Bankruptcy code upheld; setback for defaulters
New Delhi: "The defaulters' paradise is lost" and the economy's rightful position has been regained, the Supreme Court said Friday as it upheld the constitutional validity of the Insolvency and Bankruptcy Code (IBC) in its entirety.
The top court lauded the working of the IBC and said, "The flow of financial resource to the commercial sector in India has increased exponentially as a result of financial debts being repaid".
A bench of Justices R F Nariman and Navin Sinha refused to tweak any of the provisions of the IBC, which was challenged in a batch of petitions filed by several companies.
With regard to the controversial provision of section 29A of the IBC, which dealt with the rights of erstwhile promoters to participate in the recovery process of a corporate debtor, the bench said that "a resolution applicant has no vested right for consideration or approval of its resolution plan".
The court said the working of the Code is being monitored by an expert committee of the central government and in a short period, amendments have been carried out by involving all stakeholders.
"Earlier experiments, as we have seen, in terms of legislations having failed, 'trial' having led to repeated 'errors', ultimately led to the enactment of the Code. The experiment contained in the Code, judged by the generality of its provisions and not by so called crudities and inequities that have been pointed out by the petitioners, passes constitutional muster," said Justice Nariman, who penned 150-page verdict for the bench.
It noted that approximately 3,300 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 Rs 1.20 lakh crore.
The bench said 80 cases have been resolved, of which the liquidation value of 63 such cases is Rs 29,788 crore.