IBC An Imbalanced Economic Provision

- Dec 11, 2018-

Economic Times reported that Bhushan Power and Steel promoter Sanjay Singal has likened the Insolvency and Bankruptcy Code to an enabler of takeovers or liquidation instead of the intended objective resolution of bad loans to justify his eligibility to bid for the asset he has run for decades. Mr Singal described the dedicated IBC framework as an Imbalanced economic provision in a writ petition filed in the Supreme Court. He has challenged the constitutional validity of four sections of the law, including the contentious Section 29(A) that deals with the bidding eligibility for assets under resolution. A writ petition is filed in high court or Supreme Court when a fundamental right is violated. Mr Singal has called the sections ‘Violative” of Articles 1419, 20, 21, 39 and 300A of the Constitution. The petition said “IBC is an imbalanced economic provision that is metamorphosing into a takeover or liquidation code instead of its objective of being a financial resolution code.”

Mr Singal said that by excluding the promoter from bidding for his own asset through Section 29(A), BPSL's resolution process has been converted into its sale at hugely discounted rate based on its liquidation value of INR 9,700 crore instead of its going concern value of INR 25,000 crore.

If his contentions are held valid, certain provisions in the IBC could get a relook, perhaps affecting resolution process in several cases currently in various bankruptcy courts.

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