The Supreme Court two-judge Bench led by Justice RF Nariman on Monday, opined that operational creditors of a bankrupt company should also be given representation and voting rights in the Committee of Creditors (CoCs) in the proportion of their debt, at par with the financial creditors of the bankrupt company.
Seeking to protect the rights of operational creditors such as suppliers of products and services who are not given any say in the resolution proceedings of a bankrupt company, the Bench submitted that it is pertinent to deliberate on this point, keeping in view the huge amount of debt such creditors might hold against the company.
The bench has directed Attorney General KK Venugopal to ponder on this point and submit a response to the court in its next date of hearing after the winter break.
As per the provisions of the IBC, presently only financial creditors like banks comprise the Committee of Creditors, which decides what is to be done with an asset, keeping the fate of operational creditors in the hands of financial creditors.
The Bench was hearing a batch of petitions filed, challenging various provisions of the Insolvency and bankruptcy Code (IBC), as being arbitrary and biased against operational creditors. The petitions submitted that the creditors would fail to recover the true value of assets if not given representation in the resolution proceedings, including a provision for debtors to be heard even when an insolvency proceeding has been initiated by the financial creditor.
Counsel for the government, Attorney General KK Venugopal, arguing in support of the IBC, stated that “There have been signs of recovery after the introduction of the IBC over previous years. Credit realised by banks have risen. Bank growth has accelerated to touch double digits”.