Supreme Court upheld changes in Insolvency and Bankruptcy Code 2016

The Supreme Court of India on January 19, 2021 upheld two changes in the Insolvency and Bankruptcy Code, 2016.

• The bench which delivered the judgement, comprises Justice KM Joseph, Justice Rohinton Fali Nariman and Justice Ajay Rastogi.

• As per Section 32A, the new owners can’t be held liable for actions of previous management and homebuyers require a minimum threshold to initiate bankruptcy. This section was justified by the Supreme Court Bench.

• Another amendment under Section 7, upheld by the apex court, mandated the National Company Law Tribunal to admit insolvency petitions filed by at least 100 or 10% of the total homebuyers or allottees of a real estate firm—whichever is minimum.

• The amendment requiring the threshold for homebuyers had a retrospective effect, which means all applications that weren’t yet admitted by the tribunal will have to satisfy this threshold. The amendment gave applicants 30 days to comply with the requirement. The top court also upheld the retrospective nature of the amendment.