BL Case Presentation

Innoventive
Industries Vs.
ICICI Bank
BUSINESS LAW PRESENTATION
By GROUP 5B
INTRODUCTION The Insolvency and Bankruptcy Code,
2016 (“IBC”) came into force on 1
December, 2016.
The Supreme Court issued a landmark
verdict in the case of Innoventive
Industries Ltd. vs. ICICI Bank on August
31, 2017 (pursuant to the first
application moved under the IBC).
The Court stated in the very first
application under the Insolvency Code
that it is issuing its thorough judgement
so that all courts and tribunals can
notify a paradigm shift in the law.
ICICI Bank filed an application before the Mumbai Bench of
CASE FACTS
the National Company Law Tribunal ("NCLT") against
Innoventive Industries Ltd. ("Innoventive") to initiate the
insolvency resolution process because Innoventive was
declared a defaulter under the IBC.
The main contention of Innoventive was that no debt was

legally due because all of Innoventive's liabilities and
enforcement remedies were temporarily suspended for two
years due to notifications issued under the Maharashtra
Relief Undertaking (Special Provisions Act), 1958.
On 17 January 2017, the NCLT ruled that the IBC would

prevail over the Maharashtra Act due to the non-obstante
clause in Section 238 of the IBC. It was determined that the
Parliamentary statute would take precedence over the State
statute, and thus Innoventive had failed to make payments,
and thus the application was granted and a moratorium was
declared.
An appeal was filed against the above order before the

NCLAT, which was dismissed, and from there an appeal was
filed before the Supreme Court.
ISSUES RAISED
Is there a contradiction
between the IBC and State
Law ?
Whether the non-obstante

Is the appeal maintainable
Clause in Section 238 of the
because it was filed by
IBC of the Parliamentary
former Innoventive
enactment under IBC will
directors after an
take precedence over the
insolvency professional was
non-obstante Clause in
appointed to manage the
Section 4 of the
company?
Maharashtra Act?
CONTENTIONS
The order was issued without giving Innoventive notice,
which violated the principle of natural justice as defined in
RAISED BY
Section 424 of the Companies Act, 2013. It was also argued
that because the NCLT was established under the
INNOVENTIVE
Companies Act, 2013, it is bound by section 420 of the
Companies Act, 2013, which requires the parties to be given
a "reasonable opportunity to be heard" before issuing an
order.
It was argued that the Maharashtra Relief Undertaking

(Special Provisions Act, 1958) would take precedence over
the Code because it was a beneficial piece of legislation.
It was argued that the financial creditor did not get

consent of the Joint Lenders Forum to initiate the
proceedings
It was argued that the objective of this Code is to balance
the needs of all stakeholders, namely owners, borrowers, CONTENTIONS
RAISED BY
and employees, and that the old notion of sick
management, which is unable to meet its financial
ICICI BANK
obligations, should still be busted in the Code's
management position.
It was argued that under the regulation, a full suspension

should apply immediately when an appeal is accepted by
the NCLT, and the company administration should then be
taken over by a qualified temporary resolution. The
moratorium imposed by the Maharashtra Act and the
management of the State Government cannot coexist with
the moratorium imposed by the Central Act and the
administration's temporary legal control. As a result, no
case has been settled, and the appeal should be dismissed
for both sustainability and merits.
SUPREME
Once an insolvency professional is appointed to manage the
company, former directors who are no longer in management
are unable to file an appeal on the company's behalf. As a
COURT RULING result, the appeal in this case was not maintainable. However,
the Supreme Court did not dismiss the appeal solely on this
basis.
A default, according to the explanation to Section 7(1), is a
financial debt owed to any financial creditor of the corporate
debtor - it does not have to be a debt owed to the applicant
financial creditor.
The State law (i.e. the Maharashtra Act) was held to be
inconsistent with the later Parliamentary enactment (i.e. the
IBC), because the Maharashtra Act allows the State
Government to take over management of the relief
undertaking, after which a temporary moratorium is imposed
under Section 4 of the Maharashtra Act, in the same manner as
Sections 13 and 14 of the IBC.
SUPREME
The Supreme Court determined that the Tribunal was correct
in recognizing that there would be inconsistency between the
provisions of the two acts. On this point, the Appellate
COURT RULING Tribunal's decision was incorrect because repugnancy does

exist.
The Supreme Court therefore held that the Tribunal and the
Appellate Tribunal were right in admitting the application filed
by the financial creditor ICICI Bank Ltd.
The Supreme Court dismissed Innoventive Industries

Limited's appeal and upheld the decision of the National
Company Law Appellate Tribunal (NCLAT), which had upheld
the order of the National Company Law Tribunal Mumbai
(NCLT) admitting the insolvency petition filed by ICICI Bank
Limited against Innoventive Industries Limited.
KEY TAKEAWAYS
Once an insolvency professional is appointed in respect of a company, the former
directors are no longer permitted to file an appeal on its behalf.
The term "default" has a broad interpretation in the IBC. Non-payment of

disputed debt would be considered a default as long as it is "due."
The Maharashtra Act cannot obstruct the Code's corporate insolvency resolution
process. The IBC's non-obstante clause will take precedence over the Maharashtra
Act's non-obstante clause.
The ruling explains the importance of the IBC and the reasons for creating a new
code, as well as bringing insolvency law under a single umbrella with the goal of
speeding up the insolvency process. The timelines and procedure must be followed
precisely in order to achieve the intended outcome of IBC.
THANK YOU!

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Innoventive

The main contention of Innoventive was that no debt was

On 17 January 2017, the NCLT ruled that the IBC would

An appeal was filed against the above order before the

Whether the non-obstante

It was argued that the Maharashtra Relief Undertaking

It was argued that the financial creditor did not get

It was argued that under the regulation, a full suspension

COURT RULING Tribunal's decision was incorrect because repugnancy does

The Supreme Court dismissed Innoventive Industries

The term "default" has a broad interpretation in the IBC. Non-payment of

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