38.6c New Delhi, India, Friday, April 19, 2024
Judiciary

Supreme Court Issues Notice to Center in plea Challenging Constitutionality of Insolvency and Bankruptcy Code (Amendment) Act, 2020

By Aura Das      17 June, 2020 04:34 PM      0 Comments
Supreme Court Issues Notice to Center in plea Challenging Constitutionality of Insolvency and Bankruptcy Code (Amendment) Act, 2020

A notice has been issued by Supreme Court in a plea to challenge the constitutional validity of Sections 3 and 10 of the Insolvency and Bankruptcy (Amendment) Act, 2020. [Association of Karvy Investors v. Union of India].

The three-judge Bench of Justices Rohinton Nariman, Navin Sinha, and BR Gavai issued notice to the Centre and also extended protection to all such petitions filed under Section 7 of the IBC Amendment Act that does not meet the 10% requirement as introduced by the amendment.

The individual members of the petitioner organization, Association of Karvy Investors, had filed petitions under Section 7 of the IBC Act before different benches of the National Company Law Tribunal (NCLT) in India, due to the non-payment of their dues by private companies.

The Amendment Act has been challenged in the plea by stating that Section 3 "has imposed a stringent and onerous condition on the right of an individual financial creditor to file an application to initiate corporate insolvency resolution process under Section 7 of the IBC".

This condition is that the NCLT shall allow an application under Section 7 of the IBC only if 100 members of such a class of individual investors or a group of individual investors that represent 10% of such a class have jointly filed the said application.

It is also stated in the plea that an application under Section 3 of the Amendment Act shall be retrospective, thereby "directly prejudicing the members of the Petitioner Association".

The Bench today, via its order has asked for status quo to be maintained in pending applications, implying that the earlier protection granted for applications under the IBC Ordinance now stands extended to the Amendment Act as well.

The primary issue in the petition is that a Section 7 petition was earlier permitted to be filed by any Financial Creditor in its individual capacity. But now, this statutory right has been unreasonably burdened by requiring them to a) figure out the total pool of people and b) get in touch with 10% of that number.

The plea filed by Advocates Srijan Sinha, Aishwarya Sinha, and Himanshu Chaubey make the case that Section 3 of the Amendment Act is violative of the right to equality and thus "should be struck down."

The Plea filed by the Association of Karvy Investors says “Section 3 of the Impugned Act along with the other provisions of the IBC makes it clear that even though no difference exists between different classes of Financial Creditors under the IBC, the Impugned Act, seeks to differentiate between the Creditors as referred to under Sub Section 6A and those referred to under Sub Section 6, without any substantial difference existing in law. As a consequence thereof, Section 3 of the Impugned Act is violative of Article 14 of the Constitution of India and is liable to be struck down."

It has been argued in the plea that the government has "failed to appreciate" that the individual investors of a company are not necessarily localized and are spread out across the country. Highlighting the "logistical nightmare" brought forth by Sections 3 and 10, the plea states that the contact details of the investors of the company are not available publicly.



Share this article:



Leave a feedback about this
TRENDING NEWS

pil-filed-by-ashwini-kumar-upadhyay-in-sc-for-yr-bachelor-of-law-degree-after-class
Trending Judiciary
PIL filed by Ashwini Kumar Upadhyay in SC for 3-yr Bachelor of Law degree after Class XII

PIL by Ashwini Kumar in SC seeks to shorten law degree to 3 years post-Class XII, citing current 5-year span as irrational.

18 April, 2024 11:21 AM
we-all-know-what-happened-when-there-were-ballot-papers-sc-on-return-of-ballot-papers-or-100-vvpats-count
Trending Judiciary
'We all know what happened when there were ballot papers,' SC on return of ballot papers or 100% VVPATs count

SC questions EVM process, debates ballot paper return and 100% VVPAT count verification, citing past issues.

18 April, 2024 01:53 PM

TOP STORIES

lsj-exclusive-interview-how-bjp-govt-will-free-chhattisgarh-from-naxal-menace
Trending Interview
LSJ Exclusive Interview: How BJP govt will free Chhattisgarh from “Naxal menace”? [Watch Video]

What is Chhattisgarh govt's plan for solving the Maoist/Naxalite problem in the state? Will there be a surgical strike against the Naxals or solution will be found via diplomatic channels? Read the Exclusive Interview with the Deputy Chief Minister Vijay Sharma.

13 April, 2024 12:33 PM
sc-rejects-review-of-order-to-pay-rs-154-cr-compensation-to-ex-air-force-staff-for-transfusion-of-hiv-infected-blood
Trending Judiciary
SC rejects review of order to pay Rs 1.54 Cr compensation to ex Air Force staff for transfusion of HIV infected blood [Read Order]

SC denies review of Rs 1.54 Cr HIV compensation order to ex-Air Force staff for medical negligence.

13 April, 2024 03:13 PM
cji-cautions-against-overlooking-ethical-legal-consideration-on-use-of-ai-in-court-adjudication
Trending Legal Insiders
CJI cautions against overlooking ethical legal consideration on use of AI in court adjudication

CJI D Y Chandrachud warns about ethical, legal challenges in AI use in courts, stressing need for thorough review.

13 April, 2024 07:08 PM
need-to-safeguard-judiciary-from-unwarranted-pressures-21-ex-judges-write-letter-to-cji
Trending Legal Insiders
Need to safeguard judiciary from unwarranted pressures: 21 ex-judges write letter to CJI

21 ex-judges write to CJI Chandrachud urging protection of judiciary from pressures undermining its integrity and autonomy.

15 April, 2024 12:17 PM

ADVERTISEMENT


Join Group

Signup for Our Newsletter

Get Exclusive access to members only content by email