MANISH KUMAR v. UNION OF INDIA & Anr.

SCC 380 : [1979] 2 SCR 476; Ajoy Kumar Banerjee and Ors. v. Union of India and Ors. (1984) 3 SCC 127 : [1984] 3 SCR 252; Subramanian Swami v. Director, CBI and Ors. (2014) 8 SCC 682 : [2014] 6 SCR 873; Indira Sawney v. Union of India (1992) 3 Suppl. SCC 217 : [1992] 2 Suppl. SCR 454; State of West Bengal and Ors. v. Rash Bihari Sarkar and Ors. (1993) 1 SCC 479 : [1992] 3 Suppl. SCR 351; State of Kerala v. Aravind Ramakant Modawdakar and Ors. (1999) 7 SCC 400; Sansar Chand Atri v. State of Punjab and Another (2002) 4 SCC 154 : [2002] 2 SCR 881; His Holiness Kesavananda Bharti Sripadagalvaru v. State of Kerala and Another (1973) 4 SCC 225 : [1973] 0 Suppl. SCR 1; Innoventive Industries Limited v. ICICI Bank and Another (2018) 1 SCC 407 : [2017] 8 SCR 33; Vasant Ganpat Padave (D) by LRs. and Ors. v. Anant Mahadev Sawant (D) through LRs. and Ors. (2019) 12 SCALE 579; Shayara Bano v. Union of India and Others (2017) 9 SCC 1 : [2017] 9 SCR 797; S. Sundaram Pillai and others v. R. Pattabiraman and Others (1985) 1 SCC 591 : [1985] 2 SCR 643; Sonia Bhatia v. State of U.P. and Others (1981) 2 SCC 585 : [1981] 3 SCR 239; Virtual Soft Systems Ltd. v. Commissioner of Income Tax, Delhi-I (2007) 9 SCC 665 : [2007] 2 SCR 289; Hiralal Rattanlal and Ors. v. State of U.P. and another (1973) 1 SCC 216 : [1973] 2 SCR 502; Hitendra Vishnu Thakur and Others v. State of Maharashtra and Others (1994) 4 SCC 602 : [1994] 1 Suppl. SCR 360; Ambalal Sarabhai Enterprises Ltd. v. Amrit Lal & Co. and Another (2001) 8 SCC 397 : [2001] 2 Suppl. SCR 195; B.K. Educational Services Private Ltd. v. Parag Gupta and Associates (2019) 11 SCC 633 : [2018] 12 SCR 794; Lalji Raja and Sons v. Hansraj Nathuram (1971) 1 SCC 721 : [1971] 3 SCR 815; Isha Valimohamed v. Haji Gulam Mohamad & Haji Dada Trust (1974) 2 SCC 484 : [1975] 1 SCR 720; Bombay Stock Exchange v. V.S. Kandalgaonkar (2015) 2 SCC 1 : [2014] 14 SCR 409; New India Assurance Co. Ltd. v. Shanti Misra (1975) 2 SCC 840 : [1976] MANISH KUMAR v. UNION OF INDIA AND ANOTHER 923 2 SCR 266; Vinod Gurudas Raikar v. National Insurance Co. Ltd. & Ors. (1991) 4 SCC 333 : [1991] 3 SCR 912; Union of India v. Harnam Singh (1993) 2 SCC 162 : [1993] 1 SCR 862; V. Dhanapal Chettiar v. Yesodai Ammal (1979) 4 SCC 214 : [1980] 1 SCR 334; D. C. Bhatia v. Union of India (1995) 1 SCC 104 : [1994] 4 Suppl. SCR 539; Mst. Bibi Sayeeda & Ors. v. State of Bihar and Others (1996) 9 SCC 516 : AIR 1996 SC 1936 : [1996] 1 Suppl. SCR 799; M.S. Shivananda v. Karnataka SRTC (1980) 1 SCC 149 : [1980] 1 SCR 684; Rameshwar and Others v. Jot Ram and Another (1976) 1 SCC 194 : [1976] 1 SCR 847; Bansidhar v. State of Rajasthan (1989) 2 SCC 557 : [1989] 2 SCR 152; Mohinder Kumar and Others v. State of Haryana and Another (1985) 4 SCC 221 : [1985] 2 Suppl. SCR 859; D. C. Bhatia and Others v. Union of India and Another (1995) 1 SCC 104 : [1994] 4 Suppl. SCR 539; Howrah Municipal Corporation and Others v. Ganges Rope Co. Ltd. and Others (2004) 1 SCC 663 : [2003] 6 Suppl. SCR 1212; Arcelormittal India Private Limited v. Satish Kumar Gupta & Others (2019) 2 SCC 1 : [2018] 12 SCR 362; B.K. Educational Services Private Limited v. Parag Gupta and Associates (2019) 11 SCC 633 : [2018] 12 SCR 794; M.P. Steel Corporation v. Commissioner of Central Excise (2015) 7 SCC 58; Mardia Chemicals Ltd. and Others v. Union of India and Others (2004) 4 SCC 311 : [2004] 3 SCR 982; P.D. Aggrawal & Others v. State of U.P and Others (1987) 3 SCC 622 : [1987] 3 SCR 427; Darshan Singh v. Ram Pal Singh and Ors. (1992) 1 Suppl. SCC 191 : [1990] 3 Suppl. SCR 212; K.S. Paripoornan v. State of Kerala (1994) 5 SCC 593 : [1994] 3 Suppl. SCR 405; State Bank’s Staff Union (Madras Circle) v. Union of India and Others AIR 2005 SC 3446 : (2005) 7 SCC 584 : [2005] 3 Suppl. SCR 200; Delhi Transport Corpn. v. D.T.C. Mazdoor Congress (1991) 1 Suppl. SCC 600 : [1990] 1 Suppl. SCR 142 and Vijay v. State of Maharashtra (2006) 6 SCC 289 : [2006] 4 Suppl. SCR 81 – referred to. A B C D E F G H 924 SUPREME COURT REPORTS [2021] 14 S.C.R. A B C D E F Gopeshur Pal v. Jiban Chandra Chandra and Others AIR 1914 Calcutta 806 – referred to. West v. Gwynne (1910) WLR 976; In Re: Pulborough Parish School Board Election, Bourke v. Nutt (1894) 1 QB 725; Abbott and Minister of Lands (1895) AC 425; Hamilton Gell v. White (1922) 2 K.B. 422; Odgen Industries Pty. Ltd. v. Haider Doreen Lucas 3 WLR 75/ (1969) (1) All England Reports 121; Director of Public Works and Another v. Ho Po Sang and Others [1961] 3 WLR 39 and L’Office Cherifien Des Phosphates and another And Yamashita-Shinnihon Steamship Co. Ltd. (1994) 1 All ER 20 – referred to. Case Law Reference [2019] 10 SCR 381 [2018] 12 SCR 1044 [1979] 2 SCR 641 [1973] 3 SCR 39 [2018] 12 SCR 794 [2019] 3 SCR 535 [1957] SCR 488 [2011] 4 SCR 838 [2017] 14 SCR 202 [2018] 10 SCR 409 2019 (12) SCALE 572 [1953] SCR 404 [1974] 1 SCR 771 G [1974] 3 SCR 121 [1984] 3 SCR 252 [2002] 2 SCR 649 referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to [1992] 2 Suppl. SCR 454 referred to H Para 14 Para 20 Para 20 Para 20 Para 23 Para 23 Para 25 Para 25 Para 25 Para 26 Para 29 Para 31 Para 31 Para 31 Para 31 Para 31 Para 36 MANISH KUMAR v. UNION OF INDIA AND ANOTHER 925 [1960] 1 SCR 39 [1976] 1 SCR 906 referred to referred to [1992] 3 Suppl. SCR 351 referred to (1999) 7 SCC 400 [2002] 2 SCR 881 referred to referred to [1985] 3 Suppl. SCR 123 referred to [1985] 2 SCR 579 [2009] 10 SCR 821 [1999] 2 SCR 895 referred to referred to referred to [2003] 6 Suppl. SCR 1212 referred to [2018] 12 SCR 362 [2019] 3 SCR 535 (2015) 3 SCC 206 [1980] 1 SCR 684 [1971] 3 SCR 815 (1985) 1 SCC 436 referred to referred to referred to referred to referred to referred to [2004] 5 Suppl. SCR 648 referred to [2019] 7 SCR 1036 referred to [1974] 3 SCR 760 [1952] SCR 284 [1974] 2 SCR 348 [2017] 9 SCR 797 [2018] 7 SCR 379 [2018] 11 SCR 765 [2017] 10 SCR 569 AIR 2020 SC 122 [2015] 5 SCR 963 relied on relied on relied on relied on relied on relied on relied on relied on relied on Para 36 Para 36 Para 36 Para 36 Para 37 Para 38 Para 38 Para 38 Para 39 Para 39 Para 39 Para 39 Para 39 Para 40 Para 40 Para 40 Para 42 Para 42 Para 47 Para 48 Para 49 Para 49 Para 50 Para 50 Para 50 Para 50 Para 51 A B C D E F G H 926 SUPREME COURT REPORTS [2021] 14 S.C.R. A [1985] 2 SCR 579 [2009] 10 SCR 821 relied on relied on [1985] 3 Suppl. SCR 123 referred to [1992] 2 Suppl. SCR 454 referred to [1992] 3 Suppl. SCR 351 referred to [2018] 12 SCR 794 B [1955] SCR 1066 [1990] 1 SCR 272 [2019] 10 SCR 381 (2019) 9 SCC 304 [1974] 3 SCR 760 [1979] 2 SCR 476 [1984] 3 SCR 252 [2014] 6 SCR 873 (1999) 7 SCC 400 [2002] 2 SCR 881 [1973] 0 Suppl. SCR 1 [2017] 8 SCR 33 (2019) 12 SCALE 579 [2017] 9 SCR 797 [1985] 2 SCR 643 [1981] 3 SCR 239 [2007] 2 SCR 289 C D E F referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to referred to G [1973] 2 SCR 502 [1994] 1 Suppl. SCR 360 referred to [2001] 2 Suppl. SCR 195 referred to [2018] 12 SCR 794 H [1971] 3 SCR 815 referred to referred to Para 52 Para 52 Para 54 Para 134 Para 142 Para 155 Para 158 Para 170 Para 175 Para 176 Para 177 Para 178 Para 183 Para 184 Para 185 Para 186 Para 199 Para 203 Para 216 Para 216 Para 227 Para 227 Para 228 Para 233 Para 262 Para 262 Para 262 Para 272 MANISH KUMAR v. UNION OF INDIA AND ANOTHER 927 [1975] 1 SCR 720 [2014] 14 SCR 409 [1976] 2 SCR 266 [1991] 3 SCR 912 [1993] 1 SCR 862 [1980] 1 SCR 334 referred to referred to referred to referred to referred to referred to [1994] 4 Suppl. SCR 539 referred to [1996] 1 Suppl. SCR 799 referred to [1980] 1 SCR 684 [1976] 1 SCR 847 [1989] 2 SCR 152 referred to referred to referred to [1985] 2 Suppl. SCR 859 referred to [1994] 4 Suppl. SCR 539 referred to [2003] 6 Suppl. SCR 1212 referred to [2018] 12 SCR 362 [2018] 12 SCR 794 (2015) 7 SCC 58 [2004] 3 SCR 982 [1987] 3 SCR 427 referred to referred to referred to referred to referred to [1990] 3 Suppl. SCR 212 referred to [1994] 3 Suppl. SCR 405 referred to [2005] 3 Suppl. SCR 200 referred to [1990] 1 Suppl. SCR 142 referred to [2006] 4 Suppl. SCR 81 referred to Para 281 Para 287 Para 288 Para 291 Para 291 Para 292 Para 293 Para 294 Para 296 Para 297 Para 298 Para 302 Para 302 Para 303 Para 304 Para 308 Para 308 Para 312 Para 317 Para 319 Para 322 Para 323 Para 326 Para 328 CIVIL ORIGINAL JURISDICTION: Writ Petition (Civil) No. 26 of 2020. Under Article 32 of The Constitution of India With A B C D E F G H 928 SUPREME COURT REPORTS [2021] 14 S.C.R. Writ Petition (C) No. 53, 28, 47, 27, 73, 328, 210, 191, 164, 163, 166, 173, 182, 176, 177, 257, 341, 267, 333, 337, 388, 402, 390, 393, 783, 579, 806, 714, 642, 805, 19, 33, 75, 165, 850, 374, 229, 228, 209 Of 2020 And Transferred Case (c) No. 228/2020 Ms. Madhavi Diwan, ASG, Tushar Mehta, SG, Sajan Poovayya, Rana Mukherjee, Neeraj Kishan Kaul, Sr. Advs., Krishnamohan K. Menon, Chaitanyashil Priyadarshi, Ms. Dania Nayyar, Ms. Parul Sachdeva, Akash Vajpayee, Vaibhav Manu Srivastava, Bhanu Pant, Namit Saxena, Piyush Singh, Aditya Parolia, Akshay Srivastava, Nithin Chandran, Rajesh Kumar, Gaurav Goel, Srijan Sinha, Himanshu Chaubey, Ashwarya Sinha, Santosh Kumar, Ayushmaan Vatsyayana, Ms. Hemlata Rawat, Deepak Anand, Mareesh Pravir Sahay, Ms. Tasheem Ahmadi, Sudhir Kumar Gupta, Manish Gupta, Shikhil Suri, Shiv Kumar Suri, Ms. Madhu Suri, Ms. Shilpa Saini, Ms. Nikita Thapar, Ms. Vinishma Kaul, Ms. Priyanjali Singh, Ms. Rashi Bansal, Dinesh Chandra Pandey, Dhruv Gupta, Harshil Gupta, Arjun Singh Bhati, Annam D. N. Rao, Annam Venkatesh, Rahul Mishra, Sidharth Joshi, Gopal Singh Chauhan, Saurabh Trivedi, Mahesh Agarwal, Himanshu Satija, Raheel Patel, Ajitesh Soni, Rohan Talwar, Ramchandra Madan, Akash Lamba, E. C. Agrawala, Ms. Shivali, Nilotpal Shyam, Ms. Bharti Tyagi, Rajesh Goyal, Sumit Gehlawat, Tervender Singh, Abhishek Bharadwaj, Pai Amit, Ms. Pankhuri Bhardwaj, Rakesh Taneja, Parshuram A.L., Kumar Vaibhav, Ankit Agrawal, Rahat Bansal, A.D.N. Rao, Annam Venkatesh, Chandrashekhar A. Chakalabbi, Shivanshu Kumar, Shiv Kumar Pandey, Awanish Kumar, Anshul Rai for M/s Dharmaprabhas Law Associates, Mayank Pandey, Ms. Misha Rohatgi Mohta, Johnson Subba, Ms. Purti Marwaha Gupta, Dr. Anindita Pujari, Arvind Kumar Gupta, Ms. Henna George, Ms. Twisha Issar, Ms. Deval Singh, Om Narayan, Pallav Mongia, Kanu Agarwal, Ms. Sunita Sharma, Rajeev Ranjan, Ms. Sansriti Pathak, Arvind Kumar Sharma, Ms. Charu Ambwani, Hirendranath, Santanam Swaminadhan, Ms. Prakruti Golechha, Ms. Abhilasha Shrawat, Mrs. Aarthi Rajan, Amar Gupta, Divyam Agarwal, Daksh Ahluwalia, Ms. Pallavi Kumar, Adhiraj Gupta, Pratibhanu Singh, Shikhar Maniar, Ms. Raksha Aggarwal, Keshav Mohan, R.K. Awasthi, Prashant Kumar, Piyush Vats, Ms. Ritu Arora, Santosh Kumar - I, Rajesh P., Karan Rajpurohit, Krishna Dev Jagarlamudi, Vikram Hegde, Rahul Kumar, Advs. for the appearing parties. Respondent-in-person A B C D E F G H MANISH KUMAR v. UNION OF INDIA AND ANOTHER 929 The Judgment of the Court was delivered by K. M. JOSEPH, J.

#1. The petitioners have approached this Court under Article 32 of the Constitution of India. They call in question Sections 3, 4 and 10 of the Insolvency and Bankruptcy Code (Amendment) Act 2020 (hereinafter referred to as ‘the impugned amendments’, for short). Section 3 of the impugned amendment, amends Section 7(1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘the Code’, for short). Section 4 of the impugned amendment, incorporates an additional Explanation in Section 11 of the Code. Section 10 of the impugned amendment inserts Section 32A in the Code.

#2. Section 7(1) of the Code before the amendment read as follows: “7. Initiation of corporate insolvency resolution process by financial creditor: (1) A financial creditor either by itself or jointly with other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government, may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.” Explanation- For the purposes of this sub section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor. A B C D E The amendment to the same by Section 3 of the impugned amendment incorporates 3 provisos to Section 7(1), which reads as under: F “Provided that for the financial creditors, referred to in clauses (a) and (b) of sub-section (6A) of section 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, whichever is less: Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate G H 930 SUPREME COURT REPORTS [2021] 14 S.C.R. insolvency resolution process against the corporate debtor shall 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: Provided also that where an application for initiating the corporate insolvency resolution process against a corporate debtor has been filed by a financial creditor referred to in the first and second provisos and has not been admitted by the Adjudicating Authority before the commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or second proviso within thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its admission.”

#3. Section 11 before the amendment read as follows: “11. Persons not entitled to make application. - The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter, namely:- (a) a corporate debtor undergoing a corporate insolvency resolution process; or (b) a corporate debtor having completed corporate insolvency resolution process twelve months preceding the date of making of the application; or (c) a corporate debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under this Chapter; or (d) a corporate debtor in respect of whom a liquidation order has been made. Explanation 1 [I]. - For the purposes of this section, a corporate debtor includes a corporate applicant in respect of such corporate debtor.” The explanation which was inserted through the impugned amendment reads as follows: A B C D E F G H MANISH KUMAR v. UNION OF INDIA AND ANOTHER [K. M. JOSEPH, J.] 931 “Explanation II.- For the purposes of this section, it is hereby clarified that nothing in this section shall prevent a corporate debtor referred to in clauses (a) to (d) from initiating corporate insolvency resolution process against another corporate debtor.”

#4. Section 32A inserted through the impugned amendment reads as follows: “32A. (1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority under section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not— A B C (a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or D (b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court: Provided that if a prosecution had been instituted during the corporate insolvency resolution process against such corporate debtor, it shall stand discharged from the date of approval of the resolution plan subject to requirements of this sub-section having been fulfilled: Provided further that every person who was a “designated partner” as defined in clause (j) of section 2 of the Limited Liability Partnership Act, 2008, or an “officer who is in default”, as defined in clause (60) of section 2 of the Companies Act, 2013, or was in any manner incharge of, or responsible to the corporate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence as per the report submitted or complaint filed by the investigating authority, shall continue to be liable to be prosecuted and punished for such an offence committed E F G H 932 SUPREME COURT REPORTS [2021] 14 S.C.R. A B C D E F G H by the corporate debtor notwithstanding that the corporate debtor’s liability has ceased under this sub-section. (2) No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under section 31, which results in the change in control of the corporate debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not— (i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (ii) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court. Explanation.—For the purposes of this sub-section, it is hereby clarified that,— (i) an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor; (ii) nothing in this sub-section shall be construed to bar an action against the property of any person, other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation process under this Code and fulfils the requirements specified in this section, against whom such an action may be taken under such law as may be applicable. (3) Subject to the provisions contained in sub-sections (1) and (2), and notwithstanding the immunity given in this section, the corporate debtor and any person who may be required to provide assistance under such law as may be applicable to such corporate debtor or person, shall extend all assistance and co-operation to any authority investigating an offence MANISH KUMAR v. UNION OF INDIA AND ANOTHER [K. M. JOSEPH, J.] 933 committed prior to the commencement of the corporate insolvency resolution process.” A WHO ARE THE PETITIONERS?

#5. More than the lion’s share of the petitioners are allottees under real estate projects and hereinafter referred to as allotees. They have trained the constitutional gun at the impugned provisos.

#6. Under the second proviso, a new threshold has been declared for an allottee to move an application under Section 7 for triggering the insolvency resolution process under the Code. The threshold is the requirement that there should be at least 100 allottees to support the application or 10 per cent of the total allottees whichever is less. Moreover, they should belong to the same project. Almost all (except in two petitions), the petitioners also had under the erstwhile regime which permitted even a single allottee to move an application under Section 7 filed petitions singly or with less than the number required under the proviso and they are visited with the provisions of the third proviso as per which such of those applications under section 7 which had not been admitted would stand withdrawn within 30 days, if the newly declared threshold of 100 allottees or 10 per cent of the allottee whichever is lower was not garnered by the applicant/applicants.

#7. In some of the petitions, the petitioners are money lenders, that is, they have stepped in to provide finance for the real estate projects. They are also visited with the requirement which is imposed upon them under the first impugned proviso which is on similar lines as those comprised in the second proviso.

#8. Then, there is, no doubt, Section 32A, which stands impugned by the creditors and allottees. THE CODE

#9. The Code was enacted in the year 2016. It is one of the most important economic measures contemplated by the State to prevent insolvency, to provide last mile funding to revive ailing businesses, maximise value of assets of the entrepreneurs, balance the interest of all the stakeholders and even to alter the order of priority of payment of Government dues. The Code is divided into five parts. The first part is shortest portion. Part II deals with what we are concerned with in these cases and it purports to deal with insolvency resolution and liquidation B C D E F G H 934 SUPREME COURT REPORTS [2021] 14 S.C.R. A for corporate persons. ‘Corporate person’ has been defined in Section 3(7) as follows: “3(7). “corporate person” means a company as defined in clause (20) of section 2 of the Companies Act, 2013, a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008, or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider.”

#10. Section 3(8) defines ‘corporate debtor’ which provides that a corporate debtor means a person who owes a debt to any person.

#11. We may notice that Chapter II of Part II which consists of Sections 6 to 32 deal with the corporate insolvency resolution process. Chapter III deals with ordinary liquidation process in regard to corporate person. Chapter IV of Part II consisting of four sections deal with fast- track insolvency resolution process. Chapter V which consists of Section 59 only deals with voluntary liquidation of corporate person. Chapter VI deals with miscellaneous aspects. Chapter VII Part II deals with Penalties.

#12. Part III deals with insolvency resolution and bankruptcy code for individuals and partnership firms. It may be noticed at once that partnership firms with limited liability as defined in the Limited Liability Partnership Act, 2008 fall within the definition of the word ‘Corporate person’ and insolvency and liquidation process in regard to the same is found in Part II of the Code. It is in regard to Insolvency resolution and bankruptcy for the other partnership firms which one has to look to the provisions of Part III. Part III begins with Section 78 and ends with Section 187. The further provisions relate to the regulation of insolvency professional agencies and information utilities. They are all key instrumentalities for the effective working of the Code. Equally, it may be apposite to bear in mind Section 238A. It reads as follows: “238A. Limitation - The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be.”

#13. Shri Krishna Mohan Menon, learned counsel for the petitioners (allottees) in some of the petitions has addressed the following submissions before us: B C D E F G H MANISH KUMAR v. UNION OF INDIA AND ANOTHER [K. M. JOSEPH, J.] 935 The impugned amendment clearly falls foul of the mandate of Articles 14, 19 (1)(g), 21 and 300A of the Constitution. The amendment by virtue of section 3 of the Amendment Act introducing the second proviso in Section 7(1) of the Code makes a hostile discrimination between financial creditors, the category, to which the petitioners belong and the other financial creditors. Secondly, it is contended that the amendment imposing a threshold restriction is afflicted with the vice of palpable and hostile discrimination qua operational creditors. The purported protection sought to be accorded to the real estate developer, cannot form the premise for inflicting violation of constitutionally protected freedom under Article 19(1)(g) just as much as it also constitutes an insupportable invasion of the grand mandate of equality. Next, he would submit that there are inherent leakages in the impugned provisions which would make it unworkable. Thereafter, learned counsel would submit that the impugned amendment is also bad in law for the reason that it is manifestly arbitrary. Yet another argument addressed by Shri Krishna Mohan Menon, learned counsel is that the amendment has the legally pernicious effect of creating a class within a class, a result, which is frowned upon by the law.

#14. Learned counsel would expatiate and submit that under the Code, the law provides for a period of 14 days for the Adjudicating Authority to decide whether an application under Section 7 should be admitted. Section 12 declares an inflexible time limit for the insolvency resolution process to be terminated. The whole purport of the provisions of the Code and the manner in which it is structured is geared to achieve a laudable object. The Code aims at improving the ranking of India in the matter of ease of doing business. It is an economic measure which is intended to transform India into a country which would attract capital and investment. The Code has indeed resulted in a transformation of attitudes of the key players, in that it has come to be perceived as a law not merely on paper but one with teeth to it. He would point out that this Court in its decision in the Pioneer’s Case Pioneer Urban Land and Infrastructure Ltd. and another v. Union of India and others1 has elaborately dealt with the apprehension that allowing the home buyers like the petitioners who finance the builder’s activities to invoke the CIRP process will lead to misuse of the provisions and allayed the unfounded 1 (2019) 8 SCC 416 A B C D E F G H 936 SUPREME COURT REPORTS [2021] 14 S.C.R. A B C D E F G H fears. Yet the legislature has ventured to place unjustifiable clogs on the right of one category of financial creditors alone which is impermissible. The spectre of a speculative investor running riot and playing havoc has been adequately addressed by this Court. There is no worthwhile data of misuse by home buyers. He points out the judgments passed by NCLAT where the financial creditors, who are home buyers, approach the Tribunal and the cases reflect gross and inordinate delay of nearly five years justifying the approach made by the home buyers under the Code. In other words, there were genuine cases where the debtor had become insolvent and hence the home buyer had complete justification in knocking at the doors of the competent Tribunal under the Code. He took us through the reports of the Parliamentary Committee and complained that no reasons are discernible to justify the amendments. Equally, he commended for our acceptance the observations in the dissent notes and contended that they fortify the submissions.

#15. In regard to the comparison sought to be made, with similar requirements in Sections 397, 398 read with 399 of the Companies Act, 1956 and Section 241 and 244 of the Companies Act, 2013, he would submit that there are significant distinctions.

#16. Firstly, he would submit that in the case of shareholders approaching the Tribunal under the Companies Act, they would be armed with the details regarding shareholding which are always available having regard to the scheme of the Companies Act. On the other hand, he points that in regard to home buyers who have sunk their hard-earned money in real estate projects there is no system under which they could obtain data or information regarding the persons similarly circumstanced and whose co-operation and support is necessary under the impugned amendment to activise the Code.

#17. Secondly, he would submit that having regard to the explanation in Section 244 of the companies Act, 2013, it brings about clarity in regard to the situation where there is a joint holding. The absence of any such similar provision in Section 7 of the Code is emphasised in an attempt at persuading the court to overturn the law. He would further point out the practical difficulties in the working of the amended law. He submits that the date of default of various home buyers may be different. Therefore, to forge a common complaint impelling a group of home buyers to come together is impracticable and not workable’. He would submit that legislature cannot be permitted to take away through one hand what it has given by the other. MANISH KUMAR v. UNION OF INDIA AND ANOTHER [K. M. JOSEPH, J.] 937

#18. Learned Counsel would further contended that as far as the third proviso is concerned while accepting the position that the 14 days period for disposal of the matter under the Code has been understood to be directory and not mandatory, at the same time, it cannot be the law that a case should grace the docket endlessly and never witness an end and the retrospectivity which it reflects clearly renders it arbitrary.

#19. Shri Shikhil Suri, learned Counsel for the petitioner in Writ Petition (Civil) No. 191 of 2020 would submit that the impugned amendment is arbitrary being in the teeth of the principles laid down in Pioneer (supra). The object of the law would stand defeated he contends. The Ordinance would not only deprive the petitioner of her right under Section 7 but it also violates Article 14 of the Constitution of India. The threshold limit is unreasonable and arbitrary. It is excessive and irrational. It is not in public interest. He also points out that there exists adequate shield against a single allottee misusing the Code. The threshold is thrust upon only on the home buyer and is not applicable across the board for other financial creditors. It is discriminatory. There is no rationale. It treats equals unequally and unequals as equals. There is no intelligible differentia. The law does not permit classes among financial creditors. There is breach of the guarantee of equal protection of law. The threshold in Section 4, namely, default of Rupees One crore is the one which applies to all creditors. It is inexplicable as to how only in regard to home buyers, a different threshold should be insisted upon. The remedy of the home buyer is defeated. The Ordinance was brought in haste without proper discussion and debate. The amendment takes away the vested right of the home buyers. There is no intelligible differentia bearing a nexus with the object and purpose of the Act. He also emphasised the practical difficulties involved in arranging the necessary numerical strength under the impugned provision.

#20. Shri Piyush Singh, learned counsel for the petitioners would submit that once the right is conferred to make an application, then it cannot come conditioned with threshold limit as is provided in the impugned provisos. Secondly, he would point out that there is manifest arbitrariness. That apart, he would also contend that there is hostile discrimination qua other corporate debtor. The builder who is a corporate debtor, in other words, is given a more favourable treatment than other corporate debtors which is afflicted with the vice of hostile discrimination. He also complained of both under and over inclusiveness in the impugned A B C D E F G H 938 SUPREME COURT REPORTS [2021] 14 S.C.R. A B C D E F G H provisions. Next, learned counsel submits that the very object is discriminatory. Drawing our attention to both Chitra Sharma and others v. Union of India and others2 and Pioneer (supra), he would highlight that having regard to the background in which the rights of the home buyer was recognised as being one of that of a financial creditor, the amendment is clearly impermissible. He would also submit that having regard to the stand taken by the Government in the case before this Court, in particular, Pioneer (supra), the principles of promissory estoppel will apply and prevent enactment of the impugned provisions. He would expatiate and submit that the conditions which have been imposed render the remedy illusory. He drew our attention to Order 1 Rule 8 of the Code of Civil Procedure and also took us to the explanation therein. He would submit that the proviso is not on similar lines as Order 1 Rule 8. This is for the reason that under the procedure under Order 1 Rule 8, the numerical stipulation in the impugned Provisos is not insisted upon. Once persons having same interest institute a civil suit, after following the procedure all persons having the same interest become involved and what is more would be bound by the decision. Section 12 of the Consumer Protection Act which also captures and embodies the principle of Order 1 Rule 8 ensures the protection of class interest and also protect class interest without putting stiff barriers as threshold limits as done by the impugned amendment. He pointed out that the real estate owners do not take any loan from financial institutions. They raise capital exclusively from the allottees virtually. In such circumstances, to put this threshold limit is clearly impermissible. He drew our attention to the judgment of the Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P3., to buttress his submission regarding availability of principles of promissory estoppel. There is manifest arbitrariness in the provisions. He complained that the RERA has not been constituted in all the States. He also made an attempt at pointing out the perception that the amendment is to confer an unmerited advantage on the builder. This he purported to do by drawing our attention to an article in a newspaper. He essentially projected this argument as a thinly disguised argument of malice against the law giver. He also sought to draw support from the judgment of this Court in Nagpur Investment Trust and others v. Vithal Rao and others4. He reiterated the principle of hostile discrimination. He drew our attention