In Brief
In this landmark judgment on India's new Insolvency and Bankruptcy Code 2016, the Supreme Court held that a State law suspending corporate debts cannot prevent the initiation of insolvency proceedings. The appellant, a manufacturing company that defaulted on loans from 19 banks despite a restructuring plan, challenged insolvency proceedings citing a Maharashtra State Act that had temporarily suspended its liabilities. The Court found the State Act repugnant to the Code's exhaustive scheme for resolving insolvency within fixed timelines through a mandatory moratorium and professional management. Applying constitutional principles of federalism, the Court held that the later Central enactment's non-obstante clause prevails over the earlier State law, establishing that debtor companies can no longer rely on State protections to escape the insolvency process.
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