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Resolution Process Under IBC Can Continue Independent Of Winding Up Petition Pending In High Court

In CIVIL APPEAL NO. 818 OF 2018, FORECH INDIA LTD. vs EDELWEISS ASSETS RECONSTRUCTION CO. LTD., the appellant was an operational creditor, which had filed an application in the High Court to wind up the corporate debtor under Section 433(e) of the Companies Act, 2013 in 2014.

After the commencement of the IBC, the respondent, a financial creditor, filed application under Section 7 of the IBC against the corporate debtor, which was admitted by the NCLT. The appellant challenged before the NCLAT the admission of financial creditor's application, on the ground CIRP cannot be initiated when winding up proceedings were pending in HC. The NCLAT did not agree, and dismissed the appeal, holding that the application was maintainable as no winding up order was passed. Section 11 of IBC was cited by the NCLAT.

The Supreme Court rejected the judgement of the the Madras High Court in M/s. M.K. & Sons Engineering v/s. Eason Reyrolle Ltd. and agreeing with the judgment of the Bombay High Court in   PSL Limited vs. Jotun India Private Limited, held that the Corporate Insolvency Resolution Process(CIRP) under the Insolvency and Bankruptcy Code (IBC) can continue independent of any pending winding up process against the corporate debtor pending in the High Court under the Companies Act.


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