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Section 10A of IBC, Suspending powers of creditors has been questioned before Madhya Pradesh HC
A petition has been filed (VN Dubey Vs UOI) before division bench comprising Justices S C Sharma and S K Awasthi challenging the constitutional validity of section 10A of IBC, 2016 suspending the powers of corporate creditors which thereby safeguards corporate debtors from the rigors of Insolvency and Bankruptcy code.
Over months soaked in lockdown due to the outbreak of novel corona virus has brought Indian economy standstill. Unemployment has risen and productivity has fallen which caused huge corporate disruptions. Which introduced spate of relaxations in corporate and tax laws including Insolvency and Bankruptcy code, 2016. Finance minister Nirmala Sitharaman promulgated an ordinance which inserted section 10A into IBC which suspends section 7,9,10 from the same Act that provides for initiating corporate insolvency resolution process bringing into effect from June 5th, 2020 extending for next six months or more but not more than a year.
".. the ordinance was promulgated because the lockdown has caused business disruptions which may lead to default on debts pushing such companies into insolvency" government contended.
The petition, which is the form of public interest litigation was filed by advocate V N Dubey, who contended " that the proviso to section 10A of IBC, 2016 opens up the way for huge quantum of willful 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 public at large".
Petitioner also contends that section 10A of IBC not only obstructs the right to access to justice under Art 14 and 21 of the constitution but also obstructs in right to business and profession under Art 19(1)(g).
The high court of Madhya Pradesh adjourned the matter to august 27th August by insisting assistant solicitor general to acquire instructions on the petition within next six weeks.
