Important Supreme Court Judgments On Insolvency & Bankruptcy Code

Insolvency and Bankruptcy Code was enacted in 2016. Though it received the assent of the President of India in May 2016, it came into force only in November-December 2016. Stated objective of the code is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India. Some cases requiring interpretation of the Code reached the Supreme Court in 2017 itself. The Supreme Court, (mostly the bench headed by Justice Rohinton Fali Nariman) dealt with many important cases with respect to interpretation of the provisions of the Code. This article discusses ten important judgments on Insolvency and Bankruptcy Code delivered by the Supreme Court since 2017. Constitutional Validity of IBC UpheldSwiss Ribbons Pvt. Ltd. & Anr. V. Union of India & Ors. The Supreme Court upheld the constitutional validity of the Insolvency and Bankruptcy Code 2016 in its "entirety". The Court however held that to attract the bar under Section 29A from participating in resolution process, "related person" should be a person connected to the defaulting entity. "The defaulter's paradise is lost. In its place, the economy's rightful position has been regained", this is how the Supreme Court summed up the judgment 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 which starts by discussing the background which led to the enactment of the Insolvency Code. He observed that the Code is first and foremost, a Code for reorganization and insolvency resolution of corporate debtors.Treating Homebuyers As Financial Creditors Not Arbitrary : SC Upholds 2018 IBC AmendmentPioneer Urban Land and Infrastructure Ltd and Anr vs Union of IndiaDismissing a bunch of petitions filed by nearly 200 realtors, the Supreme Court upheld the amendments made to the Insolvency and Bankruptcy Code in 2018 to treat homebuyers as financial creditors. In the judgment, the bench of Justices R F Nariman, Sanjiv Khanna and Surya Kant held that the amendments do not violate Article 14 and 19(1)(g) of the Constitution and rejected the argument that they are 'arbitrary, unreasonable, excessive and disproportionate'. It held:-The Amendment Act to the Code does not infringe Articles 14, 19(1)(g) read with Article 19(6), or 300-A of the Constitution of India.-The RERA is to be read harmoniously with the Code, as amended by the Amendment Act. It is only in the event of conflict that the Code will prevail over the RERA. Remedies that are given to allottees of flats/apartments are therefore concurrent remedies, such allottees of flats/apartments being in a position to avail of remedies under the Consumer Protection Act, 1986, RERA as well as the triggering of the Code.-Section 5(8)(f) as it originally appeared in the Code being a residuary provision, always subsumed within it allottees of flats/apartments. The explanation together with the deeming fiction added by the Amendment Act is only clarificatory of this position in law.Limitation Act Applicable To Applications Filed Under Sections 7 and 9 Of Insolvency and Bankruptcy Code From The Inception Of The CodeB.K. Educational Services Private Limited V. Parag Gupta And AssociatesIn a significant Judgment delivered in September 2018, the Supreme Court held that the Limitation Act is applicable to applications filed under Sections 7 and 9 of Insolvency and Bankruptcy Code From the inception of the Code. The two Judge Bench of Justices RF Nariman and Navin Sinha held: "The right to sue", therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application."Lawyer Can Issue Demand Notice Of Unpaid Operational Debt On Behalf Of Operational CreditorMacquarie Bank Limited vs Shilpi Cable Technologies Ltd, The Supreme Court held that a lawyer on behalf of the operational creditor can issue a demand notice of an unpaid operational debt.It said: "A conjoint reading of Section 30 of the Advocates Act and Sections 8 and 9 of the Code together with the Adjudicatory Authority Rules and Forms thereunder would yield the result that a notice sent on behalf of an operational creditor by a lawyer would be in order"The court also held that the provision contained in Section 9(3)(c) of the Code ...

Important Supreme Court Judgments On Insolvency & Bankruptcy Code

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