The Supreme Court of India has set aside an order of the National Company Law Appellate Tribunal (NCLAT) that directed the initiation of insolvency proceedings against a solvent company based on a civil court decree. The Court held that the Insolvency and Bankruptcy Code, 2016 (IBC) is intended for the “reorganisation and insolvency resolution of corporate persons” and not to be used as a “money recovery mechanism” or a “substitute for ordinary execution or recovery proceedings.”
Background
The dispute originated from two loans advanced by the respondent, Shubh Gautam (a money lender), to the appellant, Anjani Technoplast Ltd., in 2010. Following defaults and the dishonour of security cheques, a summary suit was filed…