The Supreme Court today agreed to hear petitions by homebuyers against the Insolvency and Bankruptcy Code ordinance that restricts powers to initiate insolvency proceedings against defaulting companies.
The petitions filed last week challenge the ordinance that requires at least 100 or 10 percent of the total homebuyers of a company--whichever is minimum--to initiate insolvency proceedings. The petitioners said it amends Section 7 of the insolvency code, preventing them from exercising the powers granted to them by the code.
Despite being financial creditors, homebuyers are being treated differently from the others who fall under the same category, according to petitioners. This creates a “class within a class” and cannot be allowed under the law as it violates the Right to Equality guaranteed under the constitution, they said.
The ordinance changes the law retrospectively, which means it will cover all those cases where homebuyers have already approached the National Company Law Tribunal and filed insolvency applications. The compliance of the restriction has to be ensured in all pending cases within a month, according to the ordinance.
The top court bench headed by Justice Rohinton Nariman issued notice to the central government and ordered a status quo on all pending applications.
According to Advocate Srijan Sinha, among the counsel involved with the case, the Supreme Court has granted a partial stay by ordering status quo. This means that all the petitions that were filed before the amendment shall not be bound by the 30-day period given to satisfy the amendment, he said.
The court will take up the case for hearing after three weeks.
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