SC ruling on IBC vis-a-vis Companies Act leaves out nuances
Recently, the Supreme Court ruled out any attempt by existing promoters to rebid for their companies in the liquidation process. The apex court observed that Section 29 (a) of the Insolvency and Bankruptcy Code, which effectively disqualifies an existing promoter to rebid for units on the block, will prevail over Section 230 of the Companies Act, which allows the creditors and existing promoters a fighting chance to cobble together a restructuring scheme. There can be no denying that IBC has been a saviour for creditors with its 270-day time limit (at least on paper). But the nagging doubt in the minds of ‘resolution professionals’ is whether companies are being turned in for liquidation before their chances of revival have been wholly exhausted.
The question in these troubled times is whether banks need more than 180 days under the June 2019 circular (or options under Section 230) to hammer out a resolution. With Section 230 no longer being within the ambit of the NCLT’s processes, banks should diligently exercise all options before dispatching a concern to NCLT. The SC has sought to clarify the role of the NCLT by keeping out Section 230. Banks must bring to bear their resolution skills at a time when genuine investors may become hard to find.