Summary
The Court upheld admission of ICICI Bank’s financial-creditor insolvency application. The IBC prevailed over Maharashtra relief-undertaking protection because the State moratorium and management scheme conflicted with the later exhaustive insolvency code, reinforced by Section 238. It explained the financial-default admission framework, rejected belated restructuring defences and held that displaced directors could not appeal in the company’s name after appointment of an insolvency professional.
Issues
- Whether Maharashtra relief-undertaking protection prevented initiation of corporate insolvency resolution.
- What inquiry Section 7 required into financial default and the debtor’s defence.
- Whether the appeal and belated restructuring arguments could be maintained.
Provisions considered
- Sections 3(6), 3(11), 3(12), 5(7), 5(8) and 7, Insolvency and Bankruptcy Code, 2016The reproduced definitions and admission provision linked a financial creditor’s application to non-payment of debt due and payable, with the debtor able to show that no default existed. (¶¶ 18–20, 27–30)
- Sections 13, 14 and 17, Insolvency and Bankruptcy Code, 2016The reproduced framework imposed moratorium and vested management in the interim resolution professional upon the statutory steps, displacing former management. (¶¶ 22–23, 32)
- Section 238, Insolvency and Bankruptcy Code, 2016The reproduced non-obstante clause overrode inconsistent State protection and asserted rights that would obstruct the insolvency process. (¶ 55–56)
- Article 254, Constitution of IndiaThe reproduced provision and reviewed authorities governed repugnancy between concurrent-field laws, including actual conflict and exhaustive Parliamentary occupation. (¶¶ 35–50, 55–56)
- Sections 3 and 4, Maharashtra Relief Undertakings (Special Provisions) Act, 1958The reproduced relief-undertaking and suspension powers conflicted with the later IBC scheme to the extent they obstructed its operation. (¶¶ 51, 54–56)
Held
- Once management vested in an insolvency professional, erstwhile directors could not maintain an appeal on behalf of the company, which was the sole appellant. The Court nevertheless examined the substantive questions because of their wider importance. (¶ 11)
- Under the Section 7 framework explained in this judgment, default could relate to financial debt owed to any financial creditor. The debtor could show the debt was not due in law or fact; a mere dispute did not defeat admission where payment was due and default established. This differed from the operational-creditor pre-existing-dispute framework. (¶ 27–30)
- Article 254 analysis concerned the same subject matter rather than necessarily the same legislative entry. Repugnancy required actual inconsistency or interference with an exhaustive Parliamentary scheme, with efforts to reconcile laws and invalidity only to the inconsistent extent, subject to the constitutional assent framework. (¶ 35–50)
- The IBC was an exhaustive corporate-insolvency code. The Maharashtra scheme’s management takeover and potentially lengthy suspension obstructed its time-bound professional management and moratorium. Both Article 254 and Section 238 required the State protection to yield; the NCLAT was wrong to deny the existence of repugnancy although its ultimate admission outcome was correct. (¶ 51–56)
- The second restructuring defence was an afterthought that could have been presented initially and was properly not entertained in the circumstances. In any event, the MRA made repayment direct and unconditional, without dependence on further creditor funding; the new non-maturity argument was also not accepted at this stage. (¶ 57–59)
Result
Appeals dismissed and admission of ICICI Bank’s insolvency application upheld; no costs.