Writ Petition (Civil) NO. 99 OF 2018, Judgment on 25th January 2019)
In this case, SC has settled the challenges which mounting against the constitutional validity of the Code.
The key implications of the Supreme Court judgement are as follows:
(a) The distinction between promoters / management and the corporate debtor has been judicially recognised. Displacement of the promoter or the management of a company in default can now be done relatively quickly to protect the company and its assets.
(b) The Supreme Court has concluded that the IBC is a beneficial legislation and is for the benefit of the corporate debtor and therefore the admission of a company into Corporate Insolvency Resolution Process (CIRP) cannot be seen from the traditional lens of adversarial proceedings.
(c) The Supreme Court has imported fair and equitable treatment for operational creditors as a requirement for the approval of resolution plans.
(d) In addition to the provision for withdrawal under Section 12A, withdrawal of a corporate debtor from CIRP has been permitted up to the time the Committee of Creditors is constituted with the approval of the National Company Law Tribunal (NCLT).
This judgment will have a significant impact on a number of stakeholders in insolvency resolution. It will aid in early identification and resolution given that the admission process as contemplated in Section 7 of the Code as interpreted by the Supreme Court in Innoventive has been validated after the constitutional test.