The Bombay High Court is to decide the applicability of IBC against government-owned companies. The Hon’ble High Court stayed the proceedings against the government-owned company, Hindustan Antibiotics.

The petition was filed against the company in NCLT by a retired employee who claimed a sum of Rs. 17,00,000/- (approximately) plus interest, was due to him.

In response to this company petition, the debtor company filed a petition in the Bombay High Court, challenging the vires of the Insolvency and Bankruptcy Code, 2016. The petitioner in the present petition prayed to:

“hold and declare that the provisions of Insolvency and Bankruptcy Code, 2016 and more particularly Section 3(8), Section 3(23) and Section 238 and also Sections 7, 8 & 9 are unfair, illegal, drastic, unreasonable and arbitrary and are in direct conflict with statutory provisions of Companies Act, 2013 and they are also violative of Article 14 of the Constitution of India so far as “Government companies” are concerned and therefore the same are required to be declared as ultra vires, invalid, null and void.”

The High Court found that the petitioner i.e., the debtor company, has a strong prima facie case and therefore ordered a stay on the proceeding in the NCLT, and issued a notice to the Attorney General of India to seek response on the contention that the provisions of the IBC are ultra vires to the Constitution of India.


Link to image:

Link to judgment: Hindustan Antibiotics and Anr. v. Union of India and Ors.