SC right to protect IBC

Back door for promoters to retain control closed

The Supreme Court, in deciding a case dealing with the promoters of Gujarat NRE Coke, a company going through the insolvency process, has closed a major loophole in the Insolvency and Bankruptcy Code (IBC). The court declared that Section 230 of the Companies Act, which allows anyone to propose a “scheme of compromise or arrangement” with the companies’ creditors, was subject to the spirit of the IBC, which prevents promoters from finding a “back-door entry” into their former company. The Insolvency and Bankruptcy Board of India (IBBI) had introduced a specific provision that had closed this loophole, saying that anyone