LexMANISH KUMAR versus UNION OF INDIA AND ANOTHER
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A B C D E F G H 895 MANISH KUMAR v. UNION OF INDIA AND ANOTHER (Writ Petition (C) No.26 of 2020) JANUARY 19, 2021 [ROHINTON FALI NARIMAN, NAVIN SINHA AND K. M. JOSEPH, JJ.] Insolvency and Bankruptcy Code (Amendment) Act, 2020 – s.3 –s.3 of the impugned amendment, amended s.7(1) of the Insolvency and Bankruptcy Code, 2016, incorporating three provisos to s.7(1) – Under the second proviso, a new threshold was declared for an allottee to move an application u/s.7 for trigerring the insolvency resolution process under the Code – The second proviso provided that for financial creditors who were allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor was to be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent of the total number of such allottees under the same real estate project, whichever is less – Challenge to the second proviso to s.7(1) – Held: Not tenable – The object of the Statute, admittedly, is to ensure that there is a critical mass of persons (allottees), who agree that the time is ripe to invoke the Code and to submit to the inexorable processes under the Code, with all its attendant perils – The rationale behind, confining allottees to the same real estate project, is to promote the object of the Code – Once the threshold requirement can pass muster when tested in the anvil of a challenge based on Arts. 14, 19 and 21, then, there is both logic and reason behind the legislative value judgment that the allottees, who must join the application under the impugned provisos, must be related to the same real estate project – Allottees under real estate projects are financial creditors, but they possess certain characteristics, which set them apart from generality of the financial creditors, such as numerosity; heterogeneity; and individuality in decision making – If a single allottee, as a financial creditor, is allowed to move an application u/s.7, the interests of all the other allottees may be put in peril – In the circumstances, if the Legislature, taking into 895 [2021] 14 S.C.R. 895 A B C D E F G H 896 SUPREME COURT REPORTS [2021] 14 S.C.R. consideration, the sheer numbers of a group of creditors, viz., the allottees of real estate projects, finds this to be an intelligible differentia, which distinguishes the allottees from the other financial creditors, who are not found to possess the characteristics of numerosity, then, it is not for this Court to sit in judgment over the wisdom of such a measure – The allottee continues to be a financial creditor – All that is envisaged is the legislative value judgment that a critical mass is indispensable for allottees to be present before the Code, can be activised – The purport of the critical mass of applicants would ensure that a reasonable number of persons similarly circumstanced, form the view that despite the remedies available under the RERA or the Consumer Protection Act or a civil suit, the invoking of the Code is the only way out, in a particular case – If the Legislature felt that having regard to the consequences of an application under the Code, when such a large group of persons, pull at each other, an additional threshold be erected for exercising the right u/s.7, certainly, it cannot suffer a constitutional veto at the hands of Court exercising judicial review of legislation – This is not a case where the right of the allottee is completely taken away – All that has happened is a half-way house is built between extreme positions, viz., denying the right altogether to the allottee to move the application u/s.7 of the Code and giving an unbridled license to a single person to hold the real estate project and all the stakeholders thereunder hostage to a proceeding under the Code –Insolvency and Bankruptcy Code, 2016 – s.7. Insolvency and Bankruptcy Code (Amendment) Act, 2020 – s.3 – s.3 of the impugned amendment, amended s.7(1) of the Insolvency and Bankruptcy Code, 2016, incorporating three provisos to s.7(1) – The first proviso provided that for financial creditors, referred to in clauses (a) and (b) of sub-section (6A) of s.21, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent of the total number of such creditors in the same class
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