On Tuesday, the Supreme Court upheld the amendments in the insolvency and bankruptcy code which makes it mandatory for a minimum of 100 or 10% of home buyers of a project to initiate insolvency proceedings against a builder for not delivering flats or commercial shops on time.
It was ruled by the bench comprising Justices R F Nariman, KM Joseph, and Navin Sinha that upholding the amendment in law is not invalid and is not illegal. The court dismissed a wide range of petitions filed by the homebuyers challenging the validity of the amendment.
Insolvency can be triggered off even by one aggrieved buyer from the time homebuyer has been bought within the ambit of financial creditors under the IBC. It was being alleged that the law can be misused and even one home buyer who is aggrieved can initiate proceedings that were affecting the interest of other homebuyers. Thus, changes were made in the law such that sections 3, 4 and 10 were amended.
The court said the approval of the new law seems like the legislator is trying to apply breaks by asking the applicants to seek the consent of a minimum number of similar stakeholders before initiating any proceeding.
The bench upheld the validity of Section 32A of the IBC where the liability of the corporate debtor who has committed a crime before the start of the corporate insolvency process shall be ceased and the debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the adjudicating authority Section 31.
The court said that it had set its boundaries clear. The legislature’s wisdom is not open to judicial review. Keeping in mind the object of the code the court said that the interests of all stakeholders including the imperative should attract applicants who do not hesitate from adding reasonable value as a part of the resolution plan if the legislature has thought that the corporate debtor has to get his immunity with the property. The court explained in its 465-page verdict that the provision has been framed after careful thought and there is no way that the wrongdoers can simply get away from it.
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