Shot in the arm: on SC upholding Insolvency and Bankruptcy Code

 

 

 

 

Shot in the arm: on SC upholding Insolvency and Bankruptcy Code

The Supreme Court’s ruling eases the implementation of the IBC in knotty cases
Last week’s Supreme Court judgment(निर्णय/फैसला) upholding the validity of the Insolvency and Bankruptcy Code 2016 (IBC) in its “entirety(संपूर्णता/)” could have a major impact(प्रभाव)on the country’s economic landscape( परिदृश्य) The fledgling IBC has been severely tested in the two years since its enactment(कानून/अधिनियमन), with the Centre being forced to amend(संशोधन ) a couple of its provisions(प्रावधानों) in order to plug some loopholes(खामियाँ) that enabled(सक्षम) defaulting(दोषी/पैरवी न करना) borrowers(उधारकर्ताओं ) to challenge(चुनौती) the legislation(कानून ). Any law of this nature that takes over businesses and assets(संपत्ति) from defaulters and empowers(अधिकार) lenders to change the management is bound to face legal challenges. Borrowers were never going to take the IBC lying(धोके से/झूठ बोलना) down, and that is exactly(ठीक ठीक/सही) what happened; over the last two years, they have challenged various(विभिन्न ) aspects(पहलु) of the law in tribunals(अधिकरणों) and courts. In the event, the apex court’s(सर्वोच्च न्यायालय) stamp of approval on the entire Code is a strong signal to borrowers and banks even as it brings a sense of relief to the Centre, which has been watching one of its better economic initiatives(पहल/उपक्रम) being stifled(दबाया/त्रस्त) by vested(निहित ) interests(स्वार्थों /रूचियाँ).

One of the major(बड़ी ) challenges mounted against the IBC was by operational creditors, who are owed money by the company in the normal course of operations for supply of goods and services. In the payment waterfall prescribed(निर्धारित) under Section 53 of the IBC in the event(घटना/वृत्तांत) of liquidation(परिसमापन/दिवालियापन) of the company or its sale to another entity, their dues rank below those of financial creditors, workmen and employees. This was challenged by the operational creditors, who wanted equal treatment with financial creditors in the waterfall mechanism. Several landmark cases that were referred(संदर्भित /निर्दिष्ट) to the National Company Law Tribunal(कानून न्यायाधिकरण) under the IBC remain stuck there, including(समेत) that of the high-profile Essar Steel, as a result of its operational creditors(लेनदारों ) seeking(मांग/खोजना) equal(बराबर ) treatment(उपचार). With the Supreme Court now ruling that there are “intelligible(समझदार ) differentia(भिन्नता)” between operational and financial creditors, an avenue that defaulters used to stymie proceedings(कार्यवाही) has been closed. Repayment of financial debt by borrowers infuses capital(पूंजी ) into the economy as lenders can on-lend the money that has been repaid(चुकाया/वापस करना) to other entrepreneurs(व्यवसायी), thus aiding economic activity, the judges observed(अवलोकन /देखे गए।). The apex court has also clarified that a mere relationship with an ineligible(अनुचित/अयोग्य) person cannot disqualify someone from becoming a bidder(बोली लगाने वाले) for a troubled asset. It has to be proved that such a person is “connected” with the business activity of the resolution applicant. The court used strong words: “…[T]he experiment conducted (संचालित)in enacting(अमलदर/लागू करना) the Code is proving to be largely successful. The defaulter’s paradise(स्वर्ग /सुखभवन) is lost.” This constitutes a clear signal of its backing for the IBC which, despite(बावजूद) all the challenges that it has faced, has been successful in sending a message to recalcitrant(अड़ियल/हठी) defaulters that there can be no more business-as-usual when they default.

 

 

Important Vocabulary

1.Enactment(कानून/अधिनियमन),
Synonyms: achievement, cting, depiction, execution, impersonation
Antonyms: failure, neglect, block, disallowance, hindrance

2. Defaulting(दोषी/पैरवी न करना)
Synonyms: delinquency, nonpayment, absence, blemish, blunder
Antonyms: abundance, accuracy, achievement, adequacy, advantage

3. Aspects(पहलु)
Synonyms: attitude, condition, facet, form, air
Antonyms: whole

4. Loopholes(खामियाँ
Synonyms: alternative, outlet, technicality, escape clause, means of escape

5. Initiatives(पहल/उपक्रम)
Synonyms: action, drive, leadership, push, ambition
Antonyms: apathy, cowardice, idleness, inactivity, indifference

6. Stifled(दबाया/त्रस्त)
Synonyms: curb, muzzle, repress, silence, mother
Antonyms: allow, encourage, free, let go, loose

7. Liquidation(परिसमापन/दिवालियापन)
Synonyms: clearance, destruction, eradication, expulsion, removal
Antonyms: acceptance, addition, allowance, inclusion

8. Prescribed(निर्धारित)
Synonyms: arbitrary, recommended, ethical, magistral, prescriptive
Antonyms: unprescribed

9. Seeking(मांग/खोजना)
Synonyms: searching, hunting, probing, pursuing

10. Repaid(चुकाया/वापस करना)
Synonyms: compensated, indemnified, recompensed, refunded, remunerated

11. Enacting(अमलदर/लागू करना
Synonyms: achieve, execute, depict, discourse, do
Antonyms: fail, miss, direct, hinder, prevent

12. Recalcitrant(अड़ियल/हठी)
Synonyms: fractious, obstinate, rebellious, unruly, wayward
Antonyms: agreeable, compliant, manageable, obedient, yielding

13. Paradise(स्वर्ग /सुखभवन)
Synonyms: bliss, heaven, utopia, wonderland, Arcadia
Antonyms: hell

14.Observed(अवलोकन /देखे गए।)
Synonyms: attended, checked, detected, noticed, realized
Antonyms: abandoned, desecrated, forgotten, unnoticed, unperceived

15. Referred(संदर्भित /निर्दिष्ट)
Synonyms: assign, attribute, cite, hint, indicate
Antonyms: ignore, neglect, remove, hold back

16. Entrepreneurs(व्यवसायी)
Synonyms: administrator, contractor, executive, manager, producer
Antonyms: employee

 

 

 

Credit To The Hindu News Paper

The Supreme Court’s ruling eases the implementation of the IBC in knotty cases
Last week’s Supreme Court judgment upholding the validity of the Insolvency and Bankruptcy Code 2016 (IBC) in its “entirety” could have a major impact on the country’s economic landscape. The fledgling IBC has been severely tested in the two years since its enactment, with the Centre being forced to amend a couple of its provisions in order to plug some loopholes that enabled defaulting borrowers to challenge the legislation. Any law of this nature that takes over businesses and assets from defaulters and empowers lenders to change the management is bound to face legal challenges. Borrowers were never going to take the IBC lying down, and that is exactly what happened; over the last two years, they have challenged various aspects of the law in tribunals and courts. In the event, the apex court’s stamp of approval on the entire Code is a strong signal to borrowers and banks even as it brings a sense of relief to the Centre, which has been watching one of its better economic initiatives being stifled by vested interests.

One of the major challenges mounted against the IBC was by operational creditors, who are owed money by the company in the normal course of operations for supply of goods and services. In the payment waterfall prescribed under Section 53 of the IBC in the event of liquidation of the company or its sale to another entity, their dues rank below those of financial creditors, workmen and employees. This was challenged by the operational creditors, who wanted equal treatment with financial creditors in the waterfall mechanism. Several landmark cases that were referred to the National Company Law Tribunal under the IBC remain stuck there, including that of the high-profile Essar Steel, as a result of its operational creditors seeking equal treatment. With the Supreme Court now ruling that there are “intelligible differentia” between operational and financial creditors, an avenue that defaulters used to stymie proceedings has been closed. Repayment of financial debt by borrowers infuses capital into the economy as lenders can on-lend the money that has been repaid to other entrepreneurs, thus aiding economic activity, the judges observed. The apex court has also clarified that a mere relationship with an ineligible person cannot disqualify someone from becoming a bidder for a troubled asset. It has to be proved that such a person is “connected” with the business activity of the resolution applicant. The court used strong words: “…[T]he experiment conducted in enacting the Code is proving to be largely successful. The defaulter’s paradise is lost.” This constitutes a clear signal of its backing for the IBC which, despite all the challenges that it has faced, has been successful in sending a message to recalcitrant defaulters that there can be no more business-as-usual when they default.

Print Friendly, PDF & Email