29th JANUARY 2019

A) Shot in the arm: on SC upholding Insolvency and Bankruptcy Code

The Supreme Court’s Ruling Eases The Implementation Of The IBC In Knotty Cases

Last week’s Supreme Court judgment upholding the validity of the Insolvency and Bankruptcy Code 2016 (IBC) in its “entirety” could have a major impact on the country’s economic landscape. The fledgling IBC has been severely tested in the two years since its enactment, with the Centre being forced to amend a couple of its provisions in order to plug some loopholes that enableddefaulting borrowers to challenge the legislation. Any law of this nature that takes over businesses and assets from defaulters and empowers lenders to change the management is bound to face legal challenges. Borrowers were never going to take the IBC lying down, and that is exactly what happened; over the last two years, they have challenged various aspects of the law in tribunals and courts. In the event, the apex court’s stamp of approval on the entire Code is a strong signal to borrowers and banks even as it brings a sense of relief to the Centre, which has been watching one of its better economic initiatives being stifled by vested interests.

One of the major challenges mounted against the IBC was by operational creditors, who are owed money by the company in the normal course of operations for supply of goods and services. In the payment waterfall prescribed under Section 53 of the IBC in the event of liquidation of the company or its sale to another entity, their dues rank below those of financial creditors, workmen and employees. This was challenged by the operational creditors, who wanted equal treatment with financial creditors in the waterfall mechanism. Several landmark cases that were referred to the National Company Law Tribunal under the IBC remain stuck there, including that of the high-profile Essar Steel, as a result of its operational creditors seeking equal treatment. With the Supreme Court now ruling that there are “intelligible differentia” between operational and financial creditors, an avenue that defaulters used to stymie proceedings has been closed. Repayment of financial debt by borrowers infuses capital into the economy as lenders can on-lend the money that has been repaid to other entrepreneurs, thus aiding economic activity, the judges observed. The apex court has also clarified that a mere relationship with an ineligible person cannot disqualify someone from becoming a bidder for a troubled asset. It has to be proved that such a person is “connected” with the business activity of the resolution applicant. The court used strong words: “…[T]he experiment conducted in enacting the Code is proving to be largely successful. The defaulter’s paradise is lost.” This constitutes a clear signal of its backing for the IBC which, despite all the challenges that it has faced, has been successful in sending a message to recalcitrant defaulters that there can be no more business-as-usual when they default.


B) Effortless brilliance: on Djokovic’s win at Australian Open

Djokovic Beats An Error-Prone Nadal For A Record-Breaking Seventh Australian Open Title

Novak Djokovic, at his absolute best, can make even the most fiercely competitive of draws appear enervated. From the start of 2015 to mid-2016, when he won five of the six Grand Slam events, he arguably played at a level unmatched in tennis history. With his merciless demolitionof Rafael Nadal in Melbourne on Sunday, which gave the World No. 1 a men’s-record seventh Australian Open singles trophy, and his 15th Major overall taking him past American great Pete Sampras, he is on the cusp of repeating that golden run spread across 2015 and 2016. The Serb’s transformation, in just over six months, from a physically compromised and mentally withdrawn state to having a shot at sporting immortality, has been staggering. Against Nadal, he did not quite have to hit his peak; the World No.2, despite having looked the better player leading up to the final, never truly arrived, with his rhythm, timing and tactics all over the place. The 17-time Grand Slam champion seemed smitten by anxiety, a far cry from the 2018 Wimbledon semifinal when he fearlessly matched Djokovic shot for shot over five epic sets. But that is probably what the mask of invincibility does to opponents, something that Djokovic wears so effortlessly.

To be sure, Djokovic had lost in each of the three tournaments before the Australian Open — to rising youngsters in Karen Khachanov and Alexander Zverev, and the gritty Roberto Bautista Agut — suggesting a few cracks. But the manner of victory over Nadal, where he conceded a mere eight games and did not drop a set, a first in 25 finals for the Spaniard, proved that the 31-year-old had lost none of his astonishing powers of recovery. Nadal was on the path to recovery as well, playing only his first tournament since his injury-forced retirement in the U.S. Open semifinal last September. Following Roger Federer’s loss to Stefanos Tsitsipas, the 20-year-old sensation from Greece, the tournament seemed open to further upsets, but the business end demonstrated that the elite can never be written off. As Nadal said after dismantling Tsitsipas in the semifinal, what fans can instead look forward to is an irresistible battle of the generations. On the women’s side, this clash has seemed heightened in recent years, and Naomi Osaka, with her gallant three-set win over Petra Kvitova in the final, firmly established herself as the next big thing. For the 21-year-old to back up her maiden title at the U.S. Open with a win in the very next slam is character-revealing. She is now the World No.1 and also the first Asian to get there. She has thetemperament and the poise to go much further.