Supreme Court upholds constitutional validity of Insolvency and Bankruptcy Code

The apex court said the provisions of the law that bars founders from regaining control of stressed companies was legally valid.

The Supreme Court, on Friday, upheld the constitutional validity of a law that bars founders of companies that are loan defaulters from buying back stressed assets.
 
It said the provisions of the law that bars founders from regaining control of stressed companies was legally valid. The move is likely to help NPA issues resolve more quickly.  
 
The judgement is seen as a setback for founders of companies including Essar Steel Ltd, which had offered to clear all dues to regain control. 
 
The founders of Essar Steel has been making last-minute effort, with an offer worth Rs 543.9 billion ($7.7 billion), to thwart ArcelorMittal from bidding the asset. The ruling by a bankruptcy court on the Essar Steel case is scheduled on January 31.
 
In the ruling on Friday, the court also clarified that the bar on persons related to the defaulting founders would include only those who are connected to the defaulting company.
 
The Government of India has been making efforts to clean up bad loans from several banks. The new bankruptcy code was passed in 2016, which barred wilful defaulters, as well as founders of defaulting companies from submitting revival plans or bids for their failing firms. 
 
Source: Businessline

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