Case: Pioneer Urban Land and Infrastructure Limited Vs Union of India
Date of Judgement: February 28, 2021
Citation: WRIT PETITION (CIVIL) NO. 43 OF 2019
Bench: Hon’ble Justice Rohinton Fali Nariman and Hon’ble Justice Surya Kant
Petitioner: Pioneer Urban Land and Infrastructure Limited
Respondent: Union of India
Facts:
1. Several Allottees entered into an arrangement with real estate developers, whereby the developer undertook to pay a certain amount to allottees on a monthly basis from the date of execution of the agreement.
2. It was urged that the sums collected by developers under the guaranteed return schemes had the “Commercial effect of borrowing”. Therefore, various Writ Petitions were been filed before the Hon’ble Supreme Court challenging the validity of the 2018 Amendment.
Issue involved:
- Whether Insolvency and Bankruptcy Code Amendment Act, 2018 is constitutionally valid as it violates Articles of the Constitution of India?
Rationale:
1. The Supreme Court observed that the Code helps the corporate debtor to be successful against the interest of unsecured creditors like allottees, so that a proper management can perform the real estate project as originally planned and deliver the flat/apartment as soon as possible or pay compensation in the event of late delivery, or non-delivery, or refund amounts advanced together with interest.
2. As far as Article 19(1)(g) is concerned it was not infringed as the Amendment Act is made for public interest, and it is not an unreasonable restriction on the Petitioner’s fundamental right under Article 19(1)(g). Also, there is no violation of Article 300-A as no person is deprived of its property without the authority of a constitutionally valid law.
Obiter Dicta:
Section 5(8)(f) of the Code provides that, “financial debt as a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing.”
Section 7 of the insolvency and Bankruptcy code provides that, “A financial creditor either by itself or jointly with 1 other financial creditors, or any other person on behalf of the financial creditor, as may be notified2 by the Central Government may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.”
Section 19(g) of Indian constitution states, to practise any profession, or to carry on any occupation, trade or business.
Judgement:
The writ petitions and the civil appeal are disposed of as per this judgment.
Conclusion:
This case upheld the constitutional validity of the Insolvency and Bankruptcy Code Amendment Act, 2018 which provided for inclusion of ‘Real estate allottees’ within the meaning of ‘Financial creditors’ under Section 5(8)(f) of the Insolvency and Bankruptcy Code.
Drafted By: Param Mansinghka
Edited By: Tanvi Mahajan, Publisher, Law Insider
Published On: February 16, 2022 at 22:30 IST