The time stipulation of 14 days in Section 7(4) of the IBC to ascertain the existence of a default is directory not mandatory

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.1650 OF 2020

Dena Bank (now Bank of Baroda) ....Appellant(s)

vs

C. Shivakumar Reddy and Anr. .…Respondent(s)

J U D G M E N T

1. This Appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC) is against a judgment and final order dated 18th December 2019 passed by the National Company Law Appellate Tribunal (NCLAT), allowing Company Appeal (AT) (Insolvency) No.407 of 2019, filed by the Respondents and setting aside an order dated 21st March 2019 passed by the Adjudicating Authority/National Company Law Tribunal (NCLT), Bengaluru, whereby the Adjudicating Authority had admitted the Petition being CP(IB) No.244/BB/2018 filed by the Appellant Bank against the Respondent.

2. Mr. Mehta has also referred to the Counter Affidavit filed by the Respondent No.1 and the Corporate Debtor, where they admitted that the Corporate Debtor had sent a letter dated 3rd March 2017 to the Appellant Bank, offering to make payment of Rs.5.5 crores by way of One Time Settlement.

3.The scheme of the IBC is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the Corporate Insolvency Resolution Process begins. Where any corporate debtor commits default, a financial creditor, an operational creditor or the corporate debtor itself may initiate Corporate Insolvency Resolution Process in respect of such corporate debtor in the manner as provided in Chapter II of the IBC.

4.Section 7(3) requires a financial creditor making an application under Section 7(1) to furnish records of the default recorded with the information utility or such other record or evidence of default as may be specified; the name of the resolution professional proposed to act as an Interim Resolution Professional and any other information as may be specified by the Insolvency and Bankruptcy Board of India.

5.The IBC is not just another statute for recovery of debts. Nor is it a statute which merely prescribes the modalities of liquidation of a Corporate body, unable to pay its debts. It is essentially a statute which works towards the revival of a Corporate body, unable to pay its debts, by appointment of a Resolution Professional.

6.When a question arises as to the meaning of a certain provision in a statute the provision has to be read in its context. The statute has to be read as a whole. The previous state of the law, the general scope and ambit of the statute and the mischief that it was intended to remedy are relevant factors.

7. For the reasons discussed above, the impugned judgment and order is unsustainable in law and facts. The appeal is accordingly allowed, and the impugned judgment and order of the NCLAT is set aside.

Please find attached the enclosed file for the full judgement.