IBC Proceedings Cannot Replace Recovery Suits or Decree Execution: Supreme Court

The Supreme Court held that proceedings under the Insolvency and Bankruptcy Code (IBC) cannot be used as a substitute for money recovery suits or execution of civil court decrees.

Setting aside the NCLAT’s order initiating insolvency proceedings against a solvent company, the Court observed that the IBC is intended for resolution of genuine insolvency and financial distress, not for coercive recovery of dues.

It clarified that although a decree may constitute evidence of debt, every decree holder cannot automatically invoke the insolvency process in preference to execution remedies.

Finding the company financially functional and the debt amount disputed, the Court termed the initiation of CIRP an abuse of the IBC process.

[Anjani Technoplast Ltd. v. Shubh Gautam]