Overriding effect of insolvency law prevents State relief notification from blocking a complete section 7 application

Section 238 of the Insolvency and Bankruptcy Code, 2016 was treated as overriding inconsistent State law, so a notification under section 4 of the Maharashtra Relief Undertakings (Special Provisions) Act, 1958 could not bar admission of a section 7 insolvency application. The note also states that where default was shown, the default record had been filed with the information utility, and the proposed interim resolution professional faced no disciplinary bar, the section 7 application was complete and fit for admission. Moratorium directions followed and the corporate insolvency resolution process commenced.

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Issues: (i) Whether the notification issued under section 4 of the Maharashtra Relief Undertakings (Special Provisions) Act, 1958 barred admission of the insolvency application under section 7 of the Insolvency and Bankruptcy Code, 2016 in view of the competing non obstante clauses. (ii) Whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was complete and default stood established so as to warrant admission and commencement of moratorium.

Issue (i): Whether the notification issued under section 4 of the Maharashtra Relief Undertakings (Special Provisions) Act, 1958 barred admission of the insolvency application under section 7 of the Insolvency and Bankruptcy Code, 2016 in view of the competing non obstante clauses.

Analysis: The overriding clause in section 238 of the Insolvency and Bankruptcy Code, 2016 was held to prevail over any inconsistent law for the time being in force. The relief under the Maharashtra enactment was treated as operating in a different sphere, but its suspension of liabilities and remedies was found inconsistent with the statutory scheme governing default and insolvency under the Code. The notification under the State enactment was therefore not accepted as a bar to proceeding under the Code.

Conclusion: The notification under the Maharashtra Relief Undertakings (Special Provisions) Act, 1958 did not prevent admission of the insolvency application under the Insolvency and Bankruptcy Code, 2016.

Issue (ii): Whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was complete and default stood established so as to warrant admission and commencement of moratorium.

Analysis: The record showed occurrence of default, filing of the default record with the information utility, and of an interim resolution professional without any disciplinary bar. On that basis, the application under section 7 was treated as complete and fit for admission. Consequent moratorium directions and initiation of the corporate insolvency resolution process followed under the Code.

Conclusion: The section 7 application was admitted and moratorium was ordered.

Final Conclusion: The corporate debtor's objections were rejected, the insolvency petition was admitted, moratorium commenced, and an interim resolution professional was appointed for the corporate insolvency resolution process.

Ratio Decidendi: Where a later insolvency statute contains an overriding non obstante clause and the statutory conditions of default and completeness are satisfied, a prior State law suspending liabilities or remedies cannot defeat admission of a section 7 insolvency application.

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