On January 25, the Gujarat High Court was directed to keepbay from any debate relating to the validity of the Insolvency and BankruptcyCode, 2016 or the constitutional validity of the National Company Law Tribunal,by ten Supreme Court.A petition regarding a pending matter in the Gujarat HighCourt was being heard by the Bench of Chief Justice Dipak Misra and Justices A MKhanwilkar and D Y Chandrachud. The petition is not debarred from challengingthe validity of composition of the National Company Law Tribunal and thevalidity or the constitutionality of the Insolvency and Bankruptcy Code, 2016in front of the Supreme Court under Article 32 of the Constitution, as orderedby the bench. Earlier in December, 2017, notice was issued by the GujaratHigh Court in another petition challenging constitutional validity of theInsolvency and Bankruptcy Code, 2016 and the recent ordinance barring Promotersfrom submitting a resolution plan.

Post the initiation of action by the petitioner against its financialcreditor Canbank Factors Ltd., it approached the High Court under the Code whilea payment of an amount over Rs. 9 crore was pending before a Civil Court, wasup for debate.It has challenged Sections 5(7) (definition of financialcreditor), 6 (persons who may initiate corporate insolvency resolutionprocess), 7 (initiation of process by financial creditor), 12 (time-limit forcompletion of insolvency resolution process), 29 (preparation of informationmemorandum), 214(f) (obligation of information utility), 231 (bar ofjurisdiction) and 238 (Code to override other laws) of the Code.

Arguing that there exists no intelligible differentia in theclassification of a financial credit and operational creditor in the Article 14of the Constitution of India, the petition points out the difference inmechanism prescribed for the two creditors.The petitioners also argues that it is clear that barringwillful defaulters is unfair as the process of deciding who a willful defaulteris, rests completely with bankers who are biased in the matter as theirinterest lies in the recovery of the loan amount.No difference between defaulters and willful defaulters ismade by the IBC, it punishes both equally. Additionally, itchallenges Sections 17 and 20, stating that these place the management ofaffairs of the corporate debtor in the resolution professional, who “wouldhave no expertise or experience in the business of the corporate debtor, whichsolely vests with the promoters, directors, etc. of the corporate debtor, andthereby putting the entire business of the corporate debtor at stake”. It states that this violates Article 19(1) (g) of theConstitution of India, which guarantees freedom of occupation, trade orbusiness.


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