For a considerable period, insolvency jurisprudence under Section 60(2) of the Insolvency and Bankruptcy Code, 2016 (“Code”) remained unsettled on this seemingly narrow yet crucial issue: when can a Corporate Insolvency Resolution Process be said to be “pending”?
The issue became particularly contentious in proceedings involving corporate guarantors, where the question of jurisdiction is intrinsically linked to whether insolvency proceedings against the principal borrower are already pending before a particular National Company Law Tribunal. In this context, what appeared to be a mere procedural distinction assumed substantive importance, shaping judicial interpretation and influencing forum determination.
The absence of a statutory definition of the term “pending” led to divergent judicial interpretations. One line of reasoning being that pendency arises only upon the admission of an application marking the formal commencement of the CIRP, while the other being that pendency begins at the very stage of filing. This long-standing interpretative ambiguity has now been conclusively resolved. The Supreme Court, as a significant contribution in S Vasudevan, Suspended Director of M/s Tuscan Consultants and Developers Pvt. Ltd. v. IDBI Trusteeship Services Ltd. & Anr., [Company Appeal (AT) (CH) (Ins) No.362 of 2023] affirmed the view taken by the National Company Law Appellate Tribunal, Chennai (“NCLAT”), holding that pendency commences from the date of filing of the application and not upon its admission.
The interpretative exercise undertaken by tribunals and courts has largely centred on ascertaining the meaning of the term “pending”, through various judicial precedents and under the statutory context. In the absence of a definition under the Code, courts have consistently relied on its ordinary legal meaning. A foundational reference in this regard is Asgarali Nazarali Singaporawalla v. State of Bombay [AIR 1957 SC 503], wherein the Supreme Court held that a legal proceeding remains “pending” from the moment of its commencement until its final conclusion, so long as the court retains the authority to pass orders therein. This principle finds resonance in English jurisprudence as well, notably in Re Clagett’s Estate, where it was observed that a cause is deemed pending so long as any proceeding can be taken in it. Collectively, these authorities underscore that pendency is not confined to a specific procedural milestone, such as admission, but extends across the entire continuum of a proceeding from its institution to its ultimate adjudication.
In parallel, courts have also examined the concept of “initiation” to distinguish it from “commencement.” In State (CBI) v. Sashi Balasubramanian [(2006) 13 SCC 252], the Supreme Court clarified that “initiation” denotes the act of beginning. Similar interpretations were echoed in Pallav Sheth v. Custodian [(2001) 7 SCC 549] and Om Prakash Jaiswal v. D.K. Mittal [(2000) 3 SCC 171], where “initiation” was understood as the first step in the life of proceedings. Drawing upon these principles, the National Company Law Appellate Tribunal, Chennai, reasoned that the filing of an application under Section 7 of the Code constitutes initiation of the process, which thereafter remains alive until adjudication. Consequently, such proceedings fall squarely within the ambit of being “pending.”
A contribution to this interpretative exercise also came from the decision of the National Company Law Tribunal, Principal Bench, New Delhi in IDBI Trusteeship Services Ltd. v. DSS Infrastructure Pvt. Ltd. [CP(IB) No.446/2023], where the tribunal directly addressed the meaning of “pending” in the context of Section 60(2). The NCLT linked the concept of pendency to the “initiation date” under Section 5(11), holding that once an application is filed, the CIRP stands initiated and remains pending until adjudication.
The purposive interpretation of Section 60(2) of the Code has also been significantly influenced by judicial guidance from the Supreme Court in Embassy Property Developments Pvt. Ltd. v. State of Karnataka & Ors, [(2020) 13 Supreme Court Cases 308] wherein the Court underscored that the provision is designed to ensure that insolvency proceedings concerning a corporate debtor and its guarantors are adjudicated by a single forum, thereby preventing conflicting outcomes and avoiding multiplicity of proceedings. This underlying objective has played a pivotal role in shaping an expansive understanding of the term “pending.” A restrictive construction, one that confines pendency to the post-admission stage would frustrate this legislative intent by permitting parallel proceedings before different tribunals based solely on their timing of admission. Such an approach would undermine the coherent and consolidated framework envisaged under the Code.
Ultimately, by synthesising these authorities, the Supreme Court while upholding the judgment of the NCLAT arrived at a coherent and principled interpretation: pendency commences from the date of filing of an application and continues until its final adjudication, irrespective of whether the application has been admitted. In the process, the Court delineated a clear conceptual distinction between “initiation,” “commencement,” and “pendency” under the Code. “Commencement,” as defined under Section 5(12), is inextricably linked to the admission of an application and triggers substantive legal consequences, including the imposition of a moratorium and the activation of CIRP timelines. “Pendency,” on the other hand, operates within a distinct procedural domain under Section 60(2). Thus, while “commencement” signifies the formal onset of CIRP and its attendant consequences, “pendency” is broader in scope, attaching at an earlier stage and encompassing the entire duration from filing to final determination. By endorsing such a purposive and precedent-backed interpretation, it is understood that the trigger for Section 60(2) is the existence of a proceeding that has been instituted and remains undecided, and not the formal commencement of CIRP upon admission. The ruling thus removes ambiguity and strengthens the framework for coordinated insolvency proceedings involving principal borrowers and guarantors. Additionally, by clarifying that pendency commences upon initiation, the decision strengthens the architecture of consolidated insolvency proceedings and curbs tactical jurisdictional challenges grounded in procedural timing. In a legal regime where speed and coordination are central to legislative design, the interpretation of “pending” ensures that consolidation under Section 60(2) operates as intended from the moment the insolvency process is set in motion, not merely after it formally begins.
About the authors: Angad Varma is a Partner, Nikhil Mehnidratta is a Principal Associate, and Nidhisha Choksi is an Associate at Dua Associates.
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