DES’S SHRI NAVALMAL FIRODIA LAW COLLEGE, MOOT 4

DES’S SHRI NAVALMAL FIRODIA LAW COLLEGE, MOOT 4

___________________________________________________________________________

BEFORE THE HON’BLE NATIONAL COMPANY TRIBUNAL

MUMBAI
___________________________________________________________________________

CASE NO.- 01/BC/NCLT/MUM/2017

__________________________________________________________________________

IN THE MATTER BETWEEN:

INNOVENTIVE INDUSTRIES LTD. APPLICANT

VS

ICICI BANK LTD. RESPONDENT

___________________________________________________________________________
WRITTEN SUBMISSION ON BEHALF OF THE APPLICANT

_________________________________________________________________________

NAME: Harshvardhan Ghadge

CLASS: Vth BALLB
DIVISION: A
ROLL NO. 30

TABLE OF CONTENTS.......................................................................................................2
1
LIST OF ABBREVIATIONS ..............................................................................................3

INDEX OF AUTHORITIES ...............................................................................................4

STATEMENT OF JURISDICTION .....................................................................................5

STATEMENT OF FACTS …...............................................................................................6

ISSUES RAISED ...................................................................................................................8

ARGUMENTS ADVANCED ...............................................................................................9

PRAYER CLAUSE ..............................................................................................................14

LIST OF ABBREVIATIONS.

2
 NCLT National Company Law Tribunal
IBC Insolvency and Bankruptcy Code

v. or vs. Versus

SCR Supreme Court Report

Hon’ble Honorable

SCC Supreme Court Case

CIRP Corporate Insolvency Resolution Process

NCLAT National Company Law Appellate Tribunal
Ors. Others

Ltd. Limited

INDEX OF AUTHORITIES.
3
 Cases

• Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors.
• Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd.
• ArcelorMittal India Private Limited vs. Satish Kumar Gupta & Ors.
• Essar Steel India Limited vs. Satish Kumar Gupta & Ors.
• Committee of Creditors of Essar Steel India Limited Through Authorized
Signatory vs. Satish Kumar Gupta & Ors.

Statutes:

• Insolvency and Bankruptcy Code, 2016

• Maharashtra Relief Undertakings (Special Provisions Act), 1958

Books:

• Insolvency and Bankruptcy Code of India: Concepts and Procedures" by

M.S. Sahoo
• "The Law and Practice of Insolvency & Bankruptcy Code" by Aparna
Ravi
• Oxford Dictionary

Webliography:

• www.manupatra.com
• www.scconline.com
• www.casemine.com
• www.indiakanoon.com
• www.livelaw/article.com
• www. daaman.org.com

STATEMENT OF JURISDICTION

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The Counsel for the petitioner, hereby humbly submit to this Hon’ble
Tribunal’s jurisdiction to try the instant matter under section 7 of the IBC
Act. The provision under which the Applicant has approached the Hon’ble
court is read herein under as follows:

 Section 7 of the IBC:

Under this section, the NCLT has the authority to entertain applications
filed by financial creditors who seek to initiate the Corporate Insolvency
Resolution Process (CIRP) against a corporate debtor when a default has
occurred. The application needs to be supported by evidence of the
default and the name of the proposed interim resolution professional.

 Section 60(1) of the IBC

Vests jurisdiction in the NCLT to adjudicate cases involving insolvency
resolution and liquidation for corporate debtors where the minimum
amount of the default is one lakh rupees, or such higher amount as may
be specified. The NCLT is the adjudicating authority for insolvency
resolution processes and liquidation proceedings for corporate persons
including corporate debtors and personal guarantors thereof.

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 STATEMENT OF FACTS

1. The Applicant, ICICI Bank Limited is an Indian multinational bank and

financial services company headquartered in Mumbai.
2. The Respondent, M/s. Innoventive Industries Ltd., is a company engaged
in manufacturing steel products and is a Corporate Debtor.
3. The Corporate Debtor, M/s. Innoventive Industries Ltd. availed Rs.
40,74,57,388 as Term Loan facility, Rs. 21,80,00,000 as Working Capital
facility, and $7 million as External Commercial Borrowing facility.
4. The company was facing severe distress due to a combination of
operational losses and a significant downturn in the steel industry and the
first default occurred on 31.11.2016.
5. The default amounted to Rs. 12,22,10,737 (Rs. Twelve Crore, Twenty-
two Lakhs, Ten Thousand, Seven Hundred and Thirty-seven only)
towards RTL facility, Rs. 7,50,05,661(Rs. Seven Crore, Fifty Lakhs, Five
Thousand, Six Hundred and Sixty-One only) towards Working Capital
facility and Rs. 11,47,58,969(Rs. Eleven Crore, Forty-Seven Lakhs, Fifty-
Eight Thousand, Nine Hundred and Sixty-Nine only) towards External
Commercial Borrowing facility.
6. The total Outstanding amount payable by this corporate debtor was
71,019,177,034 as of November 30, 2016.
7. The company failed to repay the debt and ICICI Bank initiated Corporate
Insolvency Resolution Process (CIRP) as per Section 7 of the IBC.
8. Innoventive Industries invoked the Maharashtra Relief Undertakings Act
to declare a moratorium on debt recovery.
9. The Corporate Debtor moved an application in this abovementioned
Petition that as on the date of filing this Creditor Petition, the debts

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 existing against the Corporate Debtor have been suspended under the
Maharashtra Relief Undertaking (Special Provisions) Act on 18.7.2016.
10.Upon acceptance of the application by the NCLT in January 2017, a
moratorium was declared under Section 14 of the IBC.
11.This Moratorium was to prohibit any debt recovery efforts, the sale or
transfer of assets, or the continuation of any pending legal actions against
Innoventive.

12.Hence, this Application.

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 ISSUES RAISED

1. Whether Innoventive Industries Ltd. has defaulted on its debt

obligations to ICICI Bank as prescribed under IBC, 2016?

2. Whether the IBC provisions have an overriding effect over the

Maharashtra Relief Undertakings (Special Provisions Act), 1958?

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 ARGUMENTS ADVANCED

1. Whether Innoventive Industries Ltd. has defaulted on its debt

obligations to ICICI Bank as prescribed under IBC, 2016?

The Applicant humbly submits that,

1. Existence of Default Under IBC:

The Applicant can demonstrate through financial records and contract terms
that Innoventive Industries failed to meet its financial obligations,
constituting a 'default' under Section 3(12) of the IBC. This is a fundamental
prerequisite for initiating CIRP and is supported by the decision in Mobilox
Innocations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. 1, which clarified the
minimal threshold for establishing default under the IBC. It is further
submitted that as per Section 7, only the fact of the event of default has to be
ascertained, and no other determination has been envisaged under the Code
for admission of the application u/s 7 of the Code.

2. Legitimate Expectation of Financial Creditor: Financial creditors have a

legitimate expectation, grounded in the IBC, to trigger insolvency
proceedings when a default occurs. This expectation is based on the
principle of fairness and the intent of the IBC to ensure timely recovery of
debts. This argument is supported by Swiss Ribbons Pvt. Ltd. Vs. Union
of India (2019)2, where the Supreme Court upheld the rights of financial
creditors under the IBC. The non-fulfilment of financial obligations by
Innoventive Industries disrupts this legitimate expectation and thus
justifies the initiation of CIRP. In Committee of Creditors of Essar Steel

1 (2018) 1 SCC 353

2 (2019) 4 SCC 17
9
 India Limited vs. Satish Kumar Gupta & Ors (2020) 3, the Supreme
Court emphasized the importance of protecting creditors’ rights and
interests in the resolution process.

3. Public Interest and Economic Stability: The IBC aims to protect not only
creditors but also promote economic stability by resolving insolvency
issues efficiently. Strict compliance with default provisions promotes a
culture of prompt payment and financial discipline, critical for economic
stability.

4. The Principle of Proportionality in the Application of IBC Provisions:

The principle of proportionality ensures that actions under the IBC are
appropriate and necessary relative to the objective sought. The initiation
of CIRP against Innoventive Industries is proportionate to the substantial
amount and duration of the default. In ArcelorMittal India Pvt. Ltd. vs.
Satish Kumar Gupta & Ors. (2019)4, the Supreme Court supported the
proportionate application of the IBC, affirming that the resolution process
should be initiated based on the severity of the default.

5. Duty of Corporate Debtors Under IBC: Corporate debtors have a

statutory duty to avoid insolvent trading and minimize potential losses to
their creditors. Innoventive Industries failed in this duty by continuing
operations despite insolvency, justifying immediate CIRP. The decision in
Jaypee Kensington Boulevard Apartments Welfare Association vs.
5
NBCC (India) Ltd. & Ors (2020) reinforced the duty of corporate
debtors to act responsibly towards their creditors once insolvency

3 (2020) 2 SCC 184

4 (2019) 2 SCC 1
5 (2020) 3 SCC 124
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 becomes apparent.

6. The IBC emphasizes the importance of adhering to statutory timelines to

ensure the efficient resolution of insolvency cases. This principle ensures
that the resolution process is not only fair but also swift, minimizing the
impact on creditors and preserving the value of the debtor's assets. The
respondent argues that the default by Innoventive Industries necessitates
the prompt initiation of CIRP to adhere to the statutory timelines
specified in the IBC. Delays in addressing defaults can lead to diminished
asset values and increased liabilities, significantly impacting creditors'
potential recovery. In B.K. Educational Services Pvt. Ltd. vs. Parag
Gupta and Associates (2018)6, the Supreme Court highlighted the critical
nature of the timelines prescribed by the IBC, stating that these are to be
strictly followed to prevent undue delays in the insolvency resolution
process. In K.Sashidhar vs. Indian Overseas Bank & Ors(2019) 7, the
Supreme Court further reinforced the adherence to IBC timelines,
rejecting any unnecessary extensions unless absolutely critical,
underscoring the need for efficiency and expeditious handling of
insolvency proceedings.

6 (2019) 11 SCC 633

7 (2019) 12 SCC 150
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 2. Whether the IBC provisions have an overriding effect over the
Maharashtra Relief Undertakings (Special Provisions Act), 1958?

The Respondent humbly submits that,

1. IBC’s Overriding Effect on State Laws: Section 238 of the IBC states that
its provisions will override any other law inconsistent with it. The
Supreme Court affirmed this, stating that the IBC is a comprehensive
statute with an overriding effect, designed to be a unified framework for
insolvency and bankruptcy.

2. Inapplicability of Maharashtra Relief Undertakings Act: The Maharashtra

Act provides temporary relief from financial distress for specific
undertakings, but it does not apply to insolvency proceedings initiated
under federal laws like the IBC. The Supreme Court has highlighted that
state laws providing temporary relief cannot override the central law's
comprehensive approach to insolvency.

3. Doctrine of Pith and Substance: When analysing the legislative

competence and resolving conflicts between central and state legislation,
the doctrine of pith and substance is used to determine the true nature of
the law. The IBC, being a legislation enacted under the Union List, takes
precedence over state laws under the Concurrent List, as it predominantly
concerns the consolidation and amendment of laws relating to
reorganization and insolvency resolution.

4. Operational Efficiency and Creditor Confidence: The operational

efficiency achieved through the IBC enhances creditor confidence by

12
 ensuring timely resolution of insolvencies, which is vital for the health of
the financial sector and overall economic climate.

5. It is humbly submitted that the non obstante class in section 238 of IBC
2016 will have overriding effect over the operation of MRU Act 1958,
because the law envisaged in MRU Act is inconsistent with section 238 of
IBC 2016.

6. It is also submitted that the plain reading of section 4(iv) of

MRU(produced hereunder) makes it clear that only the right, privilege,
obligation or liability accrued or incurred before the undertaking was
declared a relief undertaking, in so far as the said right relates to availing of
any remedy for enforcement is suspended and not existence/continuation of
debt or default itself, therefore suspension of indebtedness or default has not
been contemplated or provided under the MRU Act.

Section 4(iv) of the Maharashtra Relief Undertaking Act:

(iv) any right, privilege, obligation or liability accrued or incurred before
the undertaking was declared a relief undertaking and any remedy for the
enforcement thereof shall be suspended and all proceedings relative thereto
pending before any court, tribunal, officer or authority shall be stayed;

7. It is evident on record that IB Code has come into existence subsequent to

the MRU Act therefore, notwithstanding clause in section 238 of IBC
prevails upon any other law for the time being in force, hence it cannot not
be said that Notification given under MRU Act will become a bar to passing
this order u/s. 7 of the IBC 2016.

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 PRAYER
Therefore, in light of the arguments presented, the statutory provisions, and the
authoritative judgments cited, the Respondent, ICICI Bank Ltd., respectfully
requests this hon’ble Tribunal to grant the following relief:

i. Adjudge and Declare that Innoventive Industries Ltd. has defaulted under
the terms of the IBC and is thus subject to the initiation of the Corporate
Insolvency Resolution Process (CIRP).

ii. Confirm the Overriding Effect of the IBC specifically Section 238,
affirming that it supersedes conflicting laws, including the Maharashtra
Relief Undertakings (Special Provisions) Act, 1958.

iii. Appoint an Interim Resolution Professional (IRP) to manage the affairs

of Innoventive Industries Ltd., safeguard its assets, and facilitate the
CIRP, as outlined in Section 16 of the IBC.

iv. Grant such other and further relief as this Hon’ble Tribunal may deem
just and proper in the circumstances to protect the rights of the Applicant
and promote the objectives of the IBC.

Sd/-
COUNSEL FOR THE APPLICANT

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