Supreme Court upholds constitutional validity of Insolvency and Bankruptcy Code ‘in its entirety’
It read down a provision of the code that bars promoters or related parties that have run up defaults for a year and more from bidding for their own assets.
The Supreme Court on Friday upheld the constitutional validity of the Insolvency and Bankruptcy Code in its entirety, Bar and Bench reported. The code provides for a legal framework to resolve insolvency cases and release non-performing assets quickly.
A bench of Justices Rohinton Nariman and Navin Sinha dismissed a batch of petitions challenging various sections of the code. The court had reserved its judgement on January 16.
The court also read down Section 29A of the code, which bars any promoter or related party that has run up defaults for a year or longer from bidding to repurchase their own assets that are being auctioned. An earlier format of the amendment only proposed to debar wilful defaulters – that is, entities that had refused to service their debts despite having the ability to do so.
The court ruled on Friday that the “related party” can be banned from submitting a resolution plan only if it is connected directly to the defaulting company.
