CASE COMMENT

Innoventive Industries Limited v. ICICI Bank and Another

(2018) 1 SCC 407
Coram: Rohinton Fali Nariman and Sanjay Kishan Kaul, JJ.

Facts
Innoventive Industries Limited was unable to service the financial assistance given to
it by the banks and this led to corporate debt restructuring. A master restructuring
agreement was entered into on September 09, 2014 by which funds were to be infused
by the creditors in return of certain obligation that were to be met by the debtors.
ICICI Bank filed an application to start the CIRP on December 07, 2016 against
which a reply was filed by IIL on December 17, 2016 wherein the appellant claimed
there was no debt legally due because of the operation Maharashtra Relief
Undertakings Act.
Procedural History
NCLT held that the IBC code will prevail over the Maharashtra Act in view of the
non-obstante clause in Section 238 of the Code ….@Para 6
An appeal was carried to the NCLAT which was dismissed; however, it was held that
the Code and the Maharashtra Act operate in different fields and therefore are not
repugnant to each other. ….@Para 8
Issue
On maintainability: Whether the appeal on behalf of erstwhile directors is
maintainable?
On merits: Whether the protection granted under the Maharashtra Relief Undertaking
Act renders an application under the Insolvency Code not maintainable?
Observation
♦ The Supreme Court observed that once an insolvency professional is appointed
to manage the company, the erstwhile directors who are no longer part of the
management, obviously cannot maintain an appeal on behalf of the company
….@Para 11
 ♦ The Court observed the objective of the Code is to bring the insolvency laws in
India under a single unified umbrella with the object of speeding up the
insolvency process ….@Para 13
♦ The scheme of the Code is to ensure that when a default takes place, in the
sense that a debt becomes due and is not paid, the insolvency resolution process
begins ….@Para 27
♦ The Supreme Court examined the decisions of NCLT and NCLAT and upheld
the view of NCLT that by virtue of Section 238 of IBC, a notification under the
Maharashtra Act would not stand in the way of CIRP under the Code.
….@Para 34
♦ The Supreme Court culled out Article 254 of the Constitution of India and
delved into case law on subject. In Deep Chand, Supreme Court referred to its
earlier judgments in Tika Ramji and held:
♦ Repugnancy between two statues may be ascertained on the basis of the
following principles:
(1) Whether there is direct conflict between the two provisions;
(2) Whether the Parliament intended to lay down an exhaustive code in respect of
the subject matter replacing the Act of the State Legislature;
(3) Whether the law made by Parliament and the law made by state legislature
occupy the same field ….@Para 42
♦ The non-obstante clause contained in Section 4 of the Maharashtra Act cannot
is void vis-a-vis action taken under the Central enactment by virtue of Article
254(1) ….@Para 55
Decision
We are of the view that the Tribunal was correct in appreciating that Tribunal was
correct in appreciating there would be repugnancy between the two enactments. The
Judgment of NCLAT is not correct because repugnancy does exist ….@Para 56

CRITICAL EVALUATION
Through this judgment, the Supreme Court has paved way for the implementation of
Code without any hindrance from other statutes such as the Maharashtra Reforms
Undertaking (Special provisions Act). Corporate Debtors cannot seek refuge under
other statutes for delaying the CIRP process under the Code.
However, the Maharashtra Act provided for the employment of the people by taking
over the operations of the company, this seems like a different subject matter but it
would have hindered the operation of the Code to a great deal. Because as the court
stated, Time is of Essence and swift action can help in avoiding loss of economic
value.
My submissions in this regard are that as Maharashtra Act is said to have disregard of
time taking the moratorium to continue for as long as 15 years, the IBC it seems has
moved on the same path. The data provided in the Economic Survey tells us that there
are 1640 pending CIRPs, 75% of which are more than 270 days. 421 completed
resolutions have taken an average of 495 days, whereas Section 12 of the Code aims
for 330 days.
Latest data from the IBBI1 shows that out of admitted claims of Rs. 32,861.90 crore
resolved in the quarter ended December 2021, creditors recovered just Rs 4409.76
crore or just 13.41%2

1Insolvency and Bankruptcy Board of India

2This is an Economic Times article dated March 04, 2022
https://m.economictimes.com/industry/banking/finance/ibc-led-recoveries-fall-sharply-as-delays-
mount/articleshow/89974087.cms