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
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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
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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
2026 LawText (SC) (02) 60
Civil Appeal No.11417 of 2025
SANJAY KUMAR J. , K. VINOD CHANDRAN J.
Mr. Neeraj Kishan Kaul, Ms. Purti Gupta, Mr. Ritin Rai
Omkara Assets Reconstruction Private Limited
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Nature of Litigation: Civil appeal against order of Company Law Appellate Tribunal in insolvency proceedings
Remedy Sought
Appellant sought setting aside of Appellate Tribunal's order that kept IBC application in abeyance and revival of Corporate Insolvency Resolution Proceedings
Filing Reason
Appellant filed appeal against Appellate Tribunal's order that suspended insolvency proceedings due to pending Scheme of Arrangement under Companies Act
Previous Decisions
Adjudicating Authority initiated CIRP under Section 7 of IBC -- Company Law Appellate Tribunal kept application in abeyance until disposal of High Court proceedings -- Supreme Court issued interim order reviving moratorium
Issues
Whether proceedings under IBC can be initiated when Scheme of Arrangement under Companies Act is pending before High Court
Whether IBC provisions have overriding effect over Companies Act provisions under Section 238 of IBC
Whether Scheme of Arrangement had become defunct due to non-compliance with procedural requirements
Submissions/Arguments
Appellant argued IBC has overriding effect under Section 238 and Scheme was defunct due to respondent's non-compliance -- Respondent argued proceedings under Companies Act should take precedence and IBC application should be kept in abeyance
Ratio Decidendi
IBC has overriding effect over inconsistent provisions in any other law under Section 238 -- Scheme of Arrangement under Companies Act requires strict compliance with procedural timelines to be effective -- Non-compliance with Companies Act procedures renders scheme defunct, enabling initiation of IBC proceedings -- Pending proceedings under Companies Act do not bar initiation of CIRP under IBC when scheme is defunct
Judgment Excerpts
Judicial impropriety vis-à-vis financial rectitude is the moot question arising in this appeal
IBC has been interpreted as a measure, balancing the realization of debts; public funds, to a reasonable extent while ensuring that the industry/enterprise is not driven to sure death
Section 238 of IBC provides overriding effect over inconsistent provisions in any other law
The Scheme of Arrangement had become defunct by the deliberate omissions of respondent No.2
Procedural History
Adjudicating Authority initiated CIRP under Section 7 of IBC -- Company Law Appellate Tribunal kept application in abeyance until disposal of High Court proceedings -- Supreme Court issued interim order reviving moratorium -- Supreme Court heard final arguments and delivered judgment allowing appeal
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