Manish Kumar v. Union of India and Anr

► Appeal Number : 26/2020 with 40 other write petitions

► Date : Jan 19, 2021

► Court : Supreme Court of India

► Name of Act : Insolvency and Bankruptcy Code, 2016

► Section : Challenged under Article 32 of Constitution of India

► In favour of : Respondent

► Cases referred : Asst. Commr. of Urban Land Tax v. Buckingham and Carnatic Co. Ltd.; Pioneer Urban Land and Infrastructure Ltd. and Anr v. Union of India and Ors; Maneka Gandhi v. Union of India; Ajay Hasia v. Khalid Mujib

► Name of Judge : K. M. Joseph, Rohinton Fali Nariman, Navin Sinha

► Order:

The amendments presented in the Insolvency and Bankruptcy Amendments Act 2020 introduced threshold for filing of application by Real-Estate Creditors, colloquially ‘Home-Buyers’ (effective from 28.12.19 i.e. the date of Ordinance).

Many contentions were filed before the court against Section 7(1), 32A and clarifications under Section 11 under Article 32 of the Constitution of India stating that there has been contravention of fundamental rights.

Various homebuyers contended that the Amendments have gotten restrictive in nature towards home buyers vis-à-vis other financial creditors. The principal argument was based on the fact that there is already a threshold limit of amount of default of INR 1 crore, and any further threshold limit would be discriminatory for the real-estate creditors, without any intelligible differentia.

Therefore, it was necessary to have an equitable treatment of law for all. But taking into consideration the heterogeneity and multitude of the Home Buyers it would be very difficult of each individual file a different application crowding the Adjudicating Authority. Hence, the same shall not be considered unequitable.

The home buyers that don’t fall under the limit set by the amendment act can still take recourse of other acts like RERA. In view of this the Apex Court clarified that “A supreme legislature cannot be cribbed, cabined, or confined by the doctrine of promissory estoppel or estoppel. It is incontestable that promissory estoppel serves as an effective deterrent to prevent injustice from a Government or its agencies which seek to resile from a representation made by them, without just cause.”

Ablution u/s 32A would merely wash off all the liabilities of the erstwhile management causing huge losses. Hence, section 32A was argued to be arbitrary, ultra-vires and violative of Article 300-A and Articles 14, 19 and 21.

As regards the arguments raised regarding the unconstitutionality of section 32A, the Apex Court observed that “the extinguishment of the criminal liability of the CD is apparently important to the new management to make a clean break with the past and start on a clean slate”. It further held that “Attaining public welfare very often needs delicate balancing of conflicting interests. As to what priority must be accorded to which interest must remain a legislative value judgement and if seemingly the legislature in its pursuit of the greater good appears to jettison the interests of some, it cannot, unless it strikingly ill squares with some constitutional mandate, suffer invalidation.”

The mere difficulties in given cases to comply with a law can hardly furnish a ground to strike it down.

The Hon’ble Supreme Court vide it order dated 19.01.2021, in Manish Kumar V/s Union of India, upheld the constitutional validity of the third proviso to section 7(1) and section 32A, setting aside all apprehensions against their insertion.

► Tags : Corporate Law, Insolvency and Bankruptcy Code, Constitution of India, Supreme Court

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