Insolvency and Bankruptcy Code tribunals
⚖️ Insolvency and Bankruptcy Code (IBC) Tribunals
🔹 What is the IBC, 2016?
The Insolvency and Bankruptcy Code, 2016 is a comprehensive legislation enacted to consolidate and amend laws related to the insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner.
It introduced a structured insolvency resolution process through specialized tribunals, known as:
NCLT – National Company Law Tribunal
NCLAT – National Company Law Appellate Tribunal
🏛️ Structure of IBC Tribunals:
| Tribunal | Function |
|---|---|
| NCLT | Adjudicating authority for corporate insolvency resolution processes (CIRP), liquidation, and bankruptcy of companies and LLPs |
| NCLAT | Hears appeals from NCLT and orders of the Insolvency and Bankruptcy Board of India (IBBI) |
| Supreme Court | Final appellate authority on questions of law from NCLAT |
⚙️ Key Functions of NCLT under IBC:
Admission or rejection of corporate insolvency resolution applications under Section 7 (financial creditors) and Section 9 (operational creditors)
Approval or rejection of Resolution Plans
Ordering liquidation
Oversight of Resolution Professionals (RPs) and Committee of Creditors (CoC)
Handling voluntary liquidation and fast-track insolvency cases
📚 Landmark Case Laws Related to IBC Tribunals
⚖️ 1. Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC 407
Facts:
ICICI Bank filed an application under Section 7 of the IBC for insolvency proceedings against Innoventive Industries. The corporate debtor argued that it was protected by a State law moratorium.
Issue:
Whether IBC overrides State legislation.
Held:
The Supreme Court held that the IBC has an overriding effect under Section 238, and NCLT was right in admitting the case.
Principle:
The moment default is established, NCLT must admit the case under Section 7.
IBC is a complete code and prevails over other conflicting laws.
⚖️ 2. Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17
Facts:
Constitutional validity of various provisions of the IBC was challenged, including the role of NCLT and classification between financial and operational creditors.
Held:
The Supreme Court upheld the constitutional validity of the IBC and its mechanisms, including the roles of NCLT and CoC.
Principle:
NCLT/NCLAT are independent quasi-judicial bodies.
The commercial wisdom of the CoC is non-justiciable.
Reinforced judicial discipline in insolvency matters.
⚖️ 3. Essar Steel India Ltd. v. Satish Kumar Gupta (2020) 8 SCC 531
Facts:
Essar Steel underwent CIRP, and ArcelorMittal’s resolution plan was approved. However, NCLAT modified the plan to give equal treatment to operational creditors.
Held:
Supreme Court overturned NCLAT's decision, holding that CoC’s commercial wisdom is paramount, and NCLT/NCLAT cannot interfere once the process is fair and lawful.
Principle:
Tribunals cannot second-guess commercial decisions made by the Committee of Creditors.
However, they can check for compliance with the law and procedural fairness.
⚖️ 4. ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta (2019) 2 SCC 1
Facts:
The issue was whether a resolution applicant with a non-performing asset (NPA) could be disqualified under Section 29A of the IBC.
Held:
The Supreme Court held that the purpose of Section 29A is to prevent back-door entry of defaulting promoters and protect the integrity of the insolvency process.
Principle:
Tribunals must ensure ineligibility clauses are enforced.
Reinforced the idea that IBC is meant to maximize value, not protect defaulting promoters.
⚖️ 5. Kalpraj Dharamshi v. Kotak Investment Advisors Ltd. (2021) 10 SCC 401
Facts:
The challenge was about late submission of resolution plans and whether NCLT/NCLAT could allow flexibility in timelines.
Held:
Supreme Court held that while procedural flexibility exists, the process must be transparent, and extensions should not violate principles of fairness or favor any party.
Principle:
NCLT has limited discretion in altering the CIRP timelines.
Ensures procedural discipline in the resolution process.
🔍 Summary of IBC Tribunal Jurisdiction and Powers
| Tribunal | Key Powers | Notable Features |
|---|---|---|
| NCLT | Admission/rejection of CIRP, approval of resolution plans, liquidation orders | Handles both insolvency and company law matters |
| NCLAT | Appellate jurisdiction over NCLT and IBBI orders | Can be approached before going to the Supreme Court |
| SC | Final authority on constitutional and legal matters under IBC | Often steps in to clarify conflicting interpretations |
📌 Key Principles Developed by Tribunals and Courts:
Time-bound process is essential (180 days + 90 extension)
CoC’s commercial wisdom is supreme (limited judicial review)
Section 29A ensures clean resolution applicants
Operational and financial creditors are treated differently — but fairly
NCLT/NCLAT must ensure procedural fairness, not re-evaluate business decisions
✅ Conclusion:
IBC Tribunals like NCLT and NCLAT have transformed India’s insolvency regime.
Courts have clarified the scope, powers, and limitations of these tribunals.
Their efficiency and adherence to timelines are crucial for ease of doing business and restoring creditor confidence.
RELATED Blog
0 comments