There is no back door pact for the defaulting promoter: what the Supreme Court court means
Clarification by the Supreme Court In connection with the promoter’s participation: In the bank’s liquidation process of bankruptcy will speed up the resolution process.
The Supreme Court has decided that the company’s promoter went bankrupt. This was prohibited from offers for their own company under the part of 29A of Insolvency and bankruptcy code (IBC). They are not allowed to use any schemes or settings to get their company control even if it enters into liquidation.
What did the Supreme Court say?
In the case involving Gujarat NRE Liquidation, the National Law Appellate Tribunal (NCLAT) has been held that everyone who does not meet the requirements, below the part of the 29A IBC, to bid the company, also prohibited from proposing a compromise scheme and setting based on section 230 of the Companies Act.
Section 230 of the companies act
Section 230 of the companies act allows promoters or corporate creditors to propose a scheme of arrangement or compromise in which company debt can be restructured.
In its assessment enforcing the NCLAT decision, The Apex Court said that while section 230 will apply to promoters and creditors in the normal course during the working of the company, it will not apply if the company faces liquidation under the IBC.
Compromise based on Section 230 of the 2013 Law
“The company must be safe from its management and corporate death. This will lead to real absurdity if people who do not meet the requirements send for a resolution plan, participate in the sale of company assets in liquidation, or participate in the sale of company debtors as ‘concern’, somehow allowed to propose a compromise or setting based on Section 230 of the 2013 Law, “two judges Dy Chandrachud and Mr. Shah said.
How does it affect the company’s promoter?
Clarification by the Supreme Court In connection with the promoter’s participation in the liquidation process of bankruptcy will speed up the resolution process.
The purpose of the IBC is to find appropriate buyers who are suitable for companies and liquidation progress only in cases where there are no plans that can be visible, experts believe that fast liquidation is very important to maximize the value of the company’s assets.
Section 29A
“Other interpretations will leave a gaping hole in the IBC scheme and defeat the part of section 29A object introduced for the completion and liquidation process below IBC,” Misha, a partner in Shardul Amarchand Mangaldas & Co.
Apart from this, it also settled a conflict assessment provided by different benches from the National Company Law Tribunal (NCLT), where these forums have, to follow the IBC principle of the maximum value of assets, allowing some promoters to return -bid For companies or propose settings when sent to liquidation.
