Petition filed before Madhya Pradesh High Court challenging Section 10A Insolvency & Bankruptcy Code

Madhya Pradesh Highcourt

Section 10A had suspended the initiation of corporate insolvency resolution process qua defaults which arise on or after March 25, 2020.

A Petition has been filed before the Madhya Pradesh High Court challenging the constitutional validity of Section 10A of the Insolvency & Bankruptcy Code, 2016. (V N Dubey vs UOI)

On June 30, a Division Bench of Justices SC Sharma and SK Awasthi at the High Court’s Indore Bench granted Assistant Solicitor General Milind Phadke six weeks’ time to seek instructions on the petition.

The petition, which is in the form of a public interest litigation, was filed by an Advocate V N Dubey.

The newly inserted Section 10A suspends initiation of corporate insolvency resolution process qua defaults which arise on or after March 25, 2020.As per the Section, the suspension is for a period of six months or such further period, but not exceeding one year.

It is the Petitioner’s stance that the first Proviso to Section 10A provides for a “complete forever bar” on the initiation of insolvency in respect of the defaults that occur during the period of March 25, 2020 to September 25, 2020 or March 25, 2021 (if extended by notification).

It is stated that the Ordinance leaves an impression that any debt which is supposed to be paid during this time period, if not honoured on due date, then no application for initiation of insolvency process under Insolvency and Bankruptcy Code, 2016 can be taken any time in future.“That the Proviso to Section 10A of the Insolvency and Bankruptcy Code, 2016, opens up the way for huge quantum of wilful defaults, brings in force a means of inequality and prejudice to the public at large and if not brought down immediately is capable of diluting the object and purpose of the Insolvency and Bankruptcy Code, 2016, and directly violating the basic fundamental rights, constitutional rights and other legal rights of the public at large.”the Petitioner contends.

The Petitioner thus argues that Section 10A directly obstructs not only the right to access to justice which is guaranteed under Article 14 and 21 of the Indian Constitution but also the right to business and profession conferred under Article 19(1)(g).

The matter would be heard next on August 27.

Published by Sneha Vishwakarma

Advocate, Bombay High court.

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