The Delhi High Court on Friday upheld the supremacy of Insolvency and Bankruptcy Code (IBC) over other civil laws such as those of contracts and guarantees and said that only the National Company Law Tribunal (NCLT) or similar adjudicating authorities should deal with the cases falling under the code.
If civil courts were to pass any orders in matters pertaining to IBC, the entire corporate insolvency resolution process pending before NCLT would be “put at naught” as “non-serious applicants” would submit resolution plans for consideration before the Resolution Professional (RP) and Committee of Creditors (CoC), and then not abide with it once it is approved, said a single judge bench of Justice Rajiv Sahai Endlaw.
This in turn, would lead to wastage of time, which could make resolution of corporate debtors unfeasible. In such cases, liquidation of the company would be the only alternative left owing to the time lapsed, the court said.
The observations by the court came while delivering a judgement in a plea moved by Liberty House Group against State Bank of India (SBI) and others. Liberty House Group had moved the high court seeking to stop SBI, Barclays Bank and the Resolution Professional (RP) for Castex Technologies as well as Amtek Auto, Dinkar T. Venkatasubramanian, from invoking the bank guarantees worth close of Rs 100 crore it had submitted for the two companies.
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The bank guarantees were submitted by Liberty House as a pre-condition for bidding for both the companies under the corporate insolvency resolution process. The company, however, failed to proceed with the resolution process despite having been declared the successful bidder in both the cases, following which SBI invoked the bank guarantee.
The bank guarantees, the high court said, was a measure to induce some fear in “such unscrupulous elements”, which chose to delay the corporate insolvency resolution process without any fear of consequences.
“Now if this court were to have jurisdiction and to hold either that the terms of the Process Memorandum or of the Bid Bond Guarantee (BBG) were not binding on the plaintiff and/or that the plaintiff is not in default thereof, the same would clearly amount to rendering findings inconsistent with the NCLT” Justice Endlaw said in his judgement. The entire transaction of giving of bank guarantee by Liberty House and invocation of the same by SBI was in the ambit of IBC. A decision on the same by any other court would “amount to rendering findings inconsistent with NCLT,” the judge said.
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Earlier, the Chandigarh bench of NCLT had slammed Liberty House group for failing to go ahead with the approved resolution plans for Castex Technologies and Amtek Auto. On December 5, the NCLT had, in an order, said that “the somersault taken by the Liberty House put the whole CIR Process and the machinery to quandary”.
“Such an unsavoury stance of the Liberty House would only attract adverse comments from any fair minded person particularly when there is no justifiable reason for Liberty House to drag its feet,” the NCLT had said in its order.
While rejecting Liberty House’s plea, the court imposed a cost of Rs 50 lakh on the company and asked it to pay the same to SBI within four weeks from now.
via IBC reigns supreme over other civil laws, says Delhi High Court | Business Standard News