The NCLAT held that Section 238 of the IBC gives overriding ...

Insolvency Proceedings Under IBC Section 7 Take Priority Over Conflicting Laws, NCLAT Rules.

July 12, 2024

Case Laws     Insolvency and Bankruptcy     AT

The NCLAT held that Section 238 of the IBC gives overriding effect to proceedings u/s 7, despite Section 10 of CPC. Proceedings u/s 7 must proceed, as the Code's provisions prevail over inconsistent laws. Insolvency resolution must be detected early, and remedial measures taken. Section 7 proceedings cannot be barred by Section 19 proceedings, as they cover different fields. The DRT's rejection of Section 19 proceedings cannot bar a Section 7 application. The determination of default in DRT proceedings, pending in the High Court, is relevant for Section 19 but not a reason to bar Section 7 proceedings. The Supreme Court held that a Section 7 petition is an independent proceeding, unaffected by other pending proceedings. The DRT's order and inconclusive Section 19 proceedings cannot bar a Section 7 application. The Adjudicating Authority erred in barring the Section 7 application. The appeal was allowed, and the Company Petition was revived for fresh consideration.

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