The Supreme Court has held statutory set off or insolvency set off is not applicable to Corporate Insolvency Resolution Process (CIRP) proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). Further, Regulation 29 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (Liquidation Regulations), which provides for mutual dealing and set off, does not apply to Part II of the IBC which deals with CIRP.
The principle of Set-off recognizes the right of a debtor to adjust the smaller claim owed to him against the larger claim payable to his creditor.
The Bench has also carved out two exceptions to the application of statutory or insolvency set off to CIRP proceedings. First being, when a party is …
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