FINANCIAL CREDITORS POINTED OUT LACUNAS IN THE IBC 2016 BEFORE THE DELHI HC

Ninety-four Financial Creditors put forward their grievances regarding the lacunas in the Insolvency and Bankruptcy Code 2016. They pleaded that the act does not allow recovery of money for financial creditors who are defrauded by companies undergoing the Corporate Insolvency resolution process.

Insolvency proceedings were initiated against C&C construction Ltd and M/s c&c towers ltd in 2019 by NCLT Delhi and NCLT Chandigarh, respectively. The Petitioners were clients of M/s Karvya Stock Broking Ltd. They were lured into investing in the Ponzi scheme by Karvya Realty and C&C towers. It was done without disclosing the fact that C&C towers were already declared a Non-performing asset. C&C towers not only defrauded monies but also diverted the funds to M/s C&C construction. 

The Petitioners submitted that section 66 read with sections 43 and 45 of the IBC reflects the lacunas. This lacunae coupled with the Moratorium u/s 14 restricts the petitioner from availing appropriate legal remedies for recovery. The Petitioners pointed out that a resolution professional has already sought the approval of a resolution plan. If the NCLT approves the plan, they would be bound by it irrespective of whether or not they participated in the CIRP. 

And hence the petitioners have approached the Delhi High Court under Article 226.

The Petitioners urged the HC to protect their fundamental rights and declare that IBC 2016 does not contemplate a Ponzi scheme and does not provide redressal to defrauded creditors. In view of the same, the Court issued a notice and posted the matter on October 26, 2021.

Author: Papiha Ghoshal