Supreme Court upholds IBC in its 'entirety', refuses pleas to allow operational creditors' parity with financial creditors

  • Under the current IBC, the Committee of Creditors consists only of financial creditors, excluding operational creditors from voting

  • A batch of 10 petitions had challenged various provisions of the Insolvency and Bankruptcy Code

  • The IBC prohibits promoters of bankrupt firms from bidding for insolvent companies.

The Supreme Court on Friday upheld constitutional validity of Insolvency and Bankruptcy Code (IBC) in its 'entirety', a media report said.

The apex court, while dismissing a batch of petitions challenging the IBC, refused pleas to allow operational creditors' parity with financial creditors, according to Moneycontrol.

A batch of 10 petitions had challenged various provisions of the IBC such as timelines prescribed, the jurisdiction of National Company Law Appellate Tribunal (NCLAT).

The IBC prohibits promoters of bankrupt firms from bidding for insolvent companies.

In its circular on 12 February last year, the Reserve Bank of India, in a bid to hasten the resolution of bad loans, had tightened rules to make banks identify and tackle any non-payment of loan rapidly.

In April, the Allahabad High Court had declined to give private power companies any interim relief on the February 12 RBI circular.

 Supreme Court upholds IBC in its entirety, refuses pleas to allow operational creditors parity with financial creditors

File image of the Supreme Court of India. AP

Last year, Kotak Mahindra Bank Vice Chairman and MD Uday Kotak had said that the government needed to re-look certain provisions of the Insolvency and Bankruptcy Code (IBC) as a situation might emerge where there was only one buyer for a stressed asset.

Referring to Section 29A of the IBC which prohibits promoters from buying back their own stressed assets, Kotak had said: "The challenge is not at this stage but as we go into the future, as we go into smaller companies where you may not get even one bid. How are we going to handle that situation. "Are we going to force those companies into liquidation where probably in some of those situations the only buyer may be the promoter at some price."

With inputs from agencies

 

 

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Updated Date: Jan 25, 2019 11:42:09 IST