In the landmark case of Essar Steel v Satish Kumar Gupta, it was given by the court that there is no residual equity jurisdiction in the Adjudicating Authority or the Appellate Tribunal to interfere in the merits of a business decision taken by the requisite majority of the Committee of Creditors, provided that it is otherwise in conformity with the provisions of the Code and the Regulations. This was a progressive judgement in safeguarding the interests of the committee of creditors who play a major role in the resolution process.
A distinction between different classes of creditors was made permissible which are based on reasonable and fairgrounds. It also gave that a resolution plan once approved, is binding on all stakeholders. A resolution plan refers to a proposal that aims to provide a resolution to the problem of the corporate debtor’s insolvency and its consequent inability to pay off debts. It needs to be approved by the committee of creditors, and comply with mandatory requirements prescribed in IBC. It was also given in this judgement that any time taken due to legal proceedings should not be included in the mandatory period of 330 days. The reasoning behind this was that the litigant should not have to suffer the brunt of time wasted which was beyond his control, i.e., delay in judicial proceedings. Therefore, the NCLT is allowed to provide an extension in rare cases where it is required, like in the given case at hand.
Another case that dealt with the issue of CIRP was K. Shashidhar v. Indian Overseas Bank, in which it was further solidified that the CoC had complete sovereignty over the process of CIRP. Any judgement taken by the CoC is independent and cannot be probed into by the NCLT.
In Anand Rao Korada Resolution Professional v. Varsha Fabrics, it was given by the Supreme Court that the High Court does not have the authority to auction any property of the Corporate Debtor once the proceedings under IBC have commenced. This was held with the view that once a moratorium is declared, it would be against the interest of all stakeholders involved if the assets are no longer available while the proceedings are yet underway in the NCLT.
In Swiss Ribbons Pvt. Ltd. vs Union Of India, the Supreme Court of India upheld the constitutional validity of various provisions of the IBC. It was argued that Section 29 A (j) was constitutionally not valid, however, the court held that the constitutional validity of the section is maintained. Along with that the court also states that the Insolvency Code is legislation that deals with economic matters and, in the larger sense, deals with the economy of the country as a whole and that the working of the Code, the flow of financial resources to the commercial sector in India has increased exponentially as a result of financial debts being repaid. Approximately 3300 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 INR 1,20,390 crores. This case goes to show the responsiveness and positive attitude of the court towards the code. It is evident that the judiciary has played an important role in backing the code and liberally implementing it to achieve economic gains and stability.
REFERENCES:
- Committee of Creditors of Essar Steel India Limited through Authorised Signatory vs. Satish Kumar Gupta & Ors, CIVIL APPEAL NO. 8766-67 OF 2019
- Pandey, A. (2019, July). All about resolution plan under insolvency and bankruptcy code, 2016. TaxGuru, from https://taxguru.in/corporate-law/resolution-plan-ibc-2016.html
- K. Shashidhar v. Indian Overseas Bank, CIVIL APPEAL NO.10673 OF 2018
- Anand Rao Korada Resolution Professional v. Varsha Fabrics, CIVIL APPEAL NOS. 88008801 OF 2019
- Swiss Ribbons Pvt. Ltd. vs Union Of India, WRIT PETITION (CIVIL) NO. 99 OF 2018
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