Bharti Airtel Ltd. vs. Vijaykumar V. Iyer
Citation: 2024 INSC 15; Bench: Justice Sanjiv Khanna, Justice S.V.N. Bhatti
Background
This case addressed whether Bharti Airtel Ltd. (and affiliates) could claim a right of set-off during the Corporate Insolvency Resolution Process (CIRP) initiated against the Aircel group under the Insolvency and Bankruptcy Code, 2016 (IBC). The dispute arose from spectrum trading agreements, where Airtel had provided bank guarantees and made payments to Aircel, later seeking to set off ₹145.20 crores owed by Aircel for operational charges against the amounts payable to Aircel under the agreements.
Key Legal Issues
Whether statutory or insolvency set-off rights are available to creditors during CIRP under the IBC.
Whether Regulation 29 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which allows set-off during liquidation, applies to CIRP.
The scope of mutuality and fairness in insolvency set-off claims.
Supreme Court’s Analysis
IBC as a Complete Code:
The Court held that the IBC is a self-contained code. Its provisions, including Section 238 (overriding effect) and Section 243, bar the application of external statutory set-off rights during CIRP. The Court clarified that Regulation 29 of the Liquidation Regulations only applies to liquidation, not to the resolution process.
Moratorium and Pari Passu Principle:
The Court emphasized the moratorium under Section 14 of the IBC, which prohibits the institution or continuation of suits or proceedings against the corporate debtor during CIRP. Allowing set-off would undermine the principle of pari passu (equal treatment of creditors) and could unfairly prioritize one creditor over others.
Mutuality Requirement:
The Court found that Airtel’s set-off claim did not meet the strict mutuality required for insolvency set-off, as the claims arose from different transactions and periods. Set-off of post-commencement claims against pre-commencement obligations is not permissible under the IBC.
Contractual Set-Off:
The judgment left open the possibility of contractual or transactional set-off if such rights are explicitly provided for in the contract and do not violate the IBC’s objectives, but held that statutory and insolvency set-off are not allowed during CIRP.
Decision
The Supreme Court dismissed Airtel’s appeal, holding that neither statutory nor insolvency set-off is permissible during CIRP under the IBC. The NCLAT’s decision to disallow Airtel’s set-off claim was upheld.
Significance
This landmark judgment clarifies that set-off rights—unless contractually provided and compliant with the IBC—are not available during CIRP. It strengthens the integrity of the insolvency process by ensuring equitable treatment of all creditors and upholding the moratorium and pari passu principles.
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