IBC Case Law: BRS Ventures Investments Ltd. (Appellant) Versus SREI Infrastructure Finance Ltd. & Anr. (Respondents) ; Supreme Court of India Civil Appeal No. 4565 of 2021 2024 INSC 548

Issue of Conflict: Holding Company is not the owner of the assets of its Subsidiary. Therefore, the assets of the Subsidiaries cannot be included in the Resolution Plan of the Holding Company.

Brief Facts:
Gujarat Hydrocarbon and Power SEZ Limited, is a corporate debtor. The corporate debtor approached the 1st respondent–SREI Infrastructure Finance Limited (the financial creditor), for a grant of a loan. Under the agreement dated 5th January 2011, the financial creditor granted the corporate debtor a loan of Rs.100 crores for setting up a SEZ project. The corporate debtor is a subsidiary of M/s. Assam Company India Limited (ACIL). The loan granted by the financial creditor to the corporate debtor was secured by a mortgage made by the corporate debtor of its leasehold land and a pledge of shares of the corporate debtor and ACIL. The loan was also secured by the corporate guarantee dated 5thJanuary 2011 furnished by ACIL. The financial creditor filed an Original Application before the Debt Recovery Tribunal-I, Kolkata (for short, ‘the DRT’) to recover the outstanding loan amount. On 24th March 2015, a “debt repayment and settlement agreement” was executed to which the financial creditor, the corporate debtor and ACIL (the guarantor) were parties. On account of the default committed by the corporate debtor, the financial creditor invoked the corporate guarantee of ACIL. Thereafter, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short, ‘the IBC’) was filed concerning ACIL as the guarantee was not honored.

Judgement:
Hon’ble Supreme Court summarized some of its conclusions as under:

a. Payment of the sum of Rs.38.87 crores to the 1st respondent-financial creditor under the resolution plan of the corporate guarantor-ACIL will not extinguish the liability of the 2nd respondent principal borrower/corporate debtor to pay the entire amount payable under the loan transaction after deducting the amount paid on behalf of the corporate guarantor in terms of its resolution plan;

b. A holding company is not the owner of the assets of its subsidiary. Therefore, the assets of the subsidiaries cannot be included in the resolution plan of the holding company, and

c. The financial creditor can always file separate applications under Section 7 of the IBC against the corporate debtor and the corporate guarantor. The applications can be filed simultaneously as well.

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Advisory on Registration as Investment Advisers with SEBI:-

Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 [Last amended on February 07, 2023] Regulation 3. (1):

On and from the commencement of these regulations, no person shall act as an investment adviser or hold itself out as an investment adviser unless he has obtained a certificate of registration from the Board under these regulations.

For Details: https://lnkd.in/gfExUhTA

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NCLAT Ruling: Section 231 of Companies Act and Scheme Modifications (2024)

Case Law: November 06, 2024 CMS Info Systems Ltd (Appellant)
Vs Bharatiya Kamgar Karamchari Mahasangh & Ors (Respondents)

National Company Law Appellate Tribunal Principal Bench, New Delhi Company Appeal (AT) No.27/2024

Section 231 of the Companies Act, 2013 does not permit the Tribunal to make substantial modifications to a Scheme which has been approved by its Members.

Judgement
Hon’ble NCLAT observed that Section 231 of the Companies Act, 2013 does not permit the Tribunal to make substantial modifications to a Scheme which has been approved by its Members. The Ld. NCLT could not have interpreted the Scheme contrary to the intention of the Transferor and Appellant. The intention of the Transferor and the Appellant was clear from the unambiguous wording of the Scheme under Clause 7.1 and also coupled with the fact the workmen not so identified by the Board continued in the service of the transferor company, none of such persons were abandoned/retrenched when the said Scheme was put into operation.

Rather the Transferor company and the Transferee company executed Manpower Supply Agreements whereunder the Transferee company utilised the services provided by the workmen of the Transferor company. The purpose of the Scheme was not to retrench any of the staff, employees of the Transferor company and the record would show such persons continued to be in service of the Transferor company on terms which were not in any manner less favourable to those available to the employees of the Appellant.

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Empowering Investors through Updated Investor Charter of SEBI

SEBI has updated its “Investor Charter” to enhance investor protection, market transparency, and trust and confidence among investors. Key updates include ensuring confidentiality of investor information and providing the right to exit at fair and reasonable terms from the securities market related products or services (copy of updated Investor Charter of SEBI enclosed). Further, SEBI has strengthened the grievance redressal mechanism and alternative dispute resolution mechanism with the launch of SCORES 2.0 and SMART Online Dispute Resolution. In SCORES 2.0, investor complaints are taken up directly with

SEBI registered Intermediaries/regulated entities and the designated bodies for First Level review, with SEBI taking up all complaints at the stage of Second Level Review. SMART ODR Portal facilitates online conciliation and online arbitration for resolution of disputes arising in the Indian Securities Market.

For details: https://lnkd.in/gJPrJv8J

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SEBI Capital Market and Securities Laws Update:

SMS and E-mail alerts to investors by stock exchanges (December 03, 2024)

Stock Brokers shall ensure that separate mobile number/email address is uploaded for each client. Based on the representation received from Brokers’ Industry Standards Forum (ISF), SEBI vide this circular has clarified that, under exceptional circumstances, the stock broker may, at the specific written request of a client, upload the same mobile number/Email address for more than one client provided such client belong to one family (in case of individual clients) or such client is the authorised person of an HUF, Corporate, Partnership or Trust (in case of non-individual clients).

For details: https://lnkd.in/g2vnfnwB

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SEBI Case Law 29.11.2024 RELIANCE SECURITIES LIMITED

Facts of the Case: SEBI and exchanges viz, National Stock Exchange (“NSE”) and Bombay Stock Exchange(“BSE”) had conducted a thematic onsite inspection of the books of accounts, records and other documents of Authorized Persons (APs) of Reliance Securities Limited (“Noticee/ RSL”), registered with SEBI as a Stock Broker since September 09, 2005. The inspection was conducted for the period beginning from April 01, 2022 to December 31, 2023.

The inspection findings were communicated to the Noticee and after examining the reply submitted by the Noticee, it had been alleged that the Noticee contravened provisions of the SEBI Act, 1992, SEBI (Stock Brokers) Regulations, 1992 and applicable Circulars issued thereunder, in respect of the activities carried out by it. The summary of the violations alleged to have been committed by Reliance Securities Limited are given below:-

Alleged Violations (Summarized)
1. Non-maintenance of adequate systems for recording of order placement by clients.
2. Discrepancy w.r.t existence of terminal at inspection location Vis a Vis information reported to exchange by the Noticee.
3. No proper segregation and demarcation maintained at the AP office.
4. Failure of the Noticee in ensuring that its Authorized Persons are engaged only in permitted activities. 5. Failure of the Noticee to inspect the books of active registered Authorised Person as per the applicable guidelines.
6. Non-reporting of details of active clients mapped to Authorized Persons.
7. Entrusting the CTCL/dealer terminals to its clients other than Approved Persons.
8. Inadequate supervision of AP’s by the Noticee.

SEBI Order: Having considered the facts and circumstances of the case, the material available on record, the factors mentioned in 15J of SEBI Act and also taking into account judgment of the Hon’ble Supreme Court in SEBI vs. Bhavesh Pabari (2019) 5 SCC 90 and in exercise of power conferred under Section 15I of the SEBI Act read with Rule 5 of the SEBI Adjudication Rules, the following penalty is imposed under Sections 15HB and 15A(b) of the SEBI Act, as applicable on the Noticee:

Name of the Entity Reliance Securities Limited (Noticee)
1.     Under Section 15HB of the SEBI Act Penalty Provisions Penalty (Rs.) of Rs 7,00,000/- (Rupees Seven Lakhs Only)

2.     Under Section 15A(b) of the SEBI Act Penalty Provisions Penalty (Rs.) of Rs 2,00,000/- (Rupees Two Lakhs Only)

3.     Total Rs 9,00,000/- (Rupees Nine Lakhs Only)

For details: https://lnkd.in/g_uUn3js

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IBC Update:

IBC Update: The Insolvency Professionals to act as Interim Resolution Professionals, Liquidators, Resolution Professionals and Bankruptcy Trustees (Recommendation) (Second) Guidelines, 2024 (December 02, 2024)

Insolvency and Bankruptcy Board of India has issued guidelines as the need was felt to prepare the panel of IPs in advance and share with the Adjudicating Authority (AA) to avoid administrative delays in appointment of the IP. These guidelines provide the procedure for preparing panel of Insolvency Professionals to act as Interim Resolution Professionals, Liquidators, Resolution Professionals and Bankruptcy Trustees. The panel of IPs prepared as per these guidelines will be effective from 1 January 2025 to 30 June 2025.

For details: https://lnkd.in/gu3f_AR2

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IBC Update:

Extension of time for filing Forms to monitor liquidation and voluntary liquidation processes under the Insolvency and Bankruptcy Code, 2016, and the regulations made thereunder (December 02, 2024)

Insolvency and Bankruptcy Board of India, considering representations and difficulties faced by the liquidators, has decided to extend the last date of submission of the liquidation and voluntary liquidation forms till 31.12.2024 vide issuing a circular dated December 02, 2024.

For details: https://lnkd.in/gzirz97R

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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.

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Central Information Commission vs. D.D.A. & Anr ; Supreme Court of India 2024 INSC 513

The principle of purposive interpretation supports the view that the CIC’s powers under Section 12(4) of the RTI Act include all necessary measures to manage and direct the Commission’s affairs effectively.

Facts of the Case/Background: The present appeal challenges the judgment and order, passed by the High Court of Delhi. The High Court, by the impugned order, quashed the Central Information Commission (Management) Regulations, 2007 framed by the Chief Information Commissioner and held that the CIC has no power to constitute Benches of the Commission. This appeal is confined to the issue of the validity of the Regulations and the powers of the CIC under Section 12(4) of the Right to Information Act, 2005.

Legal Issue :Whether the CIC, under the provisions of Section 12(4) of the Right to Information Act, 2005 has the authority to constitute benches of the CIC and frame Regulations for the effective management and allocation of work within the Commission, including the issuance of orders and the formation of committees?

Observations, Findings and Decision
In the present case, the RTI Act should be interpreted purposively, taking into account the broader objectives of the legislation. The purpose of the RTI Act is to promote transparency and accountability in the functioning of public authorities, ensuring citizens’ right to information. To achieve these objectives effectively, it is essential that the Central Information Commission operates efficiently and without undue procedural constraints. The principle of purposive interpretation supports the view that the CIC’s powers under Section 12(4) of the RTI Act include all necessary measures to manage and direct the Commission’s affairs effectively. This includes the ability to form benches to handle the increasing volume of cases. The formation of Benches allows for the efficient allocation of work and ensures the timely disposal of cases, which is crucial for upholding the right to information.

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