Constitutional validity of the provisions of insolvency and bankruptcy code

Abstract

In India, the legal and institutional machinery for dealing with debt default has not been in line with global standards. The recovery action by creditors, either through the Contract Act or through special laws such as the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, has not had desired outcomes. Similarly, action through the Sick Industrial Companies (Special Provisions) Act, 1985 and Companies Act, 1956 & 2013 have neither been able to aid recovery for lenders nor aid restructuring of firms. Laws dealing with individual insolvency, the Presidential Towns insolvency Act, 1909 and the Provincial Insolvency Act. 1920, are almost a century old. This has hampered the confidence of the lender. When lenders are unconfident, debt access for borrowers is diminished. In this backdrop Parliament enacted Insolvency and Bankruptcy Code, 2016 by consolidating all existing laws into single law. After enactment of this Code the question arose pertaining to couple of provisions of Code are conflicting with articles of the Constitutions. This research paper will focus on how the constitutional validity of various provisions of the Code has been challenged before various High Courts and the Supreme Court. Further the papers put forth how the issues related to constitutionality are justified by the Courts.