Vol 16 (2019) - Issue 3

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Swiss Ribbons v Union of India: The Foundation for Modern Bankruptcy Law

Synopsis

The constitutionality of the Indian Insolvency and Bankruptcy Code, 2016 ('IBC') was recently upheld in entirety by the Hon’ble Supreme Court of India. This article considers the key conclusions of the Supreme Court’s judgement and its implications for resolution of distressed companies in India.


Constitutionality of the IBC upheld

The Supreme Court’s decision in Swiss Ribbons v Union of India upholding the constitutionality of the provisions of the Insolvency and Bankruptcy Code, 2016 ('IBC' or the 'Code') is a landmark in the development of the Code.
The IBC is a significant departure from prior insolvency regimes in India, and some of its key features are novel even by global standards. The key differentiating features of the IBC (in comparison with other developed jurisdictions) are:
1. The admission threshold is low – it is based on the factum of default without an insolvency test.
2. No class rights – the constitution of a single creditors committee comprising of only financial creditors with secured and unsecured creditors being treated equally for voting.
3. Disqualification of certain bidders from participation in the resolution process.