Court’s role in insolvency cases

The Insolvency and Bankruptcy Code (IBC) has so far travelled a short journey of about 18 months where it has already faced a plethora of legal challenges. In order to overcome these challenges, parties have resorted to judicial intervention leading to resolution of several of these challenges, while the legal battle in some of the matters is still sub judice.

One must appreciate that the tribunals and the Supreme Court have been quite proactive in resolving and settling most of the issues. Certain issues have travelled from the National Company Law Tribunal (NCLT) to the National Company Law Appellate Tribunal (NCLAT) and ultimately have been settled by the Supreme Court. The issue of “dispute” was settled by the Supreme Court in Mobilox Innovations Private Limited v Kirusa Software Private Limited where it was held that there should be a pre-existing dispute, i.e. it should exist before the issuance of a demand notice by the operational creditor and a mere illusory dispute raised for the first time while replying to a demand notice cannot act as a barrier for admitting the application under the IBC.