It's a verdict that could set a precedent for other insolvency cases. The Supreme Court on Friday dismissed an appeal filed by Innoventive Industries against a National Company Law Tribunal (NCLT) verdict that ICICI Bank could start bankruptcy proceedings against the company.
The Apex Court's decision that bankruptcy code is superior to the Maharashtra Act was the last hurdle banks' way to start bankruptcy proceedings against companies that have defaulted, and recover their money.
The decision brings a big relief for the banks, the Reserve Bank of India (RBI) and the government in their fight against bad debts.
Earlier, ICICI Bank had taken Innoventive Industries to NCLT for the recovery of its due as the company had defaulted on loan repayment.
The NCLT had given a verdict in favour of the ICICI Bank, which Innoventive Industries challenged in the National Company Law Appellate Tribunal (NCLAT), where it received yet another setback.
The company later filed an appeal in the Supreme Court seeking relief under the Maharashtra Act, which states that if a company is facing bankruptcy, protection needs to be provided for the employees.
The Act states that a creditor seeking dues from the company would be held in abeyance for one year to protect the employees of the said company. It also allows employees to get 15 years of relief for the company being takeover by the creditor.