SC upholds constitutional validity of S. 3, 4 & 10 of IBC Amendment Act

Tanvi Sinha

Going against various petitions filed by homebuyers, the Supreme Court held sections 3, 4 and 10 of the Insolvency and Bankruptcy Code (Amendment) Act 2020, validated by the constitution.

The case, Manish Kumar v Union of India and others and connected cases, was taken on by a three judge bench of Justices RF Nariman, Navin Sinha and KM Joseph, who denied that the impugned sections were violative of Article 14 of the constitution.

The plea by the plaintiffs was done with reference to the amendment to the act which declared that at least 100 home buyers or 10% of the total real estate allottees would have to come together to initiate an insolvency proceeding against a defaulting builder.

The people behind the petition, an Association of Karvy Investors, had done so after numerous non-payments of their dues by defaulters.

The plea stated that the Amended Act had imposed a stringent condition in which, where they used to be able to file against a creditor on an individual capacity were rendered useless in the case now.

They further say the act thoroughly inconveniences them as now they have to figure out the total number of persons buying apartments in the complex- something that to be fair is not information given to them on the job and might be difficult to get- and also a way to come in communications with at least 10% of these people.

They further spoke about how these individual investors are often not localised but spread out in the country and that all this considered, the amended act and the impugned sections were against the object of the Act and against Article 14 of the constitution.

However, the Court refused the petition stating that the legislative does not intent to create an obstacle for the debtors, and the intention of the Centre was actually perfectly explained in the impugned sections.

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