While the Insolvency and Bankruptcy Code provides for insolvencyresoultion in a timely manner and establishment of an expedient process todecide the application and to opt for the process of liquidation if the plan isrejected, it doesn’t seem to provide for any involvement of the corporatedebtor which could lead to a negative impact on the company.On an analysis of relevant provisions of the Code from the perspectiveof a corporate debtor, it can be seen that the Code gives great powers as wellas rights to the financial creditor to get back their loans but no recourse isgiven to the corporate debtors to address their grievances. An imbalance iscreated favouring the creditors against the corporate debtors.
While the object of the Code is to give priority to the creditors, throughvarious case laws it can be seen that the corporate debtor was genuinelyconcerned and interested in revival and paying back loans but the creditor’spower prevailed and the company wastaken into liquidation. The issue that arises is whether the debtor should betaken into consideration during this process. The financial creditor can file an application for the initiation ofCorporate Insolvency Resolution Process to the Adjudicatory Authority in thecase of commission of default and it is mandated the applicants submit a copyof the application filed with the Adjudicatory Authority. The main purpose isto give the corporate debtor adequate notice that such an application has beenfiled against him. However, another issue that can be seen is that the Code does notprovide any provision for corporate debtor to make a representation infurtherance of such notice. The Code doesn’t take into account the circumstanceunder which the financial creditor might have hidden relevant documents whichcould reject the application.
In the judgment of Sree Metaliks Limited v. Union of India1,it was stated that a reasonable opportunity of hearing to the corporate debtormust be afforded despite the High Court of Calcutta stating that the AdjudicatingAuthority is to adhere to Natural Justice Principle when deciding on anapplication under Section 7 of the Code. The same rationale was also followed in the case of ICICI Bank v. InnoventivesIndustries Ltd2, where it was stated that the InsolvencyResolution Process under Section 7 of the Code would have serious consequenceson the corporate debtors as well as on the directors and shareholders as afterthe application is filed, an interim resolution professional is appointment tomanage affairs of the corporate debtor and there is instant removal of theBoard of Directors. While in these cases, through the judgmentsit can be seen that the Courts recognize the importance and need of recoursefor the debtor, the Code by itself does not provide any recourse forthe corporate debtor to raise the grievance.
There is no written procedure laiddown for the hearing given to the corporate debtor.At present, the Code illustrates a picture that seems to be in favour ofthe creditor resulting in an imbalance between the corporate debtors andcreditors. Through this paper, after an analysis of case laws and relevantsections of the IBC, the need to strike a balance between the corporate debtorsand the creditors is considered to ensure the objects of the Code are achieved.1 WP 7144(W) of 2017,Calcutta High Court 2 Company Appeal (AT)(Insolvency) No. 1 & 2 of 2017