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Members of NCLT Mumbai Bench differ on initiating insolvency process against Govt. Company

August 9, 2019[2019] 108 142 (NCLT - Mum.)

IBC : Two members of NCLT Mumbai Bench differ on situation when Corporate Insolvency Resolution Process (CIRP) can be set in motion against Corporate Debtor against a Government Company for allegedly having committed default in making payment

• As per Bhaskara Pantula Mohan, member (Judicial), CIRP process cannot be initiated against an instrumentality of State. Upon lifting corporate veil of Corporate Debtor to see who is behind same, it is found that it is none other than Government of India, in name of President of India. Initiating CIRP process against Corporate Debtor practically amounts to initiating CIRP process against Government of India which is impermissible under Constitution/Law.

• However, as per V. Nallasenapathy, Member (Technical), Corporate Debtor herein, being a company incorporated under the Companies Act, is a corporate person who owes operational debt to petitioner and hence petition is maintainable against Corporate Debtor under section 9. The legislature in its wisdom has not given any exception or exclusion to public sector/Government undertakings. Further, intention of legislature is very clear that Government companies also fall within ambit of Code. Adjudicating Authority cannot travel beyond provision of law.

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