SC upholds IBC amendments mandating minimum threshold for insolvency process against developers
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The Supreme Court on Tuesday upheld amendments to the Insolvency and Bankruptcy Code (IBC) that introduced a minimum threshold of 100 home buyers or 10% of the total allottees of a project, whichever was lower, for initiating the insolvency process against a defaulting developer.
The homebuyers had not taken kindly to these amendments on the ground that in every other category even a single creditor could by itself move the insolvency court.
They had argued that this was discriminatory and placed homebuyers at a disadvantage as they would have to herd a minimum number before they could act against any errant builder. It was also time consuming, they had claimed in court.
Before these amendments were made, even a single buyer with claims of at least ₹1 lakh could move the National Company Law Tribunal (NCLT) seeking insolvency proceedings against any builder. The amendments had been brought in after a top court ruling, which placed homebuyers on par a with other financial creditors.
Some of the petitioners were money lenders, who had to also fulfil the same requirements to recover their monies lent to the builders for their real estate projects.
Defending the law, the government had said that it reduces multiplicity of cases in the NCLT and ensures quick disposal.
A three-judge bench led by Justice R F Nariman upheld the 2019 amendments on Tuesday. The bench rejected the argument that the law was created by way of pandering to the real estate lobby and succumbing to their pressure or by way of placating their vested interests.
“Such an argument is nothing but a thinly disguised attempt at questioning the law of the legislature based on malice. A law is made by a body of elected representatives of the people. When they act in their legislative capacity, what is being rolled out is ordinary law. Should the same legislators sit to amend the Constitution, they would be acting as members of the Constituent Assembly,” the bench said.
The homebuyers had not taken kindly to these amendments on the ground that in every other category even a single creditor could by itself move the insolvency court.
They had argued that this was discriminatory and placed homebuyers at a disadvantage as they would have to herd a minimum number before they could act against any errant builder. It was also time consuming, they had claimed in court.
Before these amendments were made, even a single buyer with claims of at least ₹1 lakh could move the National Company Law Tribunal (NCLT) seeking insolvency proceedings against any builder. The amendments had been brought in after a top court ruling, which placed homebuyers on par a with other financial creditors.
Some of the petitioners were money lenders, who had to also fulfil the same requirements to recover their monies lent to the builders for their real estate projects.
Defending the law, the government had said that it reduces multiplicity of cases in the NCLT and ensures quick disposal.
A three-judge bench led by Justice R F Nariman upheld the 2019 amendments on Tuesday. The bench rejected the argument that the law was created by way of pandering to the real estate lobby and succumbing to their pressure or by way of placating their vested interests.
“Such an argument is nothing but a thinly disguised attempt at questioning the law of the legislature based on malice. A law is made by a body of elected representatives of the people. When they act in their legislative capacity, what is being rolled out is ordinary law. Should the same legislators sit to amend the Constitution, they would be acting as members of the Constituent Assembly,” the bench said.
Category : Income Tax | Comments : 0 | Hits : 912
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