Transfer in 139 Case: SC

The Supreme Court passed an order directing transfer of Writ Petition titled as “KIC Food Products Pvt. Ltd. vs. Union of India and Anr.” pending before the Delhi High Court to itself.

Article 139A(1) of the Constitution of India empowers the Supreme Court to transfer and withdraw a pending case before any High Court to itself when the case pending before the High Court involves the same or substantially the same questions of law as any case pending before itself.

The matter revolves around the constitutional validity of Section 3 of Insolvency and Bankruptcy (Amendment), 2019 Ordinance.

Facts of the case:

The case pertains to a private company and a builder named IREO Residencies Pvt Ltd who allegedly induced the plaintiff to apply for a residential unit in its project Grand Hyatt Gurgaon Residences on 26.03.2013 with the promises and representation of delivery on or before 26.03.2017 due to which the plaintiff ended up paying Rs.4,23,74,745.59, towards the said unit.

After failure of delivery of possession and after legal enquiries it transpired that IREO is neither in a position to handover the possession of the said unit nor refund the money paid to it.

The Petitioner approached the National Company Law Tribunal, Delhi by way of application under Section 7 of the Insolvency and Bankruptcy Code against IREOon 03.10.2019.

On 28.12.2019, respondent passed the IBC (Amendment) Ordinance 2019, curtailing the fundamental rights of the allottees by putting unreasonable and arbitrary classification within the Financial Creditors.

The relevant portion of S. 3 of the 2019 Amendment which seeks to amend S. 7 of the IBC is extracted as under;

“Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate 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 percent 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 or second provisos and has not been admitted by the Adjudicating Authority before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019, such application shall be modified to comply with the requirements of the first or second provisos as the case may be within thirty days of the commencement of the said Ordinance, failing which the application shall be deemed to be withdrawn before its admission.”

Objective of Insolvency and Bankruptcy (Amendment), 2019 Ordinance:

A need was felt to give the highest priority in repayment to last mile funding to corporate debtors to:

1. prevent insolvency in case the company goes into corporate insolvency resolution process or liquidation,
2. provide immunity against prosecution of the corporate debtor,
3. prevent action against the property of such corporate debtor,
4. provide a successful resolution subject to fulfilment of certain conditions
5. fill the critical gaps in the corporate insolvency framework

What is an Ordinance?

Ordinances are the temporary laws which can be issued by the president when Parliament is not in session. An Ordinance can be passed under Article 123 and 213 by the President and the Governor respectively.