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Madras HC issues notice on a writ petition questioning validity of Insolvency Code, 2016

Team SoOLEGAL 6 Sep 2017 12:07pm

Madras HC issues notice on a writ petition questioning validity of Insolvency Code, 2016

A Madras High Court bench comprising Chief Justice Indira Banerjee and Justice M Sundar yesterday issued notice on a writ petition filed by Southern Polypet Private Limited that has questioned the constitutional validity of the newly enacted Insolvency and Bankruptcy Code, 2016 related to reorganisation and liquidation procedures of corporate persons and firms.

The petitioner has specifically challenged the validity of section 5, 8, 9, 13, 14, 17, 20, 25, 29(2), 30, 31 of the code read with Rule 8 of the insolvency resolution code, 2016, claimed that it breaches the Article 14, 19 and 21 of the Constitution.

The petitioner has contended that previous Chennai NCLT Jurisdictions to handle the Insolvency resolution code 2016, is ultra vires.

Also, the code is violative of Article 14 of Right to Equality of the Constitution as it allows only financial creditors before admitting or rejecting any application, and not the debtor and thereby denying right to defend.

The bench, at the time of issuing notice, has also combined the original petition with another filed by Pratyusha Resources and Infra Pvt. Ltd.

The petition argued that section 7, 8, 9, 14, and 31 prohibit the applicant to present its case before being prosecuted under the Insolvency Resolution Code, and opposes the principles of natural Justice.

The petitioner also claimed that the enactment in Insolvency Code is designed to do more damage than any good when it comes to reorganizing any debtor, appointing a liquidation official at the stage of admission, without allowing the respondent to file any statement of objection.  

Secondly, section 8(2) read with 5(6) of the insolvency code, also contravened the Article 14 of the Constitution which provides Right to Equality before the law.

Thirdly, through Section 17 and 20, the code allows to appoint an Interim resolution professional (IRP) at the stage of admission of application and initiation of insolvency procedures, to take over the management of the debtor company, such an amendment is extremely draconian and suspends the power of the board of the corporate debtor.



Tagged: Madras High Court   Chief Justice Indira Banerjee   Justice M Sundar   Bankruptcy Code  
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