The Supreme Court of India has held that the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC) override the Special Economic Zone Act and Rules. The judgment reiterates the overriding effect of IBC over other statutes and that valuations done following due process should not be interfered with, if based on relevant material.
The Hon’ble Supreme Court, vide its judgement dated November 05, 2024 in the matter of Noida Special Economic Zone Authority v Manish Agarwal, inter alia, addressed two significant issues relating to the insolvency regime in India, (a) whether the valuation conducted as per the provisions of the IBC can be interfered with by the NCLT, and (b) do the provisions of IBC override the Special Economic Zone Act and Rules.
The appeal was filed challenging a decision by the National Company Law Appellate Tribunal (NCLAT), which had dismissed an appeal against the approval of a resolution plan by the NCLT. The Appellant contended that a clause in the Resolution Plan, regarding exemptions from the NSEZ, contradicted the established rules of the NSEZ. Additionally, the Appellant challenged the fair and liquidation valuation of the Corporate Debtor.
The Hon’ble Supreme Court held as follows:
- that valuation done following due process does not call for any interference if it is based on relevant material on record.
- that Section 238 of the IBC provides it with an overriding effect over other laws, including the SEZ Act, 2005. Thus, the IBC prevails over the SEZ Act.
In light of this judgement, it is advisable that the Clients must update their internal policies and procedures to reflect the precedence of the IBC over other statutes. This will help in maintaining consistency and avoiding any legal conflicts. Additionally, companies undergoing insolvency can be assured that the commercial wisdom of the CoC, as recognized by the NCLT, will play a crucial role in determining the outcomes of insolvency cases.
Authors & Contributors
Partner:
Associates:
Bhawana Sharma
Shreya Chandhok
Kirti Talreja
Rounak Doshi
Bharath Krishna