“Section 14 of the IBC will not be operative and applicable. Moratorium under Section 14 is to grant protection and prevent a scramble and dissipation of the assets of the corporate debtor. The contention that the “amount” to be set-off is not part of the corporate debtor’s assets in the present facts is misconceived and must be rejected”.
In the case of Bharti Airtel Limited and Another v. Vijaykumar V.IYER and Ors. [ Civil Appeal No.S 3088-3089 of 2020] the facts of the case initiates with the civil appeal case in the Supreme Court of India involved Bharti Airtel Limited and Vijaykumar V. Iyer and Others. The dispute arose from spectrum trading agreements between Bharti Airtel Limited and Aircel Limited, contingent on approval from the Department of Telecommunications. Aircel entities failed to submit bank guarantees, prompting Bharti Airtel to approach the court and make a payment of Rs. 341.80 crores. Airtel entities sought a set-off of Rs. 145.20 crores owed by Aircel entities, which was initially rejected by the Resolution Professional. While the Adjudicating Authority upheld Airtel’s right to set-off, the National Company Law Appellate Tribunal overturned the decision, asserting that set-off contradicts the objectives of the Insolvency and Bankruptcy Code (IBC).
The Supreme Court’s analysis in the civil appeal involving Bharti Airtel Limited and Vijaykumar V. Iyer and Others delved into the intricacies of set-off rights within the ambit of the Insolvency and Bankruptcy Code (IBC). The core issue revolved around the spectrum trading agreements between Bharti Airtel and Aircel, highlighting the significance of compliance with regulatory conditions, especially the submission of bank guarantees by Aircel entities. The court meticulously examined various forms of set-off, including statutory/legal set-off, contractual set-off, equitable set-off, and insolvency set-off. It elucidated that the IBC serves as a complete legal code, emphasizing the need for a meticulous adherence to its provisions and objectives.
While acknowledging the permissibility of contractual and transactional set-offs under specific circumstances, the court categorically stated that insolvency set-off is not recognized during the Corporate Insolvency Resolution Process.
The judgment underscored the importance of principles such as mutuality and reciprocity in determining the validity of set-offs in insolvency proceedings. It highlighted that strict adherence to the statutory framework is essential, and any deviation could undermine the objectives of the IBC. The court’s analysis clarified the nuanced distinctions between various forms of set-off, offering a comprehensive understanding of their applicability in the context of insolvency. Moreover, the judgment addressed prevailing misconceptions and misapplications of statutory provisions related to set-off, setting a clear precedent for the treatment of such claims in insolvency proceedings. By providing a structured analysis, the court not only resolved the immediate dispute but also laid down a foundation for consistent and principled adjudication of set-off issues within the overarching framework of the IBC. The decision serves as a guiding precedent, ensuring coherence and adherence to legal principles in future insolvency cases involving set-off claims.
The court do not find any merit in the present appeals and the same are dismissed. There will be no order as to costs.
“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”
Written by- Komal Goswami
