Case Note & Summary
The dispute involved two appeals filed by financial creditors against an order of the National Company Law Appellate Tribunal (NCLAT) regarding the corporate debtor, Supertech Ltd. The appeals challenged the NCLAT's decision to limit the Corporate Insolvency Resolution Process (CIRP) to a single project, Eco Village - II, rather than the entire corporate entity. The corporate debtor had defaulted on loans, leading to its classification as a Non-Performing Asset. The Union Bank of India initiated proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016, claiming substantial dues. The NCLT admitted the application and appointed an Interim Resolution Professional (IRP). The NCLAT's interim order restricted the Committee of Creditors (CoC) to Eco Village - II, prompting the financial creditors to appeal, arguing that the Appellate Tribunal lacked the authority to impose a project-wise resolution. The court considered various arguments regarding interim relief, including the potential harm to home buyers and the implications of allowing the ex-management to participate in the resolution process. Ultimately, the court upheld the NCLAT's interim directions, emphasizing the need to avoid irreparable harm to home buyers while allowing the project-wise resolution to proceed under specific conditions. The court decided to maintain the status quo regarding the Eco Village - II project while keeping other projects ongoing under the supervision of the IRP. The appeals were scheduled for final hearing in July 2023.
Headnote
A) Insolvency Law - Corporate Insolvency Resolution Process - Project-wise Resolution - Validity of Project-wise Resolution - Insolvency and Bankruptcy Code, 2016, Section 7 - The Appellate Tribunal's order allowing project-wise resolution was challenged on grounds of lack of authority under IBC. The court upheld the interim directions, emphasizing the need for balance of convenience and potential irreparable harm to home buyers if the entire corporate debtor was treated as a whole (Paras 10-13).
Issue of Consideration
Whether the Appellate Tribunal had the authority to adopt a project-wise resolution process under the Insolvency and Bankruptcy Code, 2016.
Final Decision
The court upheld the NCLAT's interim directions, allowing the project-wise resolution to proceed while maintaining the status quo for Eco Village - II and keeping other projects ongoing under IRP supervision.
Law Points
- Insolvency and Bankruptcy
- Corporate Insolvency Resolution Process
- Interim Relief
- Project-wise Resolution
- Committee of Creditors
- Financial Creditor Rights
