Lawstreet Journal

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

Lawstreet Journal 17 Jun 2020 10:04pm

Image courtesy: Lawstreet Journal Judiciary 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… Continue Reading...

Tagged: Supreme Court  
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