*****When IBC does not override other laws – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/business-laws/when-ibc-does-not-override-other-laws/article65363124.ece

Man holds Insolvency and bankruptcy code IBC.

Man holds Insolvency and bankruptcy code IBC. | Photo Credit: designer491

Section 238 of the Insolvency and Bankruptcy Code, which says that the Code overrides any other law, has been held by the National Company Law Appellate Tribunal, New Delhi, to be not a king under which all other laws are subordinate.

In a case between the New Okhla Industrial Development Authority Vs the Liquidator of Mega Soft Infrastructure, an earlier judgment of the NCLT had directed the Authority to transfer a plot of land that belonged to Mega Soft Infrastructure, to Groovy Structures LLP, the winner in an auction. The Authority should file any claims for its dues from Mega Soft Infra before the Liquidator, it says. The Authority appealed against this before the NCLAT, saying it had its own rules to follow.  

In a similar case involving the Municipal Corporation of Greater Mumbai (MCGM), the Supreme Court had observed that the Section 238 of IBC “cannot be read as overriding Municipal Corporation of Greater Mumbai’s right in its public duty to control and regulate how its properties are dealt with.” Holding that it was “MCGM’s right, indeed its public duty” to control and regulate how its properties are to be dealt with—which is in accordance with the Sections 92 and 92-A of the MMC Act – the apex court had said: “This Court is of the opinion that Section 238 could be of importance when the properties and assets are of a debtor and not when a third party like MCGM is involved.”

Invoking this judgment of the Supreme Court, the NCLAT said: “The above judgment of the Supreme Court fully supports the contention of the learned Counsel for the Appellant that Section 238 of the IB Code cannot be pressed to override the power of the Appellant as entrusted to it under the UP Industrial Area Development Act, 1976.” 

It said that the NCLT allowing the application for transferring the plot in favour of Groovy Structures LLP, did not mean that the transfer application need not be dealt with as per the ‘Policy & Procedure for Institutional Property Management – March, 2009.’ 

Published on May 01, 2022

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