SC overturning order in BPSL case a course correction for IBC: Experts

The SC has also addressed the issue of delays in the IBC due to litigation and extensions, which stand in the way of implementing a successful resolution plan

The Supreme Court judgment overturning its previous order for liquidation of Bhushan Steel & Power on Friday is being seen by experts as a much-needed course correction for the Insolvency and Bankruptcy Code (IBC).

 

According to them, it has brought certainty and underscored the legislative intent of the law.

 

IBC experts said the apex court’s order would also improve investor appetite and recovery for creditors.  

 

“The Supreme Court’s decision in the JSW-Bhushan Steel matter signals a maturing of the IBC as a statute moving it closer to its legislative intent of providing speed, certainty, and finality in resolution… Buyers can now step in without the shadow of unpredictable litigation undermining commercial viability,” said Sonam Chandwani, managing partner, KS Legal & Associates. 

 

The court order stressed that“...the dominant purpose of the IBC is to resort to the liquidation proceedings as the last option.” 

 

Experts said that the latest judgment will restore investor confidence and prevent erosion of value in large stressed assets. “The court has reinforced the principle that the commercial wisdom of the Committee of Creditors (CoCs) must be respected and that delays or procedural hurdles should not derail a viable resolution,” said Shiju PV, managing partner, IndiaLaw LLP. 

 

The SC has also addressed the issue of delays in the IBC due to litigations and extensions which stand in the way of implementation of the successful resolution plan.

 

It noted that the main purpose of the IBC is to ensure that the company undergoing insolvency proceedings is revived or liquidated expeditiously within a stipulated time frame. 

 

“The entire attempt of the appellants has been to thwart the corporate insolvency resolution process (CIRP) and to not permit the same to be taken to a logical end,” the court noted.

 

Under the current IBC framework, an application initiating corporate insolvency resolution must be admitted within 14 days. In reality, however, the average time taken by adjudicating authorities is over 434 days, or almost 14.5 months.

 

“This is a welcome move and reinstates investor confidence in the Indian stressed assets market and also the judiciary. Once the amendments that are pending before Parliament are introduced to the IBC, India will be put on the track to compete with other preferred jurisdictions for insolvencies,” Sukrit Kapoor, partner, King Stubb & Kasiva, Advocates and Attorneys, said. 

 

The IBC Bill, introduced in Parliament during the monsoon session, has proposed an out-of-court initiation mechanism for genuine business failures.

 

It would facilitate faster and more cost-effective insolvency resolution, with minimal business disruption as part of a creditor-initiated insolvency resolution process or the prepackaged resolution process for large companies. 

 

The idea behind the amendment, which requires the financial creditor to get approval from financial creditors of the debtor who represent 55 per cent of the debt, is to help ease the burden on judicial systems, promote ease of doing business and improve access to credit.