The Supreme Court on Thursday held that a company’s profitability does not prevent insolvency proceedings under the Insolvency and Bankruptcy Code (IBC).
A financial default, rather than commercial or balance-sheet insolvency, triggers the Corporate Insolvency Resolution Process (CIRP).
“Profitability is neither legally relevant to, nor economically probative of, the capacity to service debt. The Code proceeds upon the principle of timely intervention rather than terminal insolvency, and adopts ‘default’ under Section 3(12) of the Code, not commercial or balance-sheet insolvency, as the jurisdictional trigger,” a bench of Justices Dipankar Datta and Augustine George Masih observed.
The court dismissed appeals filed by Deepak Raheja…