The Delhi High Court today issued notice in a petition challenging the suspension of Section 10 of Insolvency and Bankruptcy Code (IBC) 2016. (Rajiv Suri vs UOI)
On June 5, Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 had suspended Section 10 IBC on account of COVID-19 for a period of six months starting March 25, 2020. The Division Bench of Chief Justice DN Patel and Justice Prateek Jalan has issued notice to the Ministry of Law and Justice, as well as to the Insolvency and Bankruptcy Board of India(IBBI).
The Petition claims that the impugned Ordinance suspends the operation of sections 7,9 and 10 of IBC, depriving the corporate applicant of the ability to initiate corporate insolvency resolution process and take the benefit of the Code for resolution of its debts.
Under Section 10 of Insolvency and Bankruptcy Code (IBC) 2016, a corporate applicant could initiate corporate insolvency resolution process in respect of a default committed by itself. The Petitioner argued that the said provisions are arbitrary, at these extraordinary times such suspension comes across as illogical and unjustified.
Further, the Petitioner states that the suspension of Section 10 of Insolvency and Bankruptcy Code (IBC) 2016 would deprive a corporate applicant of an opportunity to revive, reorganize, and resolve itself and its debts in a time-bound manner.
While calling the said suspension a violation of Article 14 and 19(g) of the Constitution, the petition states:
‘ suspension of this Section for a period of 6 months and up to 1 year would result in further deterioration of the affairs of the corporate debtor and result in making the restructuring/revival of the corporate debtor unviable. This one side sits all approach is contrary to the main objectives of the Code and instead of promoting the objective of maximization of value, will result in defeating the objectives of the code as no restructuring/ revival/ resolution will be now possible.‘
Finally, the Petitioner has also highlighted that the Ordinance takes away the vested right of the corporate applicant with a retrospective effect which is invalid and is liable to be quashed.
The matter would be heard next on August 31.