis and at the verge of closure, respondent 2–State of Kerala constituted a Cashew Revival Committee.

Further, a Revival Scheme for Cashew Processing Industries came to be formulated as per the decision taken by the Government of Kerala as well as the State Level Bankers Committee. Cashew Processing Units prima facie found liable for revival were referred to concerned Banks for taking up the restructuring process.

Respondent 1-Bank failed to check stock statements, balance sheets etc. and started taking steps under SARFAESI Act by issuing notices under Section 13(2) of the said Act.

Analysis and Decision
Bench stated that a Committee was constituted by the State for assessing the viability of Cashew Processing Unit facing crisis.

It was noted that though the cases of two of the petitioners were recommended for additional finance, the duly sworn statement of respondent 1 — bank made it clear that petitioners 1 to 3 failed to produce documents necessary for viability study.

Court noted that the instant writ petition has been filed to stop SARFAESI proceedings by virtually challenging demand notices issued under Section 13(2) thereof.

Supreme Court in the decision of Authorised Officer, State Bank of Travancore v. Mathew K.C., 2018 (1) KLT 784, held that:

“5. …….The discretionary jurisdiction under Article 226 is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well-defined exceptions as observed in CIT v. Chhabil Dass Agarwal, (2014) 1 SCC 603.

In Union Bank of India v. Panchanan Subudhi, (2010) 15 SCC 552, further proceedings under Section 13(4) were stayed in the writ jurisdiction subject to deposit of Rs. 10,00,000/- leading this Court to observe as follows :

“7. In our view, the approach adopted by the High Court was clearly erroneous. When the respondent failed to abide by the terms of one-time settlement, there was no justification for the High Court to entertain the writ petition and that too by ignoring the fact that a statutory alternative remedy was available to the respondent under Section 17 of the Act.”

Concluding the decision, Court held that the petitioners have the most efficacious remedy of challenging demand notices under Section 13(2) of the SARFAESI Act before the Debt Recovery Tribunal.

Adding to the above, Court stated that, it is not case of petitioners that the Bank has not acted in accordance with the provisions of the SARFAESI Act or in defiance of the fundamental principles of judicial procedure.

Bench held that no case for breach of principles of natural justice is made out in the present case.

In view of the above, the petition was dismissed. [Sunitha Roy v. Canara Bank, WP(C) No. 5232 of 2020 (D), decided on 13-11-2020]

13/11/2020

08/11/2020

Does the remedy under Section 14 of SARFAESI Act becomes redundant if DM is unable to take possession of secured assets within time limit? Read what SC says
Supreme Court: The 3-judge bench of L. Nageswara Rao, Hemant Gupta* and Ajay Rastogi, JJ has upheld Kerala High Court’s decision holding that Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) mandating the District Magistrate to deliver possession of a secured asset within 30 days, extendable to an aggregate of 60 days upon reasons recorded in writing, is a directory provision.
Object of SARFAESI Act
It was noticed that the SARFAESI Act was enacted to provide a machinery for empowering banks and financial institutions, so that they may have the power to take possession of secured assets and to sell them. This was done after Recovery of Debts due to Banks and Financial Institutions Act, 1993, which was first enacted to streamline the recovery of public dues, did not give desirous results.
Does inability to take possession of secured assets within time limit renders the District Magistrate Functus Officio?
Taking note of this objective of the SARFAESI Act in mind, the Court noticed that the time limit to take action by the District Magistrate has been fixed to impress upon the authority to take possession of the secured assets. However, inability to take possession within time limit does not render the District Magistrate Functus Officio.
Interpreting Section 14 of the SARFAESI Act, the Court said that
“… the secured creditor has no control over the District Magistrate who is exercising jurisdiction under Section 14 of the Act for public good to facilitate recovery of public dues. Therefore, Section 14 of the Act is not to be interpreted literally without considering the object and purpose of the Act. If any other interpretation is placed upon the language of Section 14, it would be contrary to the purpose of the Act.”
The Court noticed that the time limit is to instill a confidence in creditors that the District Magistrate will make an attempt to deliver possession as well as to impose a duty on the District Magistrate to make an earnest effort to comply with the mandate of the statute to deliver the possession within 30 days and for reasons to be recorded within 60 days. Hence, the remedy under Section 14 of the Act is not rendered redundant if the District Magistrate is unable to handover the possession. The District Magistrate will still be enjoined upon, the duty to facilitate delivery of possession at the earliest.
Limitations on power of High Courts to pass interim orders
On the issue of borrowers and other aggrieved persons invoking the jurisdiction of the High Court under Articles 226 or 227 of the Constitution of India without availing the alternative statutory remedy, the Court said that though the High Courts are well aware of the limitations in exercising their jurisdiction when affective alternative remedies are available, but a word of caution would still be necessary for the High Courts that
“… interim orders should generally not be passed without hearing the secured creditor as interim orders defeat the very purpose of expeditious recovery of public money.”
(Source : Supreme Court Cases )

06/11/2020

*The Commercial Wisdom of the CoC which covers matters including the replacement of the Resolution Professional does not fall within the limited scope of judicial review & is not justiciable - - NCLAT New Delhi*

Case Citation: (2020) ibclaw.in 319 NCLAT

The prayer was declined on the ground that the wisdom of Committee of Creditors is beyond the pale of challenge. In the instant case, the sole Financial Creditor (Indian Bank) has voted to replace the Resolution Professional under Section 22 of the ‘I&B Code’ which means the replacement is sought with 100% voting shares while the requisite vote is 66%. It is well settled that the commercial wisdom of the Committee of Creditors which covers matters including the replacement of the Resolution Professional does not fall within the limited scope of judicial review and is not justiciable.

05/11/2020

*Whether a Bank/Financial Institution can institute or continue with proceedings against a Guarantor under the SARFAESI Act, when proceedings under the IBC have been initiated against the Principal Borrower & the same are pending adjudication – High Court*

Case Citation: (2020) ibclaw.in 38 HC

The view expressed by the Supreme Court in State Bank of India v. V.Ramakrishan and Another, reported as [2018] ibclaw.in 29 SC amply demonstrates that neither Section 14 nor Section 31 of the IB Code place any fetters on Banks/Financial Institutions from initiation and continuation of the proceedings against the guarantor for recovering their dues. That being the position, the plea taken by the counsel for the petitioner that all proceedings against the petitioner, who is only a guarantor, ought to be stayed under the SARFESI Act during the continuation of the Insolvency Resolution process qua the Principal Borrower, is rejected as meritless. The petitioner cannot escape her liability qua the respondent/Bank in such a manner. The liability of the principal borrower and the Guarantor remain co-extensive and the respondent/Bank is well entitled to initiate proceedings against the petitioner under the SARFESI Act during the continuation of the Insolvency Resolution Process against the principal borrower.
( Published in IBC Law )

05/11/2020

*The period commencing from 25.03.2020 till 15.09.2020 shall be excluded while computing the period of 180 days for the purpose of bringing the CIRP & the extended period of 90 days beyond 180 days shall commence only after the prescribed period of 180 days after exclusion of aforesaid period – Hemant Sharma Resolution Professional of Global Softech Ltd. – NCLAT New Delhi*

Case Citation: (2020) ibclaw.in 314 NCLAT

NCLAT held that we are convinced that the ground projected for exclusion of the lockdown restriction period from 25th March, 2020 till 15th September, 2020 has substance and same deserves to be allowed, so as to make the resolution process meaningful and result oriented. We accordingly allow this appeal and set aside the impugned order with direction that the period commencing from 25th March, 2020 till 15th September, 2020 shall be excluded while computing the period of 180 days for the purpose of bringing the Corporate Insolvency Resolution Process to its logical conclusion. To remove any ambiguity, it is clarified that the extended period of 90 days beyond 180 days shall commence only after the prescribed period of 180 days after exclusion of aforesaid period in terms of this judgment is over.
( IBC Law )

04/11/2020

SevenHills Healthcare RP seeks fresh resolution plans.

The resolution professional (RP) for SevenHills Healthcare on Friday sought fresh resolution plans for the company, which operates multi-speciality hospitals in Mumbai and Visakhapatnam. The call for fresh bids follows the Supreme Court (SC) striking down an order which would have allowed the then co-chairman of UAE’s NMC Health B R Shetty to take over the company.
The corporate insolvency resolution process (CIRP) against SevenHills was approved in April 2018. Creditors to the company have made claims worth Rs 1,591 crore, of which claims to the tune of Rs 1,357 crore were admitted. The largest financial creditor to the company is JM Financial Asset Reconstruction Company (ARC), which has admitted claims worth Rs 976 crore. The ARC had bought out the loan exposures of Axis Bank, Canara Bank, Bank of Maharashtra and the erstwhile Allahabad Bank, State Bank of Travancore and State Bank of Patiala. Other creditors include Union Bank of India, with admitted claims of Rs 95 crore and State Bank of India (SBI), with admitted claims of Rs 80 crore.
On November 15, 2019, SC had set aside an order by the Hyderabad bench of the National Company Law Tribunal (NCLT) approving the resolution plan submitted by Shetty’s New Medical Centre (SNMC). The resolution plan projected infusion of over Rs 1,000 crore by SNMC. That amount was to be borrowed. The plan envisaged paying off financial creditors to the extent of 78.07% and operational creditors to the extent of 75%.
In its order, the apex court upheld the arguments of the Municipal Corporation of Greater Mumbai (MCGM). The municipal corporation had initially approved the resolution plan. It later changed its stance while the case was being heard at the Hyderabad tribunal and sought to be reclassified as a financial debtor. MCGM contended that the company’s 1500-bed hospital in Marol, Mumbai had not been completed by the stipulated date and arrears of lease rentals had mounted.
The SC bench comprising justices Arun Mishra, Vineet Saran and S Ravindra Bhat wrote: “…the authorities under the Code could not have precluded the control that MCGM undoubtedly has, under law, to deal with its properties and the land in question­ which undeniably are public properties.The resolution plan, therefore, would be a serious impediment to MCGM’s independent plans to ensure that public health amenities are developed in the manner it chooses, and for which fresh approval under the MMC Act may be forthcoming for a separate scheme formulated by that corporation (MCGM).”
In February 2020, Shetty stepped down as co-chairman of NMC after charges of financial wrongdoing surfaced against him. Earlier this month, he accused Bank of Baroda (BoB) and Federal Bank of colluding with former executives of his group of companies to embezzle funds, according to a report by Mint.
( Financial Express 31.10.2020 )

17/10/2020

*Adjudicating Authority is to follow the ingredients of Service of Notices & Processes as per Rule 38 of the NCLT Rules, 2016, the serving of advance copy of the application to the Corporate Debtor cannot be construed/deemed to be service of notice*

Case Citation: (2020) ibclaw.in 298 NCLAT

NCLAT held that as regards the plea taken that the Corporate Debtor was never issued with a notice by the Adjudicating Authority it is to be pointed out by the Appellate Tribunal that the Adjudicating Authority is to follow the ingredients of ‘Service of notices and processes’ as per Rule 38 of the NCLT Rules, 2016. If a notice was not duly served upon the concerned party or he was prevented by any sufficient cause from appearing when the petition / application was called for hearing, the Adjudicating Authority(Tribunal) may pass an order setting aside the ex parte hearing against him, on such terms as it thinks fit. In the instance case, the Appellant has come out with a plea that the Corporate Debtor was never issued with notice by the Adjudicating Authority and since the ‘serving’ of advance copy of the application to the ‘Corporate Debtor’ cannot be construed / deemed to be service of notice in the eye of Law .
LAW

NCLAT held that as regards the plea taken that the Corporate Debtor was never issued with a notice by the Adjudicating Authority it is to be pointed out by the Appellate Tribunal that the Adjudicating Authority is to follow the ingredients of ‘Service of notices and processes’ as per Rule 38 of ...