NCLAT's Inox Wind order a precedent

Tribunal declares insolvency proceedings against corporate debtor Inox Wind 'illegal'

The National Company Law Appellate Tribunal (NCLAT) has declared that the insolvency proceedings against Inox Wind may be stopped, marking the second example in the last one week to prove that resolution among disputing parties can help reversing the insolvency process.

According to the order, the insolvency proceedings against Inox Wind, the corporate debtor, has been declared “illegal” by the appellate tribunal.
 

The order reads, “The appointment of Interim Resolution Professional, order declaring moratorium, freezing of account and all other orders passed by Adjudicating Authority pursuant to impugned order and action taken by the Interim Resolution Professional including the advertisement published in the newspaper calling for applications are declared illegal.”

This is the first case after the recent Supreme Court judgment in the Lokhandwala Kataria vs Nisus Finance and Investment Manager where the apex court decided that since the parties involved in the insolvency proceedings had resolved the matter out of court it could allow case settlement. The NCLAT had refused to accept the withdrawal application in this matter. Following this the parties approached the apex court which gave both sides reprieve.

Mamta Binani, an insolvency professional (IP) is of the opinion that the Supreme Court verdict has set a precedent. She adds, “More such verdicts can be expected at the NCLAT.”

On the apex court’s verdict, an IP said if this happens in many cases, only the creditor who files the insolvency application would benefit. “What will happen to the dues of the remaining creditors? Each one will have to file separate insolvency petitions,” the IP added.

However, it can also be viewed in terms of the success of the Insolvency and Bankruptcy Code where the debtor cleared dues fearing insolvency proceedings. Inox Wind, too, paid up the operational creditor’s dues once the proceedings began in the National Company Law Tribunal (NCLT).

A customs agent, Jeena & Company, had dragged Inox to the NCLT over non-payment of dues totalling Rs 57 lakh. This was one of the many cases where the operational creditor filed the insolvency petition. When the Insolvency and Bankruptcy Code became operational, one of the positives that IPs noted was that the unsecured creditor or the operational creditors would be able to recover their dues.