IBC Section 253: Amendments of Act 51 of 2007

Section 253 of Insolvency and Bankruptcy Code, 2016: Amendments of Act 51 of 2007

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

The Payment and Settlement Systems Act, 2007 shall be amended in the manner specified in the Ninth Schedule.

Legal Commentary & Landmark Judgments: Section 253

Section 253 amends the Payment and Settlement Systems Act, 2007 to protect designated payment systems and clearing operations from insolvency disruption.

Protection of Clearing and Settlement: Amends Act 51 of 2007 in the manner specified in the Ninth Schedule to the Code.
Netting and Settlement Finality: Protects settlement finality, bilateral netting arrangements, and clearing houses (such as CCIL, RBI RTGS/NEFT) from insolvency clawback or stays.
Systemic Risk Mitigation: Prevents default of a single financial participant from unwinding settled interbank netting transactions across the national payments architecture.

Key Landmark Precedents:

Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17: The Supreme Court observed that protecting payment netting systems under Section 253 is critical to maintain macroeconomic stability in banking transactions.
Reserve Bank of India v. Dewan Housing Finance Corporation Ltd. (2021): Noted that financial stability safeguards insulate payment systems from general insolvency moratoriums.

Courtroom Practice & Strategic Litigation Guidance:

Resolution professionals cannot demand clawback or stay of transactions settled through RBI-authorized payment systems prior to the petition date, as Section 253 accords absolute statutory finality to netting outcomes.