Case Note & Summary
The Supreme Court of India heard three civil appeals arising from orders of the National Company Law Appellate Tribunal (NCLAT) in the corporate insolvency resolution process (CIRP) of Supertech Ltd., a real estate corporate debtor with multiple projects. The appeals were filed by financial creditors Union Bank of India and Indiabulls Asset Reconstruction Company Ltd., and by Assets and Care Reconstruction Ltd., a beneficiary of a corporate guarantee. The NCLAT had passed an order on 10.06.2022 in Company Appeal (AT) (Ins.) No. 406 of 2022, which, while admitting an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), directed that the Committee of Creditors (CoC) be constituted only for the project named 'Eco Village-II', effectively converting the CIRP into a project-wise insolvency resolution process. Another order dated 10.01.2023 directed the interim resolution professional to call a meeting of only those financial institutions who lent money to the corporate debtor before finalisation of the term sheet. The Supreme Court, noting the myriad issues and that final disposal would take time, heard counsel on interim relief. It recorded that certain offers from prospective resolution applicants had been received pursuant to NCLAT's directions and were placed before NCLAT. The Court directed NCLAT to keep further proceedings in abeyance and await further orders. The Court then heard counsel and passed interim directions for consideration of the resolution plans.
Headnote
A) Insolvency Law - Corporate Insolvency Resolution Process - Committee of Creditors - Section 7, Insolvency and Bankruptcy Code, 2016 - The NCLAT's order restricting the CoC to only one project of a real estate corporate debtor with multiple projects was challenged as converting the CIRP into a project-wise insolvency. The Supreme Court, while hearing interim relief, noted that final disposal would take time and directed that offers from prospective resolution applicants be considered, keeping further proceedings in abeyance. Held that the issue requires detailed consideration (Paras 1-3).
Issue of Consideration
Whether the NCLAT could restrict the constitution of the Committee of Creditors to only one project of a corporate debtor having multiple projects, effectively converting the CIRP into a project-wise insolvency resolution process.
Final Decision
The Supreme Court, after hearing counsel on interim relief, directed that the offers from prospective resolution applicants be considered and that NCLAT keep further proceedings in abeyance pending further orders. The Court passed interim directions for consideration of resolution plans.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- Section 7
- Corporate Insolvency Resolution Process
- Committee of Creditors
- Project-wise insolvency
- Real estate corporate debtor
- Interim relief
- Resolution plan
Case Details
Civil Appeal No. 1925 of 2023, Civil Appeal No. 5941 of 2022, Civil Appeal No. 1975 of 2023
Indiabulls Asset Reconstruction Company Limited, Union Bank of India, Assets and Care Reconstruction Ltd.
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Nature of Litigation
Civil appeals against orders of the National Company Law Appellate Tribunal in corporate insolvency resolution proceedings of Supertech Ltd.
Remedy Sought
The appellants sought to set aside the NCLAT orders restricting the Committee of Creditors to one project and directing meetings of only certain financial institutions.
Filing Reason
The NCLAT orders effectively converted the CIRP into a project-wise insolvency resolution process, which was challenged as being contrary to the IBC.
Previous Decisions
NCLAT order dated 10.06.2022 in Company Appeal (AT) (Ins.) No. 406 of 2022 and order dated 10.01.2023.
Issues
Whether the NCLAT could restrict the constitution of the Committee of Creditors to only one project of a corporate debtor having multiple projects.
Whether the NCLAT could direct the interim resolution professional to call a meeting of only those financial institutions who lent money to the corporate debtor before finalisation of the term sheet.
Submissions/Arguments
The appellants argued that the NCLAT's orders were contrary to the IBC and effectively created a project-wise insolvency resolution process.
The respondents likely supported the NCLAT orders, but specific arguments are not mentioned in the provided text.
Ratio Decidendi
The Supreme Court did not finally decide the appeals but issued interim directions, noting that the issues require detailed consideration and that final disposal would take time.
Judgment Excerpts
By the order impugned, the Appellate Tribunal, while dealing with an appeal against the order dated 25.03.2022 passed by the National Company Law Tribunal, New Delhi – Court VI, in admitting an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, has issued a slew of directions which practically have the effect of converting the corporate insolvency resolution process in question into a 'project-wise insolvency resolution process' inasmuch as the constitution of committee of creditors has been restricted only to one project named 'Eco Village-II' of the corporate debtor, who is dealing in real estate and has several ongoing projects.
Having regard to myriad issues involved and the fact that final disposal of the appeals is likely to take time, we have heard the learned counsel for the parties as regards interim relief and/or interim arrangement...
Procedural History
The NCLT admitted an application under Section 7 of the IBC against Supertech Ltd. on 25.03.2022. Appeals were filed before NCLAT, which passed orders on 10.06.2022 and 10.01.2023. These orders were challenged before the Supreme Court in three civil appeals. The Supreme Court heard the parties on interim relief and directed that further proceedings before NCLAT be kept in abeyance.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: Section 7
