Regulation 2B of the Liquidation Process Regulations, specifically the proviso to Regulation 2B (1), is constitutionally valid

Last updated: 09 April 2021

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Quick Summary

The Supreme Court of India has declared Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016, as constitutionally valid. This ruling confirms that the prohibitions outlined in Sections 29A and 35(1)(f) of the Insolvency and Bankruptcy Code, 2016, also apply to compromise or arrangement schemes under Section 230 of the Companies Act, 2013, when a company is in liquidation.

Court :
IBBI

Brief :
The Hon’ble Supreme Court in its order dated 15th March, 2021 in the above case, held that (i) prohibition placed by the Parliament in Section 29A and Section 35(1)(f) of the Insolvency and Bankruptcy Code, 2016 (IBC) must also attach itself to a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013 (Act of 2013), when the company is undergoing liquidation under the auspices of the IBC, and (ii) Regulation 2B of IBBI (Liquidation Process) Regulations, 2016 is Constitutionally valid. The Hon’ble SC made some important undernoted observations in the context of insolvency proceedings:

Citation :
Civil Appeal No. 9664 of 2019 and other appeals

Insolvency and Bankruptcy Board of India
7th Floor, Mayur Bhawan, Connaught Place, New Delhi -110001
16th March 2021

Subject: Judgment1 dated 15th March, 2021 of the Hon’ble Supreme Court of India in the matter of Arun Kumar Jagatramka. Vs. Jindal Steel and Power Ltd. & Anr. [Civil Appeal No. 9664 of 2019 and other appeals]

The Hon’ble Supreme Court in its order dated 15th March, 2021 in the above case, held that (i) prohibition placed by the Parliament in Section 29A and Section 35(1)(f) of the Insolvency and Bankruptcy Code, 2016 (IBC) must also attach itself to a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013 (Act of 2013), when the company is undergoing liquidation under the auspices of the IBC, and (ii) Regulation 2B of IBBI (Liquidation Process) Regulations, 2016 is Constitutionally valid. The Hon’ble SC made some important undernoted observations in the context of insolvency proceedings:

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FAQ :

The Supreme Court's judgment concerns the constitutional validity of Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016.

Yes, the Supreme Court has held that Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016, is constitutionally valid.

The judgment also discussed Sections 29A and 35(1)(f) of the Insolvency and Bankruptcy Code, 2016, and Section 230 of the Companies Act, 2013.

Yes, the Supreme Court ruled that these prohibitions must attach to compromise or arrangement schemes under Section 230 of the Companies Act, 2013, when a company is undergoing liquidation under the IBC.