From UPSC perspective, the following things are important :
Prelims level : Right to carry on business
Mains level : Issues over IBC
The Supreme Court has increased the time limit for the corporate resolution to extend beyond the mandated 330 days. The judgment is significant for India’s fledgling corporate resolution process under the Insolvency and Bankruptcy Code.
- As of now, the time limit for resolution process is mandatorily 330 days in all cases.
- If debts are not resolved and the bankrupt firm cannot be brought back to its feet within this time-frame, the only option left is liquidation of its assets to pay creditors.
- The court said that the provision saying the 330-day mark should be followed in the ‘ordinary course’.
- Extension of time should be granted by the NCLT if parties are able to prove there is very little time left in the resolution process and the delay has been caused by ‘tardy’ legal proceedings.
- A Bench led by Justice Nariman in a judgment, observed that many litigants suffer the prospect of liquidation for no fault of theirs.
- Delay in legal proceedings leads to the resolution process being dragged beyond the 330-day mark.
How is Article 19 involved?
- Justice Nariman said it would be arbitrary to let litigants suffer liquidation unnecessarily.
- The court held the mandatory nature of the 330-day mark as a violation of Article 14 (right to equal treatment) of the Constitution and an excessive and unreasonable restriction on the litigant’s right to carry on business under Article 19(1)(g) of the Constitution.
According to Article 19, all citizens shall have the right—
- to freedom of speech and expression;
- to assemble peaceably and without arms;
- to form associations or unions or co-operatives;
- to move freely throughout the territory of India;
- to reside and settle in any part of the territory of India; and
- the right to acquire, hold and dispose of property (deleted after 44th CAA, 1978)
- to practise any profession, or to carry on any occupation, trade or business.