In Manish Kumar v. Union of India & Ors., the Supreme Court of India rejected a writ petition challenging the constitutional validity of Section 3, 4 and 10 of Insolvency and Bankruptcy Code (Amendment) Act, 2020 (“IBC Amendment”), which prescribes the requirement of a minimum of 100 or not less than ten per cent of allottees of a real estate project acting as creditors in the same class, whichever is less, for initiating corporate insolvency resolution process against the developer company.
The Court held that the IBC Amendment protects the interest of the allotees across the board and allowing a single allottee to move an application under IBC may put the interest of all other allottees in peril.
This can also result in some allottees approaching the real estate regulating authority (RERA) while other may resort to the consumer forum. The Court said that the group of allottees in a real estate project are a heterogenous group and a vast majority of allottees may see reason in giving time and reposing faith in the existing management of real estate project, rather than bringing a complete overhaul or replacement of the developer’s company management.
Therefore, the amendments provided under the IBC Amendment are not arbitrary in nature and are constitutionally valid
