Insolvency Ordinance Faces First Challenge In Court
The ordinance amending India's Insolvency and Bankruptcy Code, which barred a majority of defaulting promoters from bidding for their assets, is now facing its first legal hurdle.
Punjab-based RMS Pvt. Ltd. has challenged the ordinance in the Punjab and Haryana High Court, a lawyer familiar with the matter told BloombergQuint on the condition of anonymity. Law firm Chandhiok & Associates is representing the petitioner.
RMS had defaulted on approximately Rs 100 crore worth of loans. The promoter had submitted a resolution plan for repaying its lenders just before the IBC ordinance. With this amendment, the promoter stood ineligible to participate in the resolution process.
RMS has challenged the ordinance on two key grounds, the lawyer quoted above said.
1. Retro-activity of the ordinance.
2. It does not distinguish between a genuine promoter and a wilful defaulter.
The high court granted interim relief to the company while allowing the resolution professional to continue to oversee it management, the lawyer said. The matter has been posted for hearing on Jan. 25. Pending the court's order, RMS would have gone into liquidation on Dec. 11.
“The overarching manner in which the ordinance is drafted would have the effect of ousting almost all promoters from the resolution process,” Pooja Mahajan, managing partner at Chandhiok & Associates and lawyer for RMS told BloombergQunt.
This could not have been the intent of the law – the BLRC report specifically talks about giving genuine promoters a second chance. In certain cases, especially for SMEs, the promoters will be the only persons submitting the plan. It would be very unfair to force a company into liquidation even if the promoter is genuine and has the ability to revive the company.Pooja Mahajan, Managing Partner, Chandhiok & Associates
The IBC ordinance, passed in late November, had made at least nine categories of persons ineligible for submitting a resolution plan for the indebted companies facing insolvency action at the National Company Law Tribunal.
Amendments to the code said that promoters whose accounts have been non-performing for a year will not be allowed to participate in the resolution plan. Those who have not have settled overdue amounts on said accounts will also not be permitted to bid for their assets.
Also Read: Everything You Need To Know About The Insolvency And Bankruptcy Code Amendments
-
Navigating Friction And Energy Realities: An Analysis Of Marco Rubio's October Visit To India
Occurring at a critical juncture marked by stalled trade negotiations and escalating geopolitical pressures over global energy supplies, the visit offers a profound window into modern US-India relations.
-
India Exports Capital. Why Not Export Trusteeship?
The big question, then, is whether India can build an institution that global borrowers, investors, banks, and lawyers can trust, even without an Indian connection.
-
France's Economy & Politics Are In Crisis | The Reason Why
Let's look at how the French economy and politics evolved under Nicolas Sarkozy, Franois Hollande and Emmanuel Macron.
-
You May Inherit The Business. You Must Earn Its Credibility.
Succession tests the founder's ability to share authority as much as it tests the next generation's readiness to assume it.
-
Signing Deals Is One Thing; Making Them Work Is Another | The Week In Whys
Sometimes, things don't turn out as planned. Indian companies have lost some bids to rivals, some projects won't produce until 2030.
-
FOMC Wall, PERM Suspension, Hospital Stocks | Talking Points This Week
A PERM suspension would directly affect green-card sponsorship rather than H-1B visas, so the near-term earnings impact could remain relatively limited. The key question is whether this marks a new phase in US scrutiny of Indian IT.
-
Everything, Everywhere, All At Once: Dalal Street's Week To Forget | Joining The Dots
Visa curbs, a Starlink spat and cancer drug caps: what connects this week's shocks for Indian markets
-
India Is Going Abroad For Critical Minerals. But It May Take Years To Pay Off | The Reason Why
Although India's steps are in the right direction, they remain modest compared with India's growing dependence.
-
When Everyone Has AI, What Gives You An Edge?
India's young workforce is entering an uncertain world of work where powerful AI tools are becoming widely accessible. The advantage will belong to those who combine deep expertise with digital fluency, and the distinctly human capabilities that technology cannot manufacture.
-
Wrong Labels, High Pesticide Residues Holding Back Agri Exports | The Reason Why
India needs stronger domestic food-safety and labelling standards, with best practices becoming part of everyday business for farmers, traders and food companies.
