August 6, 2018
In the case, the NCLAT while referring to Supreme Court’s verdict in Innoventive case has ruled that when two proceedings are initiated, one under the Insolvency and Bankruptcy Code, 2016 (I&B Code) and the other under the SARFAESI Act, 2002, then the proceeding under the I&B code shall prevail.
The appeal in the case was preferred by the Financial Creditor i.e. Canara Bank against the NCLT’s (National Company law Tribunal) order, whereby the application preferred by Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 (application for initiation of corporate insolvency resolution process by operational creditor) against the Corporate Debtor i.e. M/s. Sri Chandra Moulishvar Spinning Mills Private Limited was admitted by the Tribunal.
The Appellant’s main grievance in the case was that he had already initiated proceedings under the SARFAESI Act, 2002 for recovery against the Corporate Debtor.
The NCLAT in view of the issue involved in the case, made reference to Supreme Court’s verdict in the case of Innoventive Industries Ltd. v. ICICI Bank, whereby the Apex Court was of the view that if the application under Section 9 is complete and there is no ‘existence of dispute’ and there is a ‘debt’ and ‘default’ and then the Adjudicating Authority is bound to admit the application.
Thus, NCLAT upheld NCLT’s decision and also noted that such action cannot continue as the I&B code will prevail over SARFAESI Act, 2002.
NCLAT’s Order can be accessed here.