Delhi High Court To Hear Petition Against Suspension Of Section 10 Of IBC
The Delhi High Court has agreed to hear a petition challenging an ordinance that suspended operation of Insolvency and Bankruptcy Code, 2016, during the Covid-19 pandemic.
A bench headed by Justice DN Patel issued notice to the central government and the Insolvency and Bankruptcy Board of India over a public-interest litigation filed by Advocate Shiv Kumar Suri on behalf of petitioner Rajeev Suri.
The PIL challenges the part of the ordinance which suspends operation of section 10 of the IBC Code. The section allows a corporate entity to file for initiation of insolvency proceedings against itself if it commits a default on its debt obligations.
The central government in June came out with an ordinance that disallowed filing of insolvency applications against any company for a period of six months.
“No application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after March 25, 2020, for a period of six months or such further period, not exceeding one year from such date, as may be notified in this behalf,” the ordinance, which suspended Sections 7,9 and 10 of the IBC, said.
The petitioner told court that suspension of section 10 deprives companies from taking the benefit of the code for resolution of its debts in a time-bound manner.
The petitioner first approached Supreme Court against suspension of section 10 of the ordinance. He later withdrew the plea and approached the Delhi High Court.
The ordinance is manifestly arbitrary, unjust and unfair as it doesn’t even rationally explain the objective behind suspension of the section and would result in exposing companies to financial difficulties which makes it contrary to the objectives of the insolvency code, according to the petitioner.
The ordinance, the petitioner said, violates Articles 14 (Right to Equality) and 19(1)(g)(Right to practise any trade, business or profession) of the Indian Constitution and requested the high court to declare suspension of Section 10 of IBC to be against the law.