Recently, the Supreme Court of India had the opportunity to deal with a batch of Writ Petitions challenging the validity of certain provisions of the Arbitration and Conciliation (Amendment) Act, 2019 as well as certain aspects of the Insolvency and Bankruptcy code, 2016 (IBC). A bench of Justices Nariman, Surya Kant and Ramasubramanian delivered its verdict on these issues on 27th November, 2019 by the judgment of Hindustan Construction Company Ltd. and anr vs. Union of India (“Hindustan Construction”).
This article deals solely with the Insolvency related aspects of the judgment. Incase you’re interested in the Arbitration related aspects of the matter, please read here.
It was a contention of the Petitioner in the matter, that owing to various provisions of the Arbitration and Conciliation (Amendment) Act, 2019, there was an automatic stay of the award, which was in favour of the Petitioner. Owing to the said stay, on the one hand, the Petitioner could not obtain those monies under the Award to pay its creditors debts, and on the other hand, any debt of over INR one lakh owed to a financial or operational creditor which remains unpaid, would attract the provisions of the Insolvency Code against the Petitioner No.1 - making these provisions arbitrary, discriminatory and violative of Articles 14 and 19(1)(g) of the Constitution of India.
In view of the above contentions, to enable the make the provisions more reasonable, the following assertions were made:
In order to ascertain whether the above submissions could be accepted, the Court considered the following issues:
Owing to all the above reasons, it was held by the Hon’ble Supreme Court of India, that the challenge to the provisions of the Insolvency Code was devoid of any merit.
The conclusion therefore is, that Government Companies can still not be proceeded under the IBC, and the law and legislation as it is holds good.
Gunjan Chhabra is a Partner with Adwitya Legal LLP.
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