MANISH KUMAR versus UNION OF INDIA AND ANOTHER

MANISH KUMAR versus UNION OF INDIA AND ANOTHER

The Supreme Court upheld the 2020 amendments to the Insolvency and Bankruptcy Code: the first and second provisos to s.7(1) (numerical thresholds for certain classes of financial creditors, including debenture/security holders and allottees of the same real estate project) are a valid exercise of legislative power based on intelligible differentia (numerosity, heterogeneity, individualized decision-making) and rationally connected to the Code’s objects; Explanation II to s.11 is a clarificatory retrospective amendment applicable to pending matters; Section 32A (conditional immunity of corporate debtor/property upon approved resolution plan and change of control to untainted new...

Parties
Petitioner: Manish Kumar; Respondent: Union of India; Respondent: Another
Jurisdiction
India
Judgment Date
19 January 2021
Procedural Posture
Writ Petition (civil) Under Article 32 / Final Judgment on Merits (civil Original Jurisdiction)
Outcome
Writ petitions and transferred case dismissed (impugned amendments upheld subject to directions)
Legal Topics
Insolvency and Bankruptcy Code Amendments (2020), Section 7 Threshold for Financial Creditors / Allottees, Section 11 Explanation (clarificatory Amendment), Section 32 a (immunity for Corporate Debtor/property), Retrospectivity and Vested Rights, Article 14 Equality and Reasonable Classification, Interaction With RERA and Consumer Remedies, Limitation (limitation Act)
Insolvency and Bankruptcy Constitutional Law Administrative Law Real Estate Law Criminal Law (investigation/prosecution) Insolvency and Bankruptcy Code Amendments (2020) Section 7 Threshold for Financial Creditors / Allottees Section 11 Explanation (clarificatory Amendment) +5 more

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Parties

Manish Kumar

Petitioner

Union of India

Respondent

Another

Respondent

Procedural Posture

Writ Petition (civil) Under Article 32 / Final Judgment on Merits (civil Original Jurisdiction)

Legal Issues

  1. 1 Whether the first and second provisos to Section 7(1) of the IBC (2020 Amendment) imposing numerical thresholds for certain classes of financial creditors (debenture/security holders; allottees in the same real estate project) are constitutionally valid under Articles 14, 19 and 21
  2. 2 Whether Explanation II to Section 11 is a valid clarificatory (retrospective) amendment and applies to pending proceedings
  3. 3 Whether Section 32A (extinguishment of corporate debtor liability and immunity of property on approval of resolution plan subject to conditions) is unconstitutional (Articles 14, 19, 21, 300A)

Ratio Decidendi

The Supreme Court upheld the 2020 amendments to the Insolvency and Bankruptcy Code: the first and second provisos to s.7(1) (numerical thresholds for certain classes of financial creditors, including debenture/security holders and allottees of the same real estate project) are a valid exercise of legislative power based on intelligible differentia (numerosity, heterogeneity, individualized decision-making) and rationally connected to the Code’s objects; Explanation II to s.11 is a clarificatory retrospective amendment applicable to pending matters; Section 32A (conditional immunity of corporate debtor/property upon approved resolution plan and change of control to untainted new...

Court Disposition

Writ petitions and transferred case dismissed (impugned amendments upheld subject to directions)

Orders

  • Impugned amendments (Insolvency and Bankruptcy Code (Amendment) Act, 2020 ss.3,4,10 altering s.7(1), adding Explanation II to s.11 and inserting s.32A) upheld
  • Section 3 provisos (first and second) sustained as constitutionally valid; Explanation II to s.11 held clarificatory and retrospective and applicable to pending cases; Section 32A held valid