The Supreme Court in Manish Kumar v. Union of India^[1], while upholding the constitutional validity of the Insolvency and Bankruptcy Code (Amendment) Act, 2020 (‘Amendment Act’), which amended Sections 7, 11 and 32A of the IBC, held as follows:

i.     Section 7: The Amendment Act requires that at least 100 real estate allottees or 10% of the total number of allottees (whichever is less) file an insolvency petition in relation to a real estate project, for it to be maintainable. The Court held that this additional threshold cannot be considered discriminatory, as it serves to prevent frivolous or avoidable filings. Further, such allottees, while being treated as financial creditors also have the right to file an insolvency petition under Section 7 of the IBC;

ii.   Section 11: The Amendment Act inserted an explanation clarifying that a corporate debtor may initiate corporate insolvency resolution process against another corporate debtor. This explanation being a clarificatory amendment was held to be retrospective in nature; and

iii.   Section 32A: The Amendment Act provided that no action will be taken against the properties of the corporate debtor if, pursuant to a change in the control of the entity, the new management were not involved in the default in any manner. The Court held that the extinguishment of the criminal liability is important for the new management to start afresh. However, a person who committed or abetted the commission of the offence is not discharged of liability.

[1] Manish Kumar v. Union of India, 2021 SCC OnLine SC 30.