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As we continue our journey through the evolving insolvency landscape of 2023, we will delve into two landmark cases that further shaped the legal framework governing insolvency proceedings in India. Building upon the foundations laid in Part 1 of this series, we now turn our attention to M/s. Next Education India Pvt. Ltd. Vs. M/s. K12 Techno Services Pvt. Ltd and Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation India Ltd.
In March 2023, the Supreme Court delivered a pivotal ruling in the case of M/s. Next Education India Pvt. Ltd. vs. M/s. K12 Techno Services Pvt. Ltd., addressing the interpretation of Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) when multiple invoices are involved.
Next Education India Pvt. Ltd., the Operational Creditor, provided digital classroom services to K12 Techno Services Pvt. Ltd. (Corporate Debtor), issuing 187 invoices between 12.03.2011 and 30.06.2017. Despite non-payment, the Operational Creditor initiated proceedings under Section 9 of the I&B Code.
The NCLT dismissed the Company Petition as time-barred, a decision upheld by the NCLAT. The latter held that the starting point of limitation should be the date of the first invoice (12.03.2011).
The Supreme Court, however, set aside the NCLT and NCLAT orders. It ruled that the starting point of limitation should not be confined to the date of the first invoice. Instead, the court emphasized considering invoices raised up to at least three years preceding the date of filing the Section 9 petition.
Analysis:
This decision provides clarity on the determination of the limitation period in cases involving multiple invoices. The ruling ensures a comprehensive consideration of the invoiced period, fostering a fair and just approach in insolvency proceedings.
In another March 2023 ruling, the Supreme Court addressed the interplay between the Insolvency and Bankruptcy Code 2016 (I&B Code) and cases initiated under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) in Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation India Ltd.
Ajay Kumar Radheshyam Goenka, Managing Director of M/s. Rainbow Papers Ltd., faced legal action under Section 138 of the NI Act. Simultaneously, Corporate Insolvency Resolution Process was initiated against the accused company under Section 9 of the I&B Code.
The Supreme Court distinguished the nature of proceedings under the two statutes, asserting that the I&B Code's moratorium does not extend to criminal proceedings under Section 138 of the NI Act.
The Court clarified that if criminal proceedings under Section 138 of the NI Act have already commenced, the dissolution of the accused company during the Corporate Insolvency Resolution Process (CIRP) does not absolve signatories/directors of penal liability.
This judgment emphasizes the distinct nature of proceedings under the I&B Code and the NI Act. It provides relief to creditors by ensuring that personal penal liability persists even if the company undergoes dissolution through the IBC process.
As we continue our exploration of the intricacies of 2023's insolvency regime, these cases underscore the evolving dynamics and the need for a nuanced understanding of the intersection between insolvency laws and other statutes. Stay tuned for Part 3, where we unravel more cases that have left an enduring imprint on the corporate insolvency landscape, offering valuable insights into the evolving dynamics of insolvency laws in India.