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Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd.

Civil Appeal · 2019 INSC 77Decided 22 Jan 2019
Civil Appeal No. 818 of 2018
Justice Rohinton Fali Nariman · Justice Navin Sinha

Background

An operational creditor (Forech India) had filed a winding-up petition against a company in the Delhi High Court in 2014 over unpaid dues. While that petition was still pending, a separate financial creditor (Edelweiss) filed an independent insolvency application against the same company before the National Company Law Tribunal (NCLT) under the newer Insolvency and Bankruptcy Code, 2016, and that application was admitted. Forech challenged this, arguing its earlier winding-up petition should take priority and continue in the High Court instead.

Decision Breakdown

The Supreme Court traced the statutory history of how winding-up petitions pending in High Courts interact with the newer insolvency process under the Code, including successive amendments to Section 434 of the Companies Act. It held that an independent insolvency application validly filed under Section 7 of the Code can proceed on its own track and is not barred simply because an older winding-up petition is pending elsewhere, since Section 238 of the Code gives it overriding effect. The Court declined to interfere with the Appellate Tribunal's order allowing Edelweiss's insolvency proceeding to continue, but gave Forech liberty to apply to transfer its own winding-up case to the NCLT to be treated as a fresh insolvency application.

Lesson Learnt

Once the Insolvency and Bankruptcy Code came into force, a creditor cannot rely on an old, pending winding-up case in the High Court to block a separate, validly filed insolvency proceeding before the NCLT: the newer insolvency process generally takes precedence.

Official source (sci.gov.in)View Judgment (PDF)

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