In a landmark judgement delivered on Friday,
Supreme Court upheld the constitutional validity of the two-year-old Insolvency and Bankruptcy Code (IBC) in its entirety.
While dismissing a batch of petitions challenging the IBC, the apex court refused pleas to allow operational creditors' parity with financial creditors.
A bench headed by Justice R F Nariman pronounced its judgement on a batch of 10 petitions challenging various provisions of the IBC, which included key issues pertaining to the role and treatment of operational creditors.
The ruling upheld fledgling bankruptcy and insolvency rules and is expected to pave the way for banks to recover crores of rupees from bankrupt firms mired in litigation, lawyers said.
The Supreme Court also agreed with the provisions for speedy resolution of corporate bankruptcy and said the objectives of the law are fulfilled by the provisions provided.
CNBC-TV18 caught up with MR Umarji, former chief legal advisor, Indian Banks' Association (IBA); Bahram Vakil, founding partner, AZB & Partners and Shardul Shroff, executive chairman, Shardul Amarchand Mangaldas & Co to discuss the contents of the order.
MR Umarji said, "I think the February 12 circular will also pass muster because ultimately the circular is issued by the regulator of the banks and financial institutions and it is the exercise of regulatory power. It ensuring that the banks act in accordance with whatever decisions the regulator has taken and it has the power to give directions to the banks. So, I do not see any difficulty in upholding the February 12 circular of the RBI also when the matter is heard."
Bahram Vakil said, "I am delighted and even as you go through the judgement, it is wonderful to read including the epilogue. It has covered all the points very forcefully. The only one tiny wrinkle is that on section 12A, while it has confirmed its constitutional validity, the timing issue - that whether you can come in at the very last minute or even after the game is over, if that had been clarified it would have been paradise."Shardul Shroff said, "What the court has actually said is best explained in the last paragraph of verdict where it says that we are in a stage of experimentation and it is not proper to interdict regulations which are essentially brought in to. The court is conscious of the fact that if it starts stopping progressive litigation on what they call as inequities and minor sort of problems that can arise in an experimental legislation, those have not been as determining the constitutional validity of the law. So, as I see it in a sense they have supported the RBIs definitions on NPA, on doubtful debts. So, at least in relation to the IBC, they have supported the RBI circulars."