A batch of petitions challenging a provision of the Insolvency and Bankruptcy Code (Amendment) Ordinance 2019, which was promulgated on December 28 last year, came up for hearing before a bench comprising Justices R F Nariman and S Ravindra Bhat.
The Supreme Court agreed to examine validity of the Centre’s decision to amend an IBC provision which introduced a threshold of at least 10 per cent of homebuyers in a project or 100 of the total allottees for initiating corporate Insolvency Resolution Process (IRP) against the realtor.
A Bench of Justice RF Nariman issued notice the ministries of finance, law and corporate affairs on the petitions filed by homebuyers and the Association of Karvy Investors, challenging the Insolvency and Bankruptcy Code (Amendment) Ordinance 2019. The apex court also asked parties to maintain a status quo with regard to the application filed by homebuyers for initiating insolvency proceedings in the National Company Law Tribunals.
Challenging Section 3 of the ordinance, the petitions said the ordinance is in violation of Articles 14 (equality before law) and 21 (protection of life and personal liberty) of the Constitution as it had rendered buyers, who are financial creditors, bereft of remedy and also subjected them to discrimination by putting a precondition in the form of a minimum number of allottees of a particular project required for filing an application under Section 7 of the IBC for initiation of the IRP.
Petitioner Manish Kumar through its advocate Akash Vajpai also challenged the retrospective application of the ordinance with respect to the homebuyers’ plea before tribunals and also sought to declare section 3 of the ordinance unconstitutional.
One of the pleas said financial creditors already form a ‘class’ within creditors under the IBC and debt owed to them forms a ‘class’ under the Code.
Click here to read order: Manish Kumar Vs. UOI 13-01-2020