Imperfect ruling on constitutionality of IBC

The repeated insistence on liquidation as a "last resort" reinforces the notion that liquidation is a bad outcome

gavel, judge, court


Varun MarwahBhargavi Zaveri
On January 25, 2019, the Supreme Court upheld the constitutionality of the Insolvency and Bankruptcy Code, 2016 (Code henceforth), in its entirety. The scheme of the Code, as a whole, was challenged on the ground that it violated Article 14 of the Constitution. The main argument was that the Code unfairly discriminated between operational and financial creditors. While the court’s judgment brings respite to the financial sector, we argue that the judgment is partly inconsistent with the legislative intent underlying the Code, and may end up diluting the Code’s effectiveness.

First, the judgment repeatedly emphasises that the objective of the law is reorganisation of the debtor, and that liquidation is a “last resort”. For instance, re­ly­ing on the preamble of
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of or the Business Standard newspaper

First Published: Mar 01 2019 | 12:33 PM IST

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