Mumbai: A series of assessments in the Supreme Court have set an ungridled power from the Creditors Committee (COC) in cases of bankruptcy.
However, the wisdom of COC has been questioned in the case of Videocon and Siva Industries, which has strengthened calls for the code of ethics proposed by the Standing Parliament Committee on the finance last week.
In the early years of bankruptcy and bankruptcy codes (IBC), the Supreme Court has upheld the nature of COC’s commercial wisdom in the assessment of Essar.
The APEX court also confirmed that the court did not have the right to question the wisdom of the COC, including the lack of outstance of creditors in other cases.
In addition, there are several other orders that provide financial creditors up.
Lenders have also accepted an offer after the deadline, quoting the maximization of value, they also accept bids close to the value of liquidation, leading parliamentary panels to question their actions.
The National Companies Legal Tribunal (NCLT) has also questioned COC’s behavior in two cases.
In the case of videocon, NCLT raised doubts on the confidentiality clause used in real-time after it turned out that the bid entered by Twin Vedanta star was close to the secret liquidation value assigned by the lender.
“COC commercial wisdom such as the basic structure of the IBC process.
Every irregularities there may be wider dysfunctional implications.
However, to overcome the growing concern about uncertainty in COC decision making, now there is a need to have a professional code of ethics for the COC as suggested by the Committee Stay on finance, and criminal provisions for violations, if any, “said Hara Mishra Day, Director, UV Arc.
Recently this week, Chennai’s NCLT bench fired a proposal submitted by the COC to attract the bankruptcy process against Sivasankaran’s Siva Industries to make a one-time solution.
“NCLT observed that without receiving even a cents from the company’s debtor promoter, COC has chosen to support the withdrawal of the bankruptcy process and this will give the impression that it is not a settlement but a business restructuring plan.
Therefore, NCLT has the view that the power of authority that teaches cannot be limited In the field that the ‘commercial wisdom’ of the COC will win over other provisions of the IBC, “said Nirav Shah, DSK legal.
Shah added that while commercial assessments that need not be questioned from COC are not weaker, this reason cannot be said to apply to a one-time resolution proposal that the court must be considered before approving the same.
A senior advocate that appears on behalf of the lender says that while lender rights are undoubtedly, the code of ethics for financial creditors is needed.