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INSOLVENCY AND BANKRUPTCY CODE, 2016 IS SUPREME

INSOLVENCY AND BANKRUPTCY CODE, 2016 IS SUPREME

Insolvency and Bankruptcy Code, 2016 is supreme......

Anant Kajare Vs. Eknath Aher & Anr. (Supreme Court)

Battery of lawyers appeared in the high profile alleged ‘Ponzi scheme’ matter. This matter has been travelling to Supreme Court time and again. Previously, SEBI held that the scheme run by Citrus Check inn Limited and Royal Twinkle Star Club Limited alleged to be in the nature of ‘Collective Investment Scheme’ (CIS) which was challenged before SAT and SC. Therafter, SC had directed SEBI to conclude the investigation within 6 months. In the meantime, customers who had bought time sharing plan from the companies approached NCLT Mumbai for initiation of insolvency proceedings against the company and the insolvency proceedings commenced. Since, this was the first such matter wherein the financial creditors were NIL and the huge base of alleged 18 lakhs ‘investors’ were  involved and were classified as “Operational Creditors” by the NCLT, the question came before the Resolution Professional of constituting the Committee of Creditors to steer the process. It was first such unique case wherein the Operational creditor of almost equal amounts were to be considered. Regulation 16 of the CIRP regulations which specified that in case of no financial creditors the COC shall be of top 18 operational creditors. Resolution Professional (RP), Mr. Devendra Jain says, it was difficult to constitute COC of only 18 operational creditors and proceed. Hence, he constituted the COC by taking representatives from different groups of investors for better representations. Also, he made an advisory committee of retired bankers and legal professionals to guide the process. After, conducting the due diligence and forensic audit the RP was able to unearth assets worth Rs.3500 Crores out of outstanding of Rs. 6000 Crores(approx).

Some investors approached NCLT and NCLAT to challenge the proceedings alleging that SEBI is the appropriate authority and the same should be given the charge. Earlier on previous occasion Court had directed RP and SEBI to file progress report and investigation report which formed the basis for hearing on the high profile case.

SC after hearing senior advocate Mr. Shyam Divan who appeared for investors, Mr.Tushar Mehta for SEBI and Mr. KV Vishwanathan for Resolution Professional concluded that the work done by RP is considerable and in case any assets remain unidentifiable the same may be brought to his notice. SC ordered to held meeting of investor representative, SEBI representative with RP to bring out an amicable solution. Upholding the spirit of the Code SC has reposed faith in the process of IBC and held that the Liquidation of the assets should be done through the same. Meanwhile, RP who had moved application before Hon’ble NCLT Mumbai and got the travel ban of promoters of the two companies and  also got prohibition order absent the sale or transfer of properties purported to be held in the sister concern companies.

Advocate Nipun Singhvi appearing for the RP apprised that the RP doesn’t have any interest in the concerned companies and allegations made against the process are baseless. The IBC has infact helped the investors by getting the properties which otherwise would have taken years to be unearthed. It is in the best interest of all the stakeholders to come together and resolve the situation rather than stalling process since the matter has faced multiple litigations. Many of the investors have got freezer order from court which has led to cash crunch with the RP and the employees of the companies are in precarious situation. SC has also directed to approach appropriate forum for defreezing the bank account for defraying the operational expenses under the leadersship of RP.

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