Insolvency Laws: Supreme Court's Recent Judgment On Collusive Transactions

The Supreme Court recently in Phoenix Arc Private Limited v. Spade Financial Services Ltd. and others dealt with two sets of appeals being Civil Appeal No. 2842 of 2020 and Civil Appeal No. 3063 of 2020, arising from the judgment of the NCLAT dated 27th January 2020 whereby it dismissed the appeal under Section 61 of the IBC preferred by AAA Landmark Private Limited ("AAA") and Spade Financial Services Private Limited ("Spade") and held that they are related parties of the Corporate Debtor ("AKME Projects Limited"). The appeal before the NCLAT was to assail the order of NCLT dated 19th July 2019 whereby the NCLT held that the transactions between the Corporate Debtor and both Spade and AAA are collusive in nature and do not qualify as financial debt for the purpose of the IBC.