2023 (5) TMI 1161 - SCH - Insolvency and Bankruptcy

Supreme Court clarifies standing of unsecured creditors in insolvency proceedings under IBC

Gluckrich Capital Pvt. Ltd. Versus The State Of West Bengal & Ors.

The Supreme Court dismissed an application seeking clarification of a judgment regarding insolvency proceedings under the Insolvency and Bankruptcy Code. ... Grant of anticipatory bail - recovery under Section 66 of IBC against the persons who, prima facie, appear to be primarily responsible for the fraudulent affairs of the corporate debtors - HELD THAT:- In the name of seeking a clarification, the endeavor of the applicant herein is to indirectly get over with the judgment and order dated 18.01.2023 in WP(C) (PIL) 04 of 2023 passed by Tripura High Court in [2023 (1) TMI 921 - TRIPURA HIGH COURT]. Such an endeavor, in the guise of a clarification, cannot be permitted. The Tripura High Court has rightly relied upon the observations made by this Court in a binding precedent, in Usha Ananthasubramanian Vs. Union of India [2020 (2) TMI 1081 - SUPREME COURT], which pertains to a matter under Section 339(1) of the Companies Act, 2013 which is pari materia with Section 66 of IBC. The High Court in the case of Sudipa Nath [2023 (1) TMI 921 - TRIPURA HIGH COURT] has rightly observed that an application under Section 66(1) by the resolution professional would not bar any civil action in accordance with law, either at the instance of resolution professional or liquidator or by the corporate debtor in its new avatar on a successful CIRP for recovery of any dues payable to the corporate debtor by such organization / legal entities. Such legal action is independent of Section 66(1). It is for the Resolution Professional or the successful resolution applicant, as the case may be, to take such civil remedies against third party, for recovery of dues payable to corporate debtor, which may be available in law. The remedy against third party, however, is not available under Section 66 of IBC, and the civil remedies which may be available in law, are independent of the said Section. The application for clarification is wholly misconceived and, accordingly, stands dismissed. Issues involved: Application seeking clarification of judgment and order dated 24.02.2023 passed by the Supreme Court regarding the dismissal of a Special Leave Petition (Criminal) challenging an interim order in insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.Summary:The applicant, an unsecured financial creditor of a company facing insolvency proceedings, filed a Special Leave Petition challenging an interim order. The Supreme Court dismissed the petition stating the applicant had no locus in the matter as he was not directly involved in the proceedings. The applicant sought clarification to pursue recovery proceedings against those responsible for fraudulent affairs. However, the Court found the attempt to indirectly challenge a previous judgment to be impermissible.The Court noted that a High Court decision correctly relied on a Supreme Court precedent regarding personal liability under Section 66 of the IBC. It was clarified that Section 66 does not extend to holding other organizations or legal entities liable, and civil remedies against third parties are separate from Section 66. The Resolution Professional or successful resolution applicant can pursue civil remedies for recovery, but such actions are not covered under Section 66 of the IBC.In conclusion, the Court found the application for clarification to be misconceived and dismissed it, affirming that civil remedies against third parties for recovery are available under the law but are independent of Section 66 of the IBC.