The object of IBC is not to facilitate money recovery proceedings but to facilitate CIRP: Supreme Court

The object of IBC is not to facilitate money recovery proceedings but to facilitate CIRP: Supreme Court

The Supreme Court in Invest Asset Securitisation and Reconstruction Pvt. Ltd. versus Girnar Fibres Ltd while adjudicating an appeal filed in the case, observed that the provisions of IBC circumscribe to facilitate the CIRP and do not go beyond it in the money recovery proceedings.

In this case, the Investment Asset Securitization and Reconstruction approached the Apex Court under section 62 of the code against the order of NCLAT, wherein NCLAT upheld the order of NCLT and held that the section 7 application filed by the appellant before NCLAT is time-barred by limitation.

As in this case, the corporate debtor defaulted on 28.02.2002, wherein the NCLT held that the right to sue in this case occurred way back on 28.02.2002. However, the appellant has not produced any material on record as an acknowledgement of liability in terms of section 18 of the Limitation Act, 1963. Furthermore, NCLT does not allow the initiation of insolvency proceedings against the corporate debtor. The order of the NCLT was upheld by the NCLAT, which led to the filing of the appeal before the Hon'ble Supreme Court.

One of the primary issues in the instant matter which came for consideration before the Hon'ble court was to adjudicate upon the nature and object of the IBC.

The appellant contended that he had restructured the loan and placed the documents pertaining to the same on record, thereby the said documents and restructuring of the loan would qualify the present case to invoke section 7 of the Code to initiate insolvency proceedings.

The Court however dismissed the plea and held that the aforementioned documents relied upon by the appellant do not entitle them to file an application under section 7 of the code. Furthermore, the court upheld the order of NCLT & NCLAT, as the aforementioned tribunal had held that the application moved by the appellant was barred by the limitation period as per the Limitation Act, 1963.

The court also observed that the spirit of the IBC provisions is necessarily made to facilitate the Corporate Insolvency Resolution Proceedings and to bring the corporate debtor under the purview of insolvency proceedings and not to facilitate the money recovery proceedings. The court further concluded that in this case, the only intent of the appellant was to invoke the insolvency proceedings so as to enforce recovery against the corporate debtor.