IBC case

Material facts

 The appellant made many products and is involved in a myriad number of sectors which also
happens to be very diverse.
 The appellant began to suffer losses owing to problems involved with labour, since August 2012.
 The appellant was given loans (financial assistance) by some 19 banking entities.
 The appellant on account of not being able to pay its creditors, suggested corporate debt
restructuring (CDR).
 A consortium comprising of creditors was formed with Central Bank of India, leading.
 On 22nd February, 2014, a corporate debt restructuring resolution was approved.
 A master restricting agreement (MRA) was drawn up on 9th September 2014, according to
which additional funds were to be infused by the creditors, upon being met of certain conditions
by debtors. This MRA was to be implemented over a period of 2 years.
 On 7th December, 2016, ICICI Bank filed an application in the National Company Law Tribunal,
for insolvency process to be initiated as according to them the appellant had become a defaulter
within the meaning of the Code.
 The appellant replied that there wasn't any liability to pay (debt) because under Maharashtra
Relief Undertakings (Special Provisions Act, 1958), the government suspended the payment of
debt temporarily for a period of total of two years, viz vide first notification dated 22nd July
2015 and second notification on 18th July 2016.
 The appellant on a later date took the plea (in the NCLT) that it was unable to pay the creditors
due to non-release of funds under the MRA.
 NCLT held that the Insolvency and Bankruptcy Code would prevail over the Maharashtra. Act in
view of of non-obstante clause mentioned under s. 238 of the Code.
 Then the matter went to NCLAT. The appellate tribunal held that State Act and the Code are not
repugnant to each other however the apple and cannot derive any advantage of the State Act. It
was held that the applicant cannot prevent or avoid the insolvency proceedings.
 Then the matter came to Supreme Court of India and hence the present case.

Issue before the Court

Contentions/Arguments

By the Appellant

 The appellate tribunal has decided in our favour. The appellate tribunal held that the the two
acts are not repugnant to each other beacuse of the fact that they operate in different fields.
 The moratorium imposed by the Maharashtra Act would continue to apply because at that point
of time the ICICI Bank had still not applied for insolvency process. And at that point of time
Maharashtra Act was in force.
 Under the Maharashtra Act the debt was suspended temporarily only and not permanently.
 After the moratorium period mentioned in Maharashtra Act is over then the Code would have
effect.
 There is no repugnancy between the Maharashtra Act and the Insolvency and Bankruptcy Code
and each operates in its own field.
 The Maharashtra Act relief against unemployment while the Code provides for the liquidation
process and therefore the two act do not contradict each other.
 The Code was enacted under the Entry 9, List III, of the Seventh Schedule of the constitution
while the Maharashtra Act was enacted under Entry 23, List III, Seventh Scehdule of the
Constitution.
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Byt the Respondent

 Under the new Code company whose management cannot pay off its debt cannot be afforded
to continue remaining a part of the management.
 Under section 7 of the Code, when an application for initiating the the insolvency process is filed
then the only way out for a corporate debtor is to plead the abscence of the debt.
 The appellate tribunal should have viewed and scrutinised the MRA, upon which it would have
found simply, that there was no debt due because the funds that were to be released to the
appellants by the creditors were never disbursed. As a result of this, the restructuring process
could never be initiated.
 The two acts are repugnant to each other. They can not operate together as the as the
Maharashtra Act provides that the management of the company would be taken by the state
government after the moratorium whereas under the the Code the management of the
company is taken by Interim Resolution Professional (IRP).
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