State depositor-protection law prevails over insolvency proceedings where legislative competence and pith and substance are upheld.

The Madras HC held that the Insolvency and Bankruptcy Code, 2016 does not override the Tamil Nadu Protection of Interests of Depositors in Financial Establishments Act, 1997 so as to invalidate attachment proceedings under the State law. The depositor-protection enactment was treated as a special statute within legislative competence, upheld on the principles of pith and substance and incidental trenching, and marginal overlap with central insolvency law was not enough to displace it. On that basis, the Tribunal's order setting aside the attachment could not stand, and the State proceedings remained unaffected.

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Issues: Whether the provisions of the Insolvency and Bankruptcy Code, 2016 override the Tamil Nadu Protection of Interests of Depositors [in Financial Establishments] Act, 1997 so as to invalidate proceedings and attachment orders passed under the State enactment.

Analysis: The State enactment is a special legislation intended to protect depositors and to provide for attachment and disbursement of assets of defaulting financial establishments. The constitutional validity of the enactment had already been upheld on the basis of legislative competence, pith and substance, and the doctrine of incidental trenching. The decision relied on by the Tribunal under the Insolvency Code was not applied in a manner consistent with the nature and object of the State law, and the earlier authoritative decisions had recognised that marginal overlap with Central laws does not render the State enactment invalid. On that footing, the order of the Tribunal setting aside the attachment under the State enactment could not be sustained.

Conclusion: The provisions of the Insolvency and Bankruptcy Code, 2016 do not override the Tamil Nadu Protection of Interests of Depositors [in Financial Establishments] Act, 1997 in the manner assumed by the Tribunal, and the impugned order was rightly set aside in favour of the petitioner.

Final Conclusion: The writ petition succeeded, and the attachment-related order of the Tribunal was quashed, leaving the State proceedings under the depositor-protection law unaffected.

Ratio Decidendi: A special State enactment enacted within legislative competence and upheld on the principles of pith and substance and incidental trenching is not displaced merely because insolvency proceedings are initiated under the Insolvency and Bankruptcy Code, 2016.

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