It was only last week that the Insolvency and Bankruptcy Code, 2016 (the “Code”) and the insolvency proceedings initiated thereunder received a fillip from the Supreme Court in Innoventive Industries Limited v. ICICI Bank (discussed here). Within a matter of a few days, a contrary result emerged from the Supreme Court in Chitra Sharma v. Union of India which has struck a temporary blow to the insolvency proceedings initiated in respect of Jaypee Infratech Limited. The Court has stayed the order of the Allahabad Bench of National Company Law Tribunal (“NCLT”). Although this is on a temporary stay, and the matter will proceed further in the Supreme Court, it highlights some important issues with the Code.
The situation in the Jaypee case is understandable as the company’s insolvency is compounded by the existence of several thousands of home buyers who have been left in the lurch due to non-completion of the projects. The classification of such home buyers as particular types of creditors (i.e., financial, operational or otherwise) would be the primary bone of contention, which would consequentially define the rights and interests of such home buyers in an insolvency. A couple of previous guest posts on this Blog (here and here) provide a flavour for these issues.
For a further discussion of these issues, please see:
– Bar & Bench, which contains a summary of the petition filed in Chitra Sharma v. Union of India;
– an editorial in the Economic Times; and
– a piece by Pratik Datta on Ajay Shah’s Blog.
