Supreme Court validates Sections 95-100 of Insolvency and Bankruptcy Code 2016 constitutional validity upheld

The SC upheld the constitutional validity of Sections 95-100 of the Insolvency and Bankruptcy Code 2016. The court ruled that no judicial adjudication occurs at stages under Sections 95-99, with the resolution professional serving a facilitative role in examining applications and submitting recommendatory reports. The court rejected requirements for hearings during resolution professional appointments, finding no violation of natural justice as debtors retain participation rights. The adjudicating authority must observe natural justice principles when deciding under Section 100 whether to accept or reject applications. The interim-moratorium under Section 96 protects debtors from further legal proceedings. The provisions do not violate Articles 14 and 21 of the Constitution. Petition dismissed.

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Issues Involved:
1. Constitutional Validity of Sections 95 to 100 of the Insolvency and Bankruptcy Code (IBC) 2016
2. Role and Functions of the Resolution Professional
3. Applicability of Principles of Natural Justice
4. Impact of Moratorium under Section 96

Summary:
1. Constitutional Validity of Sections 95 to 100 of the Insolvency and Bankruptcy Code (IBC) 2016
The petitioners challenged the constitutional validity of Sections 95 to 100 of the IBC, arguing that these sections are invasive and prejudicial. They contended that a judicial body must determine the existence of a debt before initiating insolvency proceedings and appointing a resolution professional. The Supreme Court held that the provisions are not unconstitutional and do not violate Articles 14 and 21 of the Constitution. The Court emphasized that the resolution professional's role is facilitative and not adjudicatory, and the adjudicating authority must observe natural justice principles when deciding to accept or reject an application under Section 100.

2. Role and Functions of the Resolution Professional
The Court distinguished the roles of resolution professionals under Part II and Part III of the IBC. In Part III, the resolution professional's role is limited to examining the application and submitting a recommendatory report to the adjudicating authority. The resolution professional does not have the power to take over the debtor's assets or business. The Court clarified that the resolution professional's function is to gather relevant information and recommend whether the application should be accepted or rejected, without binding the adjudicating authority.

3. Applicability of Principles of Natural Justice
The petitioners argued that the IBC provisions violate natural justice by not providing a hearing before appointing a resolution professional. The Court held that the principles of natural justice are flexible and must be tailored to the situation. The debtor is given an opportunity to engage with the resolution professional during the examination of the application. The adjudicating authority must observe natural justice principles when deciding under Section 100 whether to accept or reject the application. The Court found that the statutory framework does not result in a violation of natural justice.

4. Impact of Moratorium under Section 96
The Court analyzed the interim moratorium under Section 96, which takes effect upon filing an application and ceases upon admission of the application. The interim moratorium restrains legal actions in respect of the debt but does not affect the debtor's assets or legal rights. The Court distinguished this from the moratorium under Section 14, which has a broader impact on the corporate debtor. The interim moratorium is intended to protect the debtor from further legal proceedings while the application is being examined.

Conclusion:
The Supreme Court dismissed the writ petitions, holding that:
- No judicial adjudication is involved at the stages envisaged in Sections 95 to 99.
- The resolution professional's role is facilitative and recommendatory.
- The adjudicating authority must observe natural justice principles when deciding under Section 100.
- The interim moratorium under Section 96 protects the debtor from further legal proceedings.
- Sections 95 to 100 of the IBC are not unconstitutional and do not violate Articles 14 and 21 of the Constitution.

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