The Initiation Of CIRP Should Be Only In Case Of Insolvent And Bankrupt Companies

Last updated: 24 November 2022

Save Share

Quick Summary

The Supreme Court has ruled that the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC) should only be initiated against companies that are genuinely insolvent or bankrupt. The court clarified that the IBC is not intended to penalise solvent companies that may have temporarily defaulted on financial debts. The Adjudicating Authority (NCLT) must consider the merits of a company's defence, such as a substantial favourable award or decree, before admitting a CIRP application.

Court :
Supreme Court of India

Brief :
This appeal is against a judgment and order passed by the National Company Law Appellate Tribunal (NCLAT),whereby the learned Tribunal refused to stay the proceedings initiated by the Respondent, Axis Bank Limited against the Appellant for initiation of the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC.

Citation :
The impugned order passed by the Adjudicating Authority (NCLT) and the impugned order passed by the Appellate Authority (NCLAT) dismissing the appeal of the Appellant are set aside. The NCLT shall re-consider the application of the Appellant for stay of further proceedings on merits in accordance with law.

Daily Limit Reached