LexBHARTI AIRTEL LIMITED AND ANOTHER versus VIJAYKUMAR V. IYER AND OTHERS
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* Author [2024] 1 S.C.R. 140 : 2024 INSC 15 Case Details Bharti Airtel Limited and Another v. Vijaykumar V. Iyer and Others (Civil Appeal Nos. 3088-3089 of 2020) 03 January 2024 [Sanjiv Khanna* and S.V.N. Bhatti, JJ.] Issue for Consideration The present appeals raise a question on the right to claim set-off in the Corporate Insolvency Resolution Process, when the Resolution Professional proceeds in terms of clause (a) to sub-section (2) of s.25 of the Insolvency and Bankruptcy Code, 2016 to take custody and control of all the assets of the corporate debtor. Headnotes Insolvency and Bankruptcy Code, 2016 – clause (a) to sub- section (2) of s.25, s.238, s.243 – Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 – Regn. 29 – The appellant-Airtel entities argued that they are entitled to statutory set-off or insolvency set-off, in the Corporate Insolvency Resolution Proceedings under Chapter II Part II of the IBC: Held: The IBC is a complete code relying upon the opening part of the enactment and s.238 and s.243 nullifies the argument raised by the appellant Airtel entities that they are entitled to statutory set-off or insolvency set-off, in the Corporate Insolvency Resolution Proceedings under Chapter II Part II of the IBC – Regulation 29 of the Liquidation Regulations does not apply to Part II of the IBC – The legislation or even the legislative intent permits neither statutory set-off, nor insolvency set-off. [Para 37] Insolvency and Bankruptcy Code, 2016 – Difference between the Corporate Insolvency Resolution Process and the liquidation process: Held: There is a difference between the Corporate Insolvency Resolution Process and the liquidation process of the IBC – The Corporate Insolvency Resolution Process focuses on and fosters rehabilitation, revival and resolution of the corporate debtor, [2024] 1 S.C.R. 141 BHARTI AIRTEL LIMITED AND ANOTHER v. VIJAYKUMAR V. IYER AND OTHERS whereas the liquidation process focuses on the constellation of assets of the company in liquidation, and distribution and payment to the creditors from the liquidation estate in terms of the order of preference set out in the insolvency statute. [Para 12] Insolvency and Bankruptcy Code, 2016 – Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 – Regn. 29 – Code of Civil Procedure, 1908 – Or. VIII, r.6 – Application of the Provisions of statutory set-off to Corporate Insolvency Resolution Process: Held: The provisions of statutory set-off in terms of Or. VIII, r. 6 of CPC or insolvency set-off as permitted by Regulation 29 of the Liquidation Regulations cannot be applied to the Corporate Insolvency Resolution Process – The aforesaid rule would be, however, subject to two exceptions or situations – The first, if at all it can be called an exception, is where a party is entitled to contractual set-off, on the date which is effective before or on the date the Corporate Insolvency Resolution Process is put into motion or commences – The reason is simple – The Corporate Insolvency Resolution Process does not preclude application of contractual set-off – The second exception will be in the case of ‘equitable set-off’ when the claim and counter claim in the form of set-off are linked and connected on account of one or more transactions that can be treated as one – The set-off should be genuine and clearly established on facts and in law, so as to make it inequitable and unfair that the debtor be asked to pay money, without adjustment sought that is fully justified and legal – The amount to be adjusted should be a quantifiable and unquestionable monetary claim, as the Corporate Insolvency Resolution Process is a time-bound summary procedure. [Paras 30 and 32] Words and Phrases – Set-off – Meaning of: Held: Set-off in generic sense recognises the right of a debtor to adjust the smaller claim owed to him against the larger claim payable to his creditor – Set-off is given legal preference for three reasons – First, in economic terms, set-off is a form of security recognised in law – It is, however, not a security in a strict sense, but a right that enhances provision of credit and acts as a stimulus to trade and commerce by giving a degree of confidence to parties dealing with each other – Secondly, it helps reduce litigation, promotes economy of time and is an efficient method in resolving debt between parties – Thirdly, natural equi
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