The Supreme Court in the case titled Association of Karvy Investors v. Union of India has issued a notice to the central government on 16th June 2020 regarding the constitutionality of the provisions of the Insolvency and Bankruptcy Code (Amendment) Act, 2020. A plea was filed seeking the constitutional validity of Sections 3 and 10 of the Insolvency and Bankruptcy Code (Amendment) Act, 2020. The notice was issued to the central government by a three-judge bench comprising of Justice Rohinton Nariman, Justice Navin Sinha and Justice B R Gavai. The Court has also extended protection to all the pertinent petitions filed under Section 7 of the Insolvency and Bankruptcy Code (Amendment) Act, 2020 that does not meet the 10% requirement as directed by the amendment.
The individual members of the petitioner institution, Association of Karvy Investors had filed the plea under Section 7 of the Insolvency and Bankruptcy Code Act before the different benches of the National Company Law Tribunal (NCLT) in India because of the non-payment of their dues by the private companies. The petition seeks to challenge the said Amendment Act by asserting that Section 3 "has imposed a strict and onerous condition on the right of an individual financial creditor in order to file the application for initiating corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code". The applicable condition is that NCLT will allow an application under Section 7 only when 100 members of such class of individual investors or a group of them that represent 10% of the class who has jointly filed an application. The present plea was filed by Advocates Srijan Sinha, Aishwarya Sinha, and Himanshu Chaubey and they emphasized that section 3 of Insolvency and Bankruptcy Code (Amendment) Act, 2020 violates the right to equality and hence, shall be struck down. It emphasizes that the application under section 3 of the said amendment act has been considered as a retrospective and this leads to the prejudices amongst the members of the petitioner association.
In the order passed by the bench, it has provided for the status quo that shall be maintained in the pending applications as the earlier provisions stand amended by the new IBC Ordinance.
#saketagarwal #IBC #insolvency #NCLT
