The Supreme Court, recently, in the case of Phoenix Arc Private Limited v. Spade Financial Services Limited ¹, held that the intent of Sec. 21 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) will be defeated if related parties are just determined “in presaenti” i.e., on the present basis. The issue pertained to the interpretation of Section 21 of the IBC, which provides for constitution of the Committee of Creditors (“CoC”).

It is safe to say that the Insolvency and Bankruptcy Code, 2016 (“IBC” or “Code“) and the regime it has spawned, has effected a complete turnaround in the way insolvency and liquidation proceedings were dealt with in India. The IBC has quickly become the preferred route for creditors and debtors alike, with stakeholders lauding the efficiency of the Code. The standout factor that has contributed to the success of the Code is the strict timeline prescribed and followed during the insolvency resolution process.

In a recent order issued by the National Company Law Appellate Tribunal (“NCLAT“) in the case of Sushil Ansal Vs. Ashok Tripathi¹, the NCLAT has held that a decree-holder cannot be treated as a financial creditor for the purpose of triggering insolvency proceedings against a company.