Omkara Assets Reconstruction Private Limited Vs Amit Chaturvedi and Ors. (Supreme Court of India)
The Supreme Court considered an appeal concerning the interplay between proceedings under the Companies Act, 1956 and initiation of Corporate Insolvency Resolution Proceedings (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC). The financial creditor had approached the Adjudicating Authority under Section 7 of the IBC seeking initiation of CIRP for recovery of over Rs.154 crores arising from term loans disbursed in 1999 and 2000, with default commencing from 01.01.2003. The corporate debtor opposed the application on the ground that proceedings relating to a Scheme of Arrangement (SOA) under Sections 391 to 394 of the Companies Act were pending before the Punjab and Haryana High Court.
The Adjudicating Authority found non-compliance with Section 391 requirements and held that the SOA had become defunct. It invoked Section 7 of the IBC, relying on Section 238 which gives the IBC overriding effect, imposed moratorium under Section 14, and appointed an Interim Resolution Professional (IRP). The Appellate Tribunal, however, kept the CIRP in abeyance pending disposal of the High Court proceedings. The Supreme Court had earlier revived the moratorium and allowed the IRP to resume charge.
The Court examined the procedural requirements under Section 391 and the Companies (Court) Rules, 1959. It noted that after the creditors’ meeting report was taken on record on 25.07.2008, no second motion was filed within the prescribed time. The second motion was filed belatedly in 2009, and the sanction order was passed only on 23.07.2019. The Court observed that there was no plausible explanation for nearly ten years’ delay, and statutory timelines were not complied with. Filing of the sanction order before the Registrar was also not done within the prescribed period. Form INC-28 was filed only on 06.07.2023, well beyond the due date. The Court found no compliance with statutory timelines and held that the SOA had become redundant, inoperative and defunct.
