In a bold move, the Supreme Court highlighted the Jet Airways insolvency case as a wake-up call, exposing critical weaknesses within the Insolvency and Bankruptcy Code (IBC). The court, led by Chief Justice Chandrachud along with Justices JB Pardiwala and Manoj Misra, stressed the urgent need for enhancements in managing timelines, guiding the Committee of Creditors (CoC), and instituting a robust oversight mechanism.
“This litigation has been an eye-opener,” the court emphasized, underscoring the necessity to address IBC deficiencies. To bolster the IBC, the court recommended three core reforms:
Establishing Oversight for Creditors’ Committee Decisions
Acknowledging the importance of the CoC’s judgment in selecting resolution plans for financially troubled companies, the court suggested forming an oversight committee to ensure effective adherence to guidelines. This would, it noted, enhance the CoC’s practical and operational relevance, minimizing risks in decision-making.
Reinforcing Resolution Timelines and Accountability
The court criticized the National Company Law Tribunals (NCLTs) and the National Company Law Appellate Tribunal (NCLAT) for granting frequent concessions to Successful Resolution Applicants (SRAs), who often seek extended timelines. To avoid such delays, the court urged NCLTs and NCLATs to uphold stringent compliance standards, ensuring resolution plans progress without unwarranted exceptions.
Introducing a Monitoring Committee
To ensure smooth plan execution post-approval, the court proposed that the IBC mandate a dedicated monitoring committee. This body would oversee the transfer of assets and compliance with the resolution plan, including quarterly updates to stakeholders. The committee, comprising resolution professionals, CoC nominees, and the resolution applicant, would streamline implementation, reduce disputes, and maintain transparency.
Finally, the court ordered the liquidation of Jet Airways under the IBC while directing that its recommendations be reviewed by the Union Finance Ministry and the Insolvency and Bankruptcy Board of India (IBBI), setting a clear mandate to reinforce the IBC for a more resilient insolvency framework.
