Understand; HON'ble ~SC ruling in ICICI vs Innoventive, dated 31st August, 2017, one of the first substantive rulings of the Supreme Court under the Insolvency and Bankruptcy Code:
The important principles held by the Supreme Court are as follows:
1. ICICI’s insolvency application against Innoventive has been upheld by the Supreme Court. The insolvency declaration was being challenged on the ground that Innoventive was a “relief undertaking” under the Maharashtra law for relief in case of industrial undertakings.
2. Supreme Court held that there was a conflict between the Maharashtra Relief law and the Bankruptcy Code, but citing well settled rulings in the past, the SC held that in case of a conflict between a state law and a Central Law, the Central Law will prevail. The Insolvency and Bankruptcy Code is a law that codifies the existing law on bankruptcy, enacted under the powers given to the Central Govt under Part I of Seventh Schedule of the Constitution, and therefore, overrides any contrary state law.
3. In several remarks through the ruling, the SC has highlighted the fact that time is of essence in bankruptcy proceedings.
4. In case of financial debt, the question of a dispute does not arise. All that the financial creditor is required to produce is evidence of non-payment through records of information utility or otherwise.
5. The SC also hinted at a very important principle – which may actually become a sad spot if the existing directors of companies under insolvency matters try to challenge the insolvency filings – that once the Insolvency has been ordered, the Board of Directors ceases to have the power to represent the company.
6. SC also remarked: “Entrenched managements are no longer allowed to continue in management if they cannot pay their debts.”
This is one of the first substantive rulings on the Insolvency law, and settles some nagging issues.
*Actively watching NCLT & SARFARESI Act too;*
UdayPrabhu@Activist.com
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