Abhishek Tripathi and Avantika Shukla look at role of adjudicating bodies in IBC’s evolution
The Insolvency and Bankruptcy Code, 2016 (IBC), is considered to be among the biggest achievements of the National Democratic Alliance (NDA) government. With the NDA coming back to power, it can be assumed that the IBC will receive a greater push. The role of adjudicating authorities will be crucial and recent judgments show that the courts have risen to the challenge.
The Supreme Court has led the way by showing the necessary urgency in disposing of insolvency matters, and the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) have followed in its footsteps by upholding the sanctity of the process and developing a cohesive insolvency jurisprudence.
In the Swiss Ribbons case, the Supreme Court, in upholding the constitutional validity of the code, and making a distinction between operational and financial creditors, clearly expressed its support of the fundamental design of the corporate insolvency resolution process (CIRP) under the code. Further, the Supreme Court has also upheld the validity of the distribution waterfall mechanism of the code, section 12A, which deals with the withdrawal of insolvency proceedings, and section 29A that deals with persons ineligible to be resolution applicants and the relaxation of the rules applicable to micro, small and medium enterprises. The supervisory roles of the NCLT and the NCLAT were affirmed by the court by holding that they may permit the withdrawal of insolvency proceedings at any stage.
Abhishek Tripathi is the managing partner of Sarthak Advocates & Solicitors, and Avantika Shukla is an associate in the insolvency practice.