SC to examine validity of 2019 amendments into IBC

The Supreme Court on Wednesday agreed to examine the 2019 amendments into the Insolvency and Bankruptcy Code, even though they were yet to be notified and implemented.

A bench of Justices R F Nariman and Surya Kant agreed to hear on August 19 a batch of writ petitions which, the court was informed, would be filed within a week. The court asked Attorney General K K Venugopal to be present on the scheduled date.

The Amendments to the Code, yet to be notified, give a 330-day deadline for corporate resolution process, including for litigation and other juridical processes.

The court passed the orders allowing the filing of petitions for challenging the validity of amendments while deferring hearing in the case related to ArcelorMittal's bid for Essar Steel, as senior advocates Harish Salve, Mukul Rohatgi, Kapil Sibal, Ranjit Kumar, Iqbal Chagla and P Chidambaram were present to argue the matter.

The bench said when the amendments have been made to the IBC, this matter should be decided in light of fresh challenges since the counsel appearing for operational creditors submitted they would prefer to challenge the changes in the code. The bench pointed out the amendments could be challenged even before they were notified.

Parliament had on August 1 approved changes in the three-year-old Insolvency and Bankruptcy Code (IBC) providing greater clarity over the distribution of proceeds of the auction of loan defaulting companies, with the Lok Sabha passing the bill with a voice vote.

The Insolvency and Bankruptcy Code (Amendment) Bill 2019 gives committee of creditors of a loan defaulting company explicit authority over the distribution of proceeds in the resolution process and fixes a firm timeline of 330 days for resolving cases referred to the IBC.

According to the proposed amendments, once the Corporate Insolvency Resolution Process (CIRP) begins, it has to be completed in 330 days, including litigation stages and judicial process.

Among others, the approved resolution plan would be binding on central and state governments as well as various statutory authorities.