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SC upholds IBC’s Section 32A: Why is it important, what are the implications?

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SC upholds IBC’s Section 32A: Why is it important, what are the implications?


SC has upheld section 32A of Insolvency and Bankruptcy Code (IBC).

What did the Supreme Court say in its judgment?

In its judgment, the apex court, while upholding the validity of Section 32 A of IBC, said

  1. It was important for the IBC to attract bidders who would offer reasonable and fair value for the corporate debtor to ensure the timely completion of corporate insolvency resolution process (CIRP).
  2. Such bidders, however, must also be granted protection from any misdeeds of the past since they had nothing to do with it.
  3. Such protection, the court said, must also extend to the assets of a corporate debtor, which form a crucial attraction for potential bidders and helps them in assessing and placing a fair bid for the company, which, in turn, will help banks clean up their books of bad loans.

What is Section 32A?

  • Section 32A provides that Corporate Debtor shall not be prosecuted for an offence committed prior to commencement of Corporate Insolvency Resolution Process (CIRP) once Resolution Plan has been approved by Adjudicating Authority (AA).
  • The section further provides that no action shall be taken against property of Corporate Debtor covered under such a Resolution Plan.

What’s the issue then?

32A continues to hold liable every person who was a ‘designated partner’ or an ‘officer who is in default’ or was in any manner in-charge of, or responsible to Corporate Debtor for conduct of its business or associated in any manner and who was directly or indirectly involved in commission of such offence.

Why is the SC upholding Section 32A important?

  • With the Supreme Court upholding the validity of Section 32 A, the cases such as that of Bhushan Power are expected to be completed soon.
  • Experts also said that this will give confidence to other bidders to proceed with confidence while bidding on such disputed companies and their assets.

Sources: Indian Express.