Conferring rights upon individual shareholders of a company going through insolvency to litigate during corporate insolvency resolution process (CIRP) can derail the timeline prescribed in the Insolvency and Bankruptcy Code (IBC), Solicitor General Tushar Mehta has said.
Appearing for the Reserve Bank of India-appointed administrator in Srei, Mehta has pointed out that the IBC prescribed the sanctity of time limit. Once a decision is taken, if every shareholder is read with the right or locus to approach, then the very object, intent and purpose of IBC would be lost.
He was making his submissions in an application filed by a minority shareholder praying for recall of the order passed by the National Company Law Tribunal (NCLT) initiating CIRP in Srei companies.
Citing several judgments, the SG said only the company can speak for the shareholder. The shareholder has no independent or individual identity contrary to or apart from the company, except in the inter se relationship.
Mehta also said the IBC was provided for revival of a company which had been destroyed beyond repair and, therefore, the interest of the shareholder was always in support of CIRP and not opposing it. To buttress this, he pointed to the reasons behind the supersession of Srei boards by the RBI.
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During the Covid pandemic, there was a window provided — if there was default during the period, no CIRP was to be initiated. But in the present case, the default continued, Mehta said. “Therefore, 10A would not remotely support them.”
Both the minority shareholder and Adisri Commercial, the largest shareholder in Srei, had brought up Section 10A and said the date of default in SIFL and SEFL fell during the period suspended for initiation of CIRP under Section 10A of the IBC.
Jishnu Saha, senior counsel appearing for the administrator in applications filed by Adisri, pointed out in his submissions that the NCLT order admitting the application for CIRP records the submission that there has been continuing default and is borne out by the RBI notification. Therefore, 10A does not get attracted and invalidate the admission of insolvency.