PIL filed in Madras High Court moved against amendment to insolvency code

A PIL has been filed in Mras High Court challenging a Central ordinance amending Insolvency and Bankruptcy Code (IBC) wherein fresh insolvency proceedings will t be initiated for defaults on account of coronavirus pandemic.

When it came up for hearing, first bench of Chief Justice A P Sahi and Justice Senthilkumar Ramamoorthy directed ditional Solicitor General R Sankaranarayanan to get instructions from authorities concerned in six weeks after he opposed petition, saying amendment was only a temporary measure in view of COVID-19 lockdown.

Petitioner M Gagan Bothra, a city-based financier, in his public interest litigation petition challenged ordinance promulgated by government on June 5 amending IBC, saying it would go against very object of code.

ordinance was unconstitutional, ultra vires and against principles and reason which led to enforcement of code, he contended.

As per amendment, default on repayments from March 25, day when nationwide lockdown began to curb coronavirus infections, would t be considered for initiating insolvency proceedings for a certain period of time.

Under IBC, an entity can seek insolvency proceedings against a company even if default is only one day. This is subject to minimum threshold of Rs 1 crore. Earlier, threshold was Rs 1 lakh.

ASG Sankaranarayanan objected to petition being moved as a PIL. amendment has been brought through ordinance only in view of pandemic and it is only for a temporary period specified in amendment, he said.

He ded that IBC was t a legislation for recovery of money for which petitioner or any aggrieved person can move an appropriate suit in a civil court.

Making it clear that suspension of provision for moving insolvency applications against corporate defaulters is only temporary, ASG sought court to grant him time to file a counter to plea after getting due instruction from authorities concerned.

(Photo Credit: PTI)