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M/S. Innoventive Industries Ltd v. ICICI Bank and Anr

Civil Appeal · 2017 INSC 837Decided 31 Aug 2017
Civil Appeal Nos. 8337-8338 of 2017
Justice Rohinton Fali Nariman · Justice Sanjay Kishan Kaul

Background

Innoventive Industries, a multi-product manufacturer, began defaulting on loans from a 19-bank consortium after 2012 due to labour problems, and entered into a corporate debt restructuring plan (a Master Restructuring Agreement, or MRA) in 2014. When the company still failed to pay, ICICI Bank applied to the National Company Law Tribunal (NCLT) in December 2016 to trigger the insolvency resolution process under the newly-enacted Insolvency and Bankruptcy Code. Innoventive resisted, first arguing that two Maharashtra government notifications under the Maharashtra Relief Undertakings (Special Provisions) Act, 1958 had suspended all its debts and liabilities, and later arguing (in a second, later application) that it hadn't actually defaulted because the lenders themselves had failed to release restructuring funds under the MRA.

Decision Breakdown

The Supreme Court held that the Insolvency and Bankruptcy Code, a later Parliamentary (Central) law with a sweeping non-obstante clause (Section 238), overrides the earlier Maharashtra Act under Article 254(1) of the Constitution wherever the two conflict, so the State-law moratorium on Innoventive's debts could not block the Code's insolvency process. The Court also held that the NCLT and NCLAT were right to reject Innoventive's belated second defense (that no real default occurred), both because it came well after the Code's strict 14-day decision timeline and because a specific MRA clause made the company's repayment obligations "unconditional," independent of whether the lenders had released restructuring funds. On this basis, the Court dismissed the appeals and upheld the admission of ICICI Bank's insolvency application, with no order as to costs.

Lesson Learnt

Once a company genuinely defaults on a debt, it cannot rely on a state government's relief/moratorium law to block the Centre's insolvency process: the national Insolvency and Bankruptcy Code's strict timelines and override provisions take priority, and raising new defenses late in the process (after the Code's short statutory windows) will not be entertained.

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

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