NewDelhi : The Supreme Court of India today upheld the validity of Insolvency and Bankruptcy Code “in its entirety”.
However, the Court read down Section 29A holding that the “related party” should be connected to the business organisation/ defaulting company for there to be a bar on submission of resolution plan.
“The defaulter’s paradise is lost. In its place, the economy’s rightful position has been regained”, said the Apex Court while upholding the constitutional validity of various provisions of the Insolvency and Bankruptcy Code, 2016.
Justice Rohinton Fali Nariman, for the bench also comprising of Justice Navin Sinha, authored 150 paged judgment. The bench observed that the Code is first and foremost, a Code for reorganization and insolvency resolution of corporate debtors.
“We are happy to note that in the working of the Code, the flow of financial resource to the commercial sector in India has increased exponentially as a result of financial debts being repaid. Approximately 3300 cases have been disposed of by the Adjudicating Authority based on out-of-court settlements between corporate debtors and creditors which themselves involved claims amounting to over INR 1,20,390 crores” the Epilogue of the judgement said.
Some of the provisions that were under challenge include Sections 3(12), 5(7), 6, 7, 12, 29, 62, 214(f), 231 and 238 of Insolvency and Bankruptcy Code, 2016.
Most importantly, the petition had also assailed all the appointments made to NCLT and NCLAT prior to 2018 on the ground that it falls foul of the judgment rendered by the Supreme Court in Madras Bar Association v. Union of India.
(With inputs from BarandBench.com)