NCLT carves out an exception for applicability of Limitation Act to Insolvency Application
The Mumbai Bench of the National Company Law Tribunal (“NCLT”) has held that a debt barred by limitation can be proceeded against under the provisions of the Insolvency and Bankruptcy Code (“IBC”) if the debt is continued to be recorded in the books of the corporate debtor.
The matter came to be decided by the NCLT in the case of TJSB Sahakari Bank Limited v. Unimetal Castings Limited. It may be noted here that the Supreme Court (“SC”) in the case of B.K. Educational Services Private Limited v. Parag Gupta and Associates held that the Limitation Act, 1963 will apply to proceedings under the IBC.
The corporate debtor in this case relied on this decision of the SC to contend that the debt was hit by the provisions of the Limitation Act, 1963 and was thus time barred. It contended that the date of default was June 30, 2015 and the Insolvency Application was filed on August, 2018, i.e., three years after the debt becoming due.
The NCLT, rejecting the contention of the corporate debtor held that for the financial year ending 2016-17, the corporate debtor showed the sum owed to the applicant bank on its books as ‘long term borrowings’ and in view of such admission of debt, the period of limitation would stand extended.
Quick Views:
- The decision of the NCLT correctly applies the law laid down by the Supreme Court in the B.K. Educational Services case. This case only spoke about the applicability of the Limitation Act, 1963 to proceedings under the IBC, however, the NCLT correctly distinguished it from the case at hand when it said that the acknowledgement of the debt by the corporate debtor on its books would extend the period of limitation.
Rule prohibiting companies and partnership firm not formed for the specific purpose of valuation from conducting valuation is constitutionally valid: Delhi HC
The Delhi High Court (“Del HC”) in the case of Cushman and Wakefield India Pvt. Ltd. V. Union of India has held that Rule 3(2) of the Companies (Registered Valuers & Valuation Rules), 2017 (“Valuation Rules”) is constitutionally valid and has upheld its validity.
Rule 3(2) of the Valuation Rules prohibits any partnership entity, or company, if such company is a subsidiary, joint venture or associate company of another company or body corporate from being a registered valuer. The said rule was challenged as being unconstitutional on the ground that it violates Articles 14, 19 (1) (g) and 301 of the Constitution of India and places unreasonable restriction on the right of the petitioner to carry on the trade and business of valuation.
The Union of India on the other hand contended that a separate chapter on valuation was introduced in the Companies Act, 2013 with the intention of regulating the profession of valuation under a separate regulatory regime and to guide and develop the same in line with international standards. It further contended that with myriad used of valuation under the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016, the integrity, impartiality and truthfulness of the valuation process is absolutely essential to the proper working of these laws and to incoming FDI in India which is based on such valuation. The Valuation Rules were made with the objective to instill independence and professionalism in the field of valuation and given its importance, the Valuation Rules also sought to avoid any situation of conflict of interest with an entity conducting the valuation. The Union of India contended that it wanted to develop valuation as a ‘profession’ and not as a ‘business’ formed with sole purpose of profit maximization.
The Del HC accepted the contention of the Union and held that the objective and intention behind introducing the Valuation Rules is to introduce higher standards of professionalism in the valuation industry, specifically in relation to valuations undertaken for the purpose of the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016. The Valuation Rules, as they stand now, obviates the possibility of any conflict of interest on account of diverging interests of associate or constituent entities which shall undermine the very process of valuation.
Quick Views
- The Union of India is correct on emphasizing the need for maintaining integrity and professionalism in the valuation industry. Valuation reports have multiple uses, for example, it is used under Section 62 (1) (c) of the Companies Act, 2013 for issuance of new shares. And in light of this, it needs to be ensured that there is no conflict of interest with the entity conducting the valuation.
Legality of Fantasy Sports can be decided by state governments: Central Government
During the on-going session of the Parliament, the Union Government was asked about the legality of fantasy sports, whether it is ‘game of chance’ or ‘game of skill’ and whether a proposal to regulate the financial transactions relating to fantasy sports gaming industry is being contemplated by it.
The Union Government, in its reply stated that betting and gambling comes under Entry 34 of the State List of the Indian Constitution and that the state governments are competent to enact laws on the issue. However, the Union Government did not specify if it plans to regulate the fantasy sports gaming industry in the country.
Quick Views
- States like Telangana have already brought legislation to ban all kinds of game of skill whether played offline or online. Therefore, the Union Government’s reply that states can regulate the issue of legality of fantasy sports is hardly new. It was an opportunity for the Union Government to present its views on how it viewed fantasy sports gaming and if any proposal was being considered by it to regulate the industry in general. However, the Union Government seems to have let go of this opportunity to clarify its position on regulating the fantasy sports gaming industry.
Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.