Businesses often rely on trade credit insurance to protect themselves from customers’ inability to pay for products or services. An interesting question that arose recently in the Indian insolvency context was that when a creditor’s claim for pending dues is paid out by an insurer, can the creditor, having received such pay-out, maintain an insolvency action against the debtor? The National Company Law Tribunal (“NCLAT”) has answered this in the affirmative.
The case of Uniworld Sugars Limited (the Corporate Debtor) has a long and chequered history which started before the Allahabad Bench of the NCLT and after doing a round before the NCLAT and the Supreme Court, has been finally decided by the Chandigarh Bench of NCLT vide an Order dated March 20, 2023.
Background
The regime under the Insolvency and Bankruptcy Code, 2016 (“IBC”), is largely creditor centric. In fact, extraordinary as it may sound, corporate insolvency resolution process (“CIRP”) under IBC is nothing short of a puppet show, with the Committee of Creditors (“CoC”) as the puppet master. The CoC, comprising of financial creditors of the corporate debtor, is paramount in terms of making the most significant decisions of the process and plays a vital role in resolving the debt.
In a recent judgment in the case of ABG Shipyard, the Supreme Court has decided an extremely relevant question of law concerning the liquidation process under the Insolvency & Bankruptcy Code, 2016 (“IBC”).
Premise
Since the advent of the Insolvency & Bankruptcy Code, 2016 (“IBC”), the insolvency law regime in India has been consolidated and uniformized. Courts have repeatedly held that the IBC is a code in itself and that one need not look elsewhere in deciding matters under it.
When the Insolvency & Bankruptcy Code, 2016 (“IBC”) was notified in 2016, one of its most talked about provisions was the limited scope of adjudication and consequently narrow jurisdiction conferred upon the National Company Law Tribunal (“NCLT”) in deciding insolvency cases. In fact, the provisions of the Code in respect of financial creditors were viewed by many as draconian and unconstitutional as the NCLT, prior to commencement of insolvency process, is required to only examine a debt and default and nothing else.
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Introduction
In 2016, with the birth of the Insolvency and Bankruptcy Code, 2016 (“IBC”), for the first time in its history, the country witnessed a comprehensive legislation which provided for a consolidated insolvency regime, whether it be for companies, partnership firms or individuals.
This article discusses the applicability of IBC to companies in which the Government of India has a stake.
What the law does not say
Introduction
The Insolvency & Bankruptcy Code, 2016 (“IBC”) has been one of the most talked about debated, evolving legislations of recent times. It has brought with itself, a sea change in the manner that debt is resolved in India. From its very advent in late 2016, IBC has been embroiled in long fought interpretational tussles which have resulted in various gaps being filled in by the Supreme Court of India. In fact, the legislation itself has undergone several and frequent amendments.
Introduction
National Company Law Tribunal (“NCLT”) was introduced in the Companies Act, 1956 in the year 2002. However, despite that, the erstwhile Company Law Board continued to function and NCLTs remained only on the statute book. It was only in late 2016 when the Insolvency & Bankruptcy Code, 2016 (“IBC”) was notified, that the NCLTs became operational.
Exclusive Jurisdiction