Manish Kumar v. Union of India 2021 SCC OnLine 30 - Synopsis
Ahir Mitra 19 May 2021

Manish Kumar v. Union of India.

2021 SCC OnLine 30


The petitioners approached the Court in this case, questioning Sections 3, 4, and 10 of the Insolvency and Bankruptcy Code (Amendment) Act, 2020.The challenged amendment amends Section 7(1) of the Insolvency and Bankruptcy Code, 2016, in Section 3. It adds three provisos to Section 7. (1). Section 4 of the challenged amendment adds a new Explanation to IBC Section 11 (Explanation II). In the IBC, Section 32-A is inserted by Section 10 of the challenged amendment.

The majority of the petitioners were real estate project allottees, and they pointed the constitutional gun at the challenged provisos. The second proviso established a new threshold for an allottee to file an application under Section 7 of the IBC to initiate the insolvency resolution process. The threshold is the requirement that the application is supported by at least 100 allottees or 10% of the total allottees, whichever is lower. They should all be part of the same mission. Money lenders were among the other petitioners, who stepped in to provide funding for the real estate projects. They were also subjected to the condition put on them under the first impugned proviso, which is identical to the second proviso's requirements.

The supreme legislature was estopped from enacting the impugned enactment by the principle of promissory estoppel in Pioneer Urban Land and Infrastructure Ltd. v. Union of India.[1] The Court stated that a supreme legislature can’t be confined by the doctrine of promissory estoppel or estoppel because it acts as a sovereign body. On the one hand, the principle of promissory estoppel has seen incredible progress, but it is undeniable that it acts as an important deterrent to prevent injustice from a government or its agencies seeking to rescind a representation rendered without just cause. Union of India v. Godfrey Philips (India) Ltd,[2] was referred.

The Court upheld the challenged amendments, but only on the condition that certain directives given under Article 32 of the Constitution of India be followed. If any of the petitioner's file applications within two months of today for the same default, as alleged in their applications, and are also compliant with either the first or second proviso under Section 7(1)[3], as the case may be, they will be exempted from the requirement of paying court fees in the manner described in the preceding paragraph.

If the petitioner's file applications under Section 7 of the Limitation Act within two months of today, in accordance with any of the provisos, as the case may be, and the application is prohibited under Article 137 of the Limitation Act, on the default, alleged in the already filed applications, if the petitioners file applications under Section 5 of the Limitation Act, The Adjudicating Authority shall allow the applications and the duration of delay shall be excused in relation to the period during which the earlier applications submitted by them, which are the subject of the third proviso, were pending before the Adjudicating Authority.

Only the advantages of court fee exemption and the condonation of the delay induced by the applications pending before the Adjudicating Authority are subject to the two-month time limit. In other words, petitioners are still free to file applications, even after the two-month period has passed, and seek the advantage of a delay condonation under Section 5 of the Limitation Act, in relation to the time during which the applications filed under the unamended Section 7 were pending before the Adjudicating Authority, as well as afterward.

[1] (2019) 8 SCC 416.

[2] (1985) 4 SCC 369

[3] Insolvency and Bankruptcy Code, 2016


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