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Case Law : Telecom Regulatory Authority of India (Appellant) Versus Reliance Telecom Ltd. & Ors. (Respondents) ; National Company Law Appellate Tribunal (NCLAT) Principal Bench New Delhi Company Appeal (AT) (Insolvency) Nos. 273 & 355 of 2024. IBC Prevails over TRAI Act? Judgement: One of the submission advanced by learned Counsel for the Appellant is that TRAI Act is a special law governing all aspects of the provisions of telecommunications service in the country, whereas the IBC is a general law governing insolvency, hence the provisions of TRAI Act would prevail in respect of matters dealing with the Regulations of the telecom companies. The IBC is a special law and latter enactment than to the TRAI Act, which was enacted in 1997, whereas IBC has been enacted in 2016. Section 238 of the IBC gives overriding effect to the provisions of the IBC to all other laws. Section 238 of the IBC is as follows: “238. Provisions of this Code to override other laws - The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.” Learned Counsel for the Respondent has relied on the judgment of the Hon’ble Supreme Court in A. Navinchandra Steels Pvt. Ltd. vs. SREI Equipment Finance Ltd. & ors. – Civil Appeal Nos.4230-4234 of 2020 decided on 01.03.2020. The Hon’ble Supreme Court in paragraph 14 of the judgment has held that IBC is a special statute, which must prevail in the event of conflict, but has a non-obstante clause contained in Section 238. Paragraph 14 of the judgment of the Hon’ble Supreme Court is as follows: “14. Having heard learned counsel for all the parties, it is important to restate a few fundamentals. Given the object of the IBC as delineated in paragraphs 25 to 28 of Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 [“Swiss Ribbons”], it is clear that the IBC is a special statute dealing with revival of companies that are in the red, winding up only being resorted to in case all attempts of revival fail. Vis-à-vis the Companies Act, which is a general statute dealing with companies, including companies that are in the red, the IBC is not only a special statute which must prevail in the event of conflict, but has a non-obstante clause contained in Section 238, which makes it even clearer that in case of conflict, the provisions of the IBC will prevail.” Hon’ble NCLAT held that in view of the clear pronouncement of the above law, submission of the Appellant that TRAI Act is a special statute and would prevail over the IBC, has to be rejected. For details: https://lnkd.in/dJrX8ySN

HOW GENTLEMANLY ARE GENTLEMAN BUSINESS TRANSACTIONS TODAY? This fresh post on this seemingly every day topic seeks to educate on the significance of formalizing business transactions through written contracts, shedding light on the risks of informal agreements in today's business landscape. As a seasoned Commercial Lawyer, I have midwifed many transactions and witnessed diverse approaches to transactions, revealing crucial insights. - Trust versus Documentation: Not all business dealings necessitate formal paperwork to solidify commitments. Remarkably, some high-value transactions transpire without a single signature, underscoring the integrity and trustworthiness of involved parties—an uncommon trait in contemporary business scenarios. - Risks of Informal Agreements: Engaging in transactions without contractual clarity poses substantial risks. Some individuals venture into deals without formal agreements, assuming they can exit at will. However, unforeseen adversities often arise unannounced, highlighting the peril of operating without legal safeguards. - Superficial Formalities: Instances exist where parties opt for contractual documentation but disregard its contents. This superficial approach leads to frequent breaches and legal disputes, deviating from agreed terms and conditions. Managing such clients can pose challenges due to their lax attitude towards contractual obligations. Believe me, the variations in approaches to contractual relationships abound but in essence, I wish to stresses the paramount importance of documenting transactions. The adage "the faintest ink is better than the strongest memory" holds true, emphasizing that formalizing agreements, albeit seemingly inconvenient, is pivotal. Timely, thorough contract drafting, coupled with proficient legal guidance, can safeguard against financial losses and legal entanglements. Share your current challenges in your Business Transaction in the comments below. 👇 #sesooami #oakfieldconsultingchambers

Insolvency: Any payment made voluntarily by Corporate Debtor towards electricity dues after insolvency commencement date/ during moratorium under Section 14 of IBC cannot be appropriated towards pre-CIRP electricity charges – NCLAT New Delhi Mr. Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) For Appellant(s): Mr. Yakesh Anand, Ms. Sonam Anand, Mr. Akshay Thakur, Advocates. For Respondent(s): Mr. Pranjit Bhattacharya, Ms. Raj Sarit Khare, Advocates. Case Citation: (2024) ibclaw.in 603 NCLAT In this important judgment, Hon’ble NCLAT held that: (i) Merely because the Corporate Debtor had paid the pre-CIRP dues, the Appellant cannot insist that this payment has to be accounted only towards payment of pre-CIRP dues and that this amount cannot be subjected to adjustment against current CIRP electricity dues. (ii) Once moratorium had been declared, it was not open to the Corporate Debtor to appropriate any amount from its account not even to clear pre-CIRP dues as it did not fall within the definition of the “insolvency resolution process costs” as defined under Section 5(13) of the IBC. (iii) Even if the electricity dues of the pre-CIRP period had been paid voluntarily by the Corporate Debtor, since the amount was paid after the commencement of the CIRP, Section 14 which provides for moratorium would have come into play and no pre-CIRP payments could have been made out of the assets of the Corporate Debtor during CIRP. (iv) If the sum which had been paid voluntarily not been reappropriated towards assets of the Corporate Debtor, it would have amounted to preferential treatment to the Appellant and attracted Section 43 of the IBC vitiating the resolution process. https://lnkd.in/gNHNqHUX

Suretyship Under Indian Law: A Comprehensive Overview Introduction Suretyship, a legal construct under Indian contract law, involves a tripartite agreement wherein one party (the surety) guarantees the performance or repayment of a debt by another party (the principal debtor) to a third party (the creditor). This arrangement is governed primarily by the Indian Contract Act, 1872, which delineates the rights and obligations of each party. Legal Framework Key sections of the Indian Contract Act, 1872, pertaining to suretyship include: Section 126: Defines a contract of guarantee, identifies the parties involved, and establishes that a guarantee can be either oral or written. Section 128: Stipulates that the surety's liability mirrors that of the principal debtor, unless otherwise stipulated in the contract. Section 133: Details the surety's right to be indemnified by the principal debtor for any payments made on their behalf. Section 134: Elucidates the circumstances under which a surety can be discharged from liability. Section 141: Highlights the surety's entitlement to benefit from any securities that the creditor holds against the principal debtor. Risks and Considerations for Sureties Entering into a suretyship agreement entails certain risks: Financial Liability: In the event of the principal debtor's default, the surety bears the financial burden of fulfilling the obligation. Legal Entanglements: Disputes between the principal debtor and creditor can ensnare the surety in legal proceedings, leading to time and cost overruns. Reputational Damage: A principal debtor's default can tarnish the surety's reputation, particularly in business circles. Best Practices for Sureties Thoroughly review the contract terms and assess the principal debtor's financial capacity before agreeing to become a surety. Comprehend the full extent of your liability and the potential financial implications. Seek legal counsel to clarify any ambiguities in the contract and safeguard your rights. Conclusion Suretyship serves as a valuable tool for facilitating credit transactions, but it requires a prudent approach from all parties involved. By understanding the legal framework and associated risks, sureties can make informed decisions that protect their interests. #surety #legal #india #contract #companylaw #corporatelaw

As legal counsel, one of the most important aspects of managing business relationships is understanding what happens when the other party to a contract ceases to exist. Whether due to dissolution, bankruptcy, or other unforeseen circumstances, how do you address this challenge? I'd love to share my thoughts with the LinkedIn community on this topic and hear your perspectives as well! 1. Review the Contract: First, take a close look at the contract itself. Many agreements contain clauses that outline what happens in the event of a party's cessation. Provisions for termination or obligations that survive such events can help you understand your next steps. 2. Seek Legal Recourse: Depending on the circumstances, there may be grounds for seeking damages or restitution for any losses incurred due to the other party's failure to meet their contractual obligations. 3. Notify Relevant Authorities: If the cessation affects compliance or licensing requirements, don’t forget to inform the necessary regulatory bodies or authorities. In Malaysia, for example, the Companies Act 2016 outlines specific procedures when a company is dissolved, especially when dealing with outstanding contracts and liabilities. Termination by Operation of Law Another important area to understand is "termination by operation of law." This concept refers to the automatic termination of contracts under certain conditions—no need for judicial intervention. In Malaysia, this could occur under: 1) Insolvency: If a party becomes insolvent, the contract may terminate by law. 2) Dissolution: A dissolved company cannot continue to fulfill its contractual obligations, leading to automatic termination. I’d love to hear your thoughts—how have you navigated these situations in your practice or business? What steps do you take to ensure protection when a contracting party ceases to exist?

Navigating the Complexities of Commercial Recovery In today's fast-paced business environment, ensuring timely recovery of commercial debts is crucial for maintaining healthy cash flow and sustaining business operations. However, the process of commercial recovery can be intricate, often requiring a robust legal strategy to navigate effectively. 1. Legal Documentation: Proper documentation is the foundation of successful commercial recovery. This includes well-drafted contracts, invoices, and correspondence that clearly outline payment terms and conditions. Ensuring all agreements are legally sound and enforceable is essential. 2. Negotiation and Mediation: Often, disputes can be resolved through negotiation or mediation, saving both parties time and resources. An experienced legal advisor can facilitate these discussions, aiming for a mutually beneficial resolution while preserving business relationships. 3. Litigation: When amicable solutions are not possible, litigation might be necessary. A strategic approach to filing suits, whether for recovery of dues or damages, can expedite the process. It's crucial to work with legal professionals who have a deep understanding of commercial laws and procedural intricacies. 4. Enforcement: Obtaining a favorable judgment is only part of the process. Enforcing that judgment is equally important. This might involve garnishments, liens, or other legal mechanisms to ensure compliance and recovery of the owed amounts. 5. Proactive Measures: Implementing proactive measures, such as credit checks and due diligence before extending credit, can minimize the risk of defaults. Regular reviews of outstanding debts and prompt action on overdue accounts are also vital.

TIPS TO SECURE PAYMENT IN BUSINESS TRANSACTIONS: The client: Hi, A client reached out to me for supply of goods . But I heard that this client has a bad reputation for paying people. I want to do the job but I am worried about not getting paid, what do you suggest? My response: Doing business with people you can’t trust can be tricky. But there are ways to navigate it. 1. Establish a secure payment structure:If you distrust your client that much, then create a trust mechanism. Specify that payment must first be made into a separate account with an independent institution. This way, once you have concluded your job, you are immediately entitled to the payment sum in the trust. 2. Specify responsibilities and completion criteria: Craft the agreement detailing what your responsibilities are and the criteria for completion. This would reduce disputes and the basis of when you would be entitled to payment. This may cost you extra with regard to paying the trust institution but it is a safer option. 3. Utilize Professional Legal Advise: Seeking legal guidance is a prudent move. Always draft agreements that are tailored to your business needs, expressing your intentions clearly and protecting your interests comprehensively. ……………………… My name is Pepple Oprite and I am passionate about using the law as a tool to foster business growth. I offer legal support to create agreements that not only express your intentions but also protect your business interests. Feel free to reach out to me if you are looking to enhance the legal framework of your business transactions. Let’s work together that your business thrives in a secure and legally sound environment. #LegalAdvise #LegalAdvisory #BusinessLaw #businessgrowthstrategy #contractdrafting #securetransactions

Tracking evolving perspectives on the interplay between the Stamp Act and IBC – By Nihareeka Ghadage, student at ILS Law College, Pune The Hon’ble National Company Law Appellate Tribunal, Principal Bench (NCLAT) through its December 22, 2023 decision in Hiren Meghji Bharani vs Shankheshwar Properties Pvt. Ltd. & Anr. [Company Appeal (AT) (Insolvency) No.446 of 2023] (2023) ibclaw.in 822 NCLAT, held that an application to initiate Corporate Insolvency Resolution Process (CIRP) cannot be held to be unmaintainable merely because of non-stamping. It was held that in such cases, CIRP can be initiated against the corporate debtor based on the other material on record which proves the existence of default. These other documents can be in the nature of a balance sheet or any other financial document. Hence if such documents are realised and the unstamped document is not even considered as proof, the mere existence of this document cannot mean to hold the entire CIRP application unmaintainable. Stamping requirements have always been an issue of contention, whether in arbitration agreements or insolvency-related documents. The plethora of judgements available on the interplay between stamping requirements and arbitration agreements plays a direct role in the deciding issues on the interplay between the Stamp Act and the Insolvency and Bankruptcy Code (IBC). This article aims to evaluate the issue of insufficient stamping and applications under section 7 or section 9 of the #IBC. https://lnkd.in/gH6unt24

Important judgment on Interim Moratorium in Personal Guarantor Insolvency If a Personal Guarantor filed application under Section 94 of IBC prior to any application being filed under Section 95 by Financial Creditor, the Personal Guarantor cannot be granted the benefit of an interim moratorium under Section 96 of the Code Shri Harnam Singh Thakur (Judicial Member) and Shri Ashish Kumar Verma (Technical Member) Case Citation: (2024) ibclaw.in 704 NCLT Hon’ble NCLT Chandigarh Bench, considering the facts of the case, held that: (i) If an application is filed under Section 94 by the Personal Guarantor himself, prior to any application being filed under Section 95 of the Code by the Financial Creditor and it appears to the Adjudicating Authority that the Section 94 Application is mere a shield to avoid or dodge the insolvency process which has been initiated by the Financial Creditors, the Personal Guarantor cannot be granted the benefit of an interim moratorium under Section 96 of the Code in the interest of justice. (ii) The moratorium u/s 96 claimed by Personal Guarantor against the initiation of insolvency resolution on account of the filing of petition u/s 95 by banks would not come to his rescue, when he herself has admitted to be in default as per petition filed by her u/s 94 of the Code. Read here: https://lnkd.in/daKyGjvE 

The recent unreported Malaysian Court of Appeal case of WTK Realty Sdn Bhd v Kathryn Ma Wai Fong dated 15th April 2024 is of reading interest for lawyers practising corporate litigation.   Brief facts: The High Court ordered the winding up of a company, WTK Realty Sdn Bhd, based on just and equitable grounds under Section 465(1)(h) of the Companies Act 2016. The finding of the High Court was made based on admissions of both sides in their respective affidavits that WTK Realty Sdn Bhd is a family business. There was an irretrievable breakdown in the relationship of mutual trust and confidence between the family members who are shareholders which justified a winding up order being made.   The Court of Appeal affirmed the decision of the High Court and reiterated certain well-known important principles for winding up based on just and equitable grounds. The principles are as follows:   1.          The Court’s jurisdiction to wind up a company on the just and equitable grounds under Section 465(1)(h) of the Companies Act 2016 is not limited to quasi-partnership. The “just and equitable” principle in a winding petition is a dynamic concept and is not limited to the pre-conditions stated by Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd & Ors (1973) AC 360.   2.          The fact that a company is profitable is not necessarily relevant and sufficient to prevent a winding up order being made under the “just and equitable” ground. The “just and equitable ground” is not dependent on the establishment of insolvency although it is frequently relied on as an additional or alternative ground.   3.          The absence of deadlock in management is not sufficient to prevent a winding up order being made if the basis for the petition for winding up was the breakdown of mutual trust and confidence between the shareholders.   4.          Bare averments that the petition was presented for a collateral purpose and in bad faith will be given little weight by the court.   5.          When a petition under section 465(1)(h) of the Companies Act 2016 is presented, it is not obligatory for the court to consider alternative remedies before making a winding up order.   6.          The appointment of a liquidator is a matter of discretion vested in the winding up court. There must be a very good reason for appellate interference.