High Court held that the initiation and completion of CIRP are only warranted when a company is deemed bankrupt or insolvent, and not otherwise.
The Karnataka High Court Single-Judge Bench of Justice Hemant Chandangoudar reviewed a petition and observed that the initiation and completion of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016, are only warranted when a company is deemed bankrupt or insolvent, as clarified by the Supreme Court in Vidarbha Industries Power Limited v. Axis Bank Limited, REEDLAW 2022 SC 07529.
In the High Court proceedings, Sri. D.R. Ravishankar, Senior Advocate representing the petitioner's counsel, submitted that the bank's valuation report indicated total completed receivables amounting to Rs. 1,50,21,42,000, while the current valuation of the villas within the project stood at Rs. 81,78,08,000. He relied on the Supreme Court's ruling in Vidarbha Industries Power Limited v. Axis Bank Limited, REEDLAW 2022 SC 07529, which clarified that the question of timely initiation and completion of the Corporate Insolvency Resolution Process (CIRP) only arises when companies are bankrupt or insolvent, asserting that the impugned order under Section 7 of the Insolvency and Bankruptcy Code, 2016, lacks legal sustainability.
Additionally, Ravishankar communicated that the petitioners were willing to deposit Rs. 5 crores with the respondent bank within three weeks. The court granted an interim order as requested until the next hearing date, while also allowing the respondent bank the liberty to seek modification or vacation of the interim order if necessary. The matter was scheduled for re-listing on August 23, 2024, and the court ordered hand delivery of the order to ensure prompt communication. This decision highlighted the court’s intention to balance the interests of both parties while upholding the legal principles governing insolvency proceedings.
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