A division bench of the Supreme Court hearing a batch of petitions filed by some 40 companies challenging the validity of the Insolvency and Bankruptcy Code, 2016 observed that operational creditors of companies that are undergoing corporate insolvency resolution process should have a say in the committee of creditors (CoC) and get voting rights proportional to the debt owed to them.
The bench of Justice Rohinton Nariman and Justice Navin Sinha noted that in some cases debt owed to operational creditors by the companies is huge, but at present they do not have a say in the process, only financial creditors like banks have a say. So far in its response the government has said that the purpose of bringing in IBC was to ensure speedy resolution of debt and not just to help financial creditors. AG Venugopal submitted that petitioners are challenging various provisions which may mean doing away with the bill entirely, which he argued against vehemently. Court asked the Attorney General KK Venugopal to take instructions regarding the observations made and file a reply by first week of January 2019.
The companies have challenged Sections 3(12), 5(7), 6, 7, 12, 29, 62, 214(F), 231 and 238 of the IBC. Petitioner companies alleged that a certain class of operational creditors were being discriminated against and that the IBC was unfair as it only protects the rights of financial creditors. These observations are significant considering the recent example of engineering and construction major Larsen & Toubro, an operational creditor of Bhushan Steel Ltd had to move multiple courts in an attempt to recover its dues of Rs 900 crore, their petition was dismissed by the National Company Law Appellate Tribunal (NCLAT) in August.
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