ICICI Bank's win in Innoventive Ind case could set a precedent for other insolvency cases

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

ICICI Bank's win on Friday against defaulter Innoventive Industries in the Supreme Court could set a precedent for other insolvency cases.

The apex court ruled that Insolvency and Bankruptcy Code (IBC) is superior to the Maharashtra Relief Undertaking Act (MRU Act) and that management of a company undergoing bankruptcy proceedings cannot continue in its role and must step aside.

The court dismissed an appeal filed by Innoventive Industries against a National Company Law Appellate Tribunal (NCLAT) verdict and said that ICICI Bank could start bankruptcy proceedings against the company.

The apex court Justice R F Nariman said: "Entrenched managements are no longer allowed to continue in management if they cannot pay their debts."

This brings relief to banks, Reserve Bank of India (RBI) and the government, as it bolsters the IBC, which says once an insolvency professional is appointed by creditors, the management should step aside and let the company be run by the professional. The insolvency professional, in turn, will decide if the company must go in for liquidation after six months.

At present, over 150 big cases have been admitted at the NCLT under the IBC. For immediate filing of nearly Rs 1.7 lakh crore worth of non-performing assets (25 percent of total NPAs) under IBC, the RBI has also indentified 12 large cases including Essar Steel, which was also contested in Gujarat High Court and was ruled in favour of banks.

The case of ICICI Bank vs Innovative Industries, which was the first case admitted under the Code in December 2016 in Mumbai, reached the Supreme Court challenging the NCLAT’s judgment.

ICICI Bank had taken the Pune-based Innoventive Industries to NCLT for the recovery of its due as the company had defaulted on loan of about Rs 1,000 crore.

The NCLT had given a verdict in favour of the ICICI Bank, which Innoventive Industries challenged in the NCLAT seeking relief under Maharashtra Relief Undertaking Act (MRU Act), where it received yet another setback.

Innoventive Industries had appealed that it could not be called a defaulter because the Maharashtra government had notified protection to the employees of the company and a suspension of its dues for a period of one year up to July 2017. The Supreme Court ruled that in matters of contention between state laws and those of the Centre’s, the latter should prevail.

The Supreme Court finally ruled, “We are of the considered view that the NCLT and the NCLAT were right in admitting the application filed by the financial creditor ICICI Bank Ltd."