Facts: The appellant, Omkara Assets Reconstruction, sought to initiate Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC against the Corporate Debtor (CD) for a default exceeding Rs. 154 crores. The CD resisted the application, citing a pending Scheme of Arrangement (SOA) initiated in 2008 under Sections 391-394 of the Companies Act, 1956, before the Punjab and Haryana High Court. Although the High Court had sanctioned the SOA in 2019, the creditors had withdrawn their consent in 2009 due to the CD's inaction. Furthermore, the CD failed to comply with statutory timelines for filing the sanction order with the Registrar of Companies (ROC), rendering the scheme defunct. Despite these lapses, the NCLAT stayed the CIRP, keeping the IBC application in abeyance pending the High Court proceedings.
Procedural Posture: The Adjudicating Authority (NCLT) initially admitted the Section 7 petition and appointed an IRP. On appeal by the CD's erstwhile director, the NCLAT kept the CIRP in abeyance. The appellant then approached the Supreme Court of India via this Civil Appeal.
Issue: Whether the pendency or purported approval of a Scheme of Arrangement under the Companies Act, 1956, can stall or supersede the initiation of CIRP under the Insolvency and Bankruptcy Code, 2016, especially when statutory timelines and procedural requirements of the scheme were not met?
Holding: No, the IBC proceedings cannot be stalled. The Supreme Court set aside the NCLAT order and restored the NCLT's order initiating CIRP.
Reasoning: The Court reasoned that Section 238 of the IBC confers an overriding effect over other laws. It observed that the SOA was "for all practical purposes defunct" due to a ten-year delay in moving the second motion and failure to file Form INC-28 within prescribed timelines. Furthermore, under the Companies (Transfer of Pending Proceedings) Rules, 2016, the proceedings should have been transferred to the NCLT as they were not "reserved for orders" when the rules took effect. The Court emphasized that judicial discipline cannot be used by "tardy litigators" to jeopardize public funds or hold the economy hostage. It clarified that the IBC is a special statute aimed at the timely revival of companies, and independent proceedings under Section 7 must be tried on their own merits regardless of pending winding-up or arrangement proceedings under the general Companies Act.