Case Note & Summary
The Supreme Court allowed an appeal against the Company Law Appellate Tribunal's order that kept in abeyance an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) for initiating Corporate Insolvency Resolution Proceedings (CIRP) -- The Tribunal had initiated CIRP against respondent No.2 Corporate Debtor for recovery of Rs.154,33,12,274/- with future interest on defaulted loans -- Respondent No.2 resisted claiming pending Scheme of Arrangement proceedings under Sections 391-394 of the Companies Act, 1956 before the Punjab and Haryana High Court -- The Appellate Tribunal kept the IBC application in abeyance until disposal of High Court proceedings -- The Supreme Court held that the IBC has overriding effect under Section 238 and the Scheme of Arrangement had become defunct due to respondent's non-compliance with procedural requirements -- The Court revived the moratorium under Section 14 of IBC and permitted the Interim Resolution Professional to resume charge
Headnote
The Supreme Court allowed the appeal and set aside the order of the Company Law Appellate Tribunal which had kept the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) in abeyance -- The Court held that the IBC has overriding effect over inconsistent provisions in any other law under Section 238 of IBC -- The Scheme of Arrangement under Sections 391-394 of the Companies Act, 1956 had become defunct due to non-compliance with procedural requirements and timelines -- The Corporate Insolvency Resolution Proceedings (CIRP) were properly initiated under Section 7 of IBC despite pending proceedings before the High Court -- The moratorium under Section 14 of IBC was revived and the Interim Resolution Professional was permitted to resume charge of the Corporate Debtor
Issue of Consideration
The Issue of Consideration was whether proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) could be initiated when a Scheme of Arrangement under Sections 391-394 of the Companies Act, 1956 was pending before the High Court, and whether the IBC provisions have overriding effect over the Companies Act provisions
Final Decision
The Supreme Court allowed the appeal and set aside the order of the Company Law Appellate Tribunal -- The Court held that the IBC proceedings under Section 7 were properly initiated and the Scheme of Arrangement under Companies Act had become defunct -- The moratorium under Section 14 of IBC was revived and the Interim Resolution Professional was permitted to resume charge of the Corporate Debtor
Law Points
- Insolvency and Bankruptcy Code
- 2016 (IBC) has overriding effect over inconsistent provisions in other laws under Section 238 -- Companies Act
- 1956 provisions for Scheme of Arrangement under Sections 391-394 require strict compliance with procedural timelines -- Corporate Insolvency Resolution Proceedings (CIRP) under Section 7 of IBC can be initiated despite pending proceedings under Companies Act if scheme is defunct due to non-compliance -- Moratorium under Section 14 of IBC is a statutory consequence of initiating CIRP
