Supreme Court upholds Constitutional Validity of Insolvency & Bankruptcy Code in its 'Entirety'. Read Judgment.

The apex court was hearing a batch of petitions, including some operational creditors, that had challenged the insolvency law on the grounds that it discriminates against operational creditors and their interests as against the financial creditors.

Former Attorney General for India, Senior Advocate Mukul Rohatgi was among the lawyers appearing for the petitioners challenging the law. The top court had reserved its judgment on 16th January,2019.

The Supreme Court also rejected the operational creditors’ challenge to insolvency law. Operational creditors had argued that they provide services to companies in exchange for services and have the right to initiate insolvency proceedings if their payments are defaulted upon. They, however, do not have the right to participate in the resolution process through the committee of creditors.

Under Insolvency and Bankruptcy Code, the committee can only consist of financial creditors who assess and vote on resolution plans submitted by interested bidders.

The petitioners had argued that by barring promoters from bidding for their own companies, the IBC forces the sale of the company to new bidders. This, they said, is against the fundamental rights of promoters of a company. The case to allow promoters to bid for their companies under Insolvency and Bankruptcy Code was originally filed by the promoters of Bhushan Power & Steel. The Supreme Court had later merged similar petitions by the operational creditors of Binani Cement, who felt that their rights were being obliterated under the insolvency law.

Read Judgment @ LatestLaws.com

Swiss Ribbons Pvt. Ltd. & Anr. Vs UOI 25.01.2019(Downloadable PDF)