What the article is about:
- The article talks about recent ruling of Supreme Court on IBC (insolvency and bankruptcy code) and its impact on timely resolution.
Relevance:
- GS2: Government policies and intervention for development in various sector.
- GS3: Indian economy
Analysis:
- As per the judgement in Vidarbha industries power Ltd .v.Axis Bank the NCLT “has to consider the grounds made out by the corporate debtor against admissions, on its own merit.”
What is IBC, 2016:
- The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
Insolvency: Insolvency is a state of financial distress in which a person or business is unable to pay their debts.
Bankruptcy: Bankruptcy is a legal proceeding carried out to allow individuals or businesses freedom from their debts, while simultaneously providing creditors an opportunity for repayment.
Possible impacts of the judgment:
- This creates space for application by financial creditor to be rejected even if there is a default.
- It may also lead to delays in the admissions of cases beyond the timeline envisaged, as NCLT(national company law tribunal) is now required to inquire if the default is due to cash distress and whether it can repay.
- The probable delays in either admitting the case or the resolution process will only lead to further destruction asset values.
Conclusion:
- NCLT must ensure that the to timeline envisaged in the code are strictly adhered to.
