M/S Ram Chand and Sons Vs. Union of India, W.P. (C) 7141/2020
Advocate: SERMON RAWAT
The High Court of Delhi took up a Petition challenging the Constitutional validity of the proviso to S. 4 of the IBC 2016 and the constitutional validity of the Central Government’s Notification dated 24.03.2020 whereby the threshold to initiate proceedings under IBC has been increased from Rs. 1 Lac to Rs. 1 Crore.
Proviso to Section 4 of IBC 2016
4(1) This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees:
Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one crore rupees.
Central Government through the virtue of this proviso issued a notification on 24th March 2020 limiting the threshold amount to initiate proceedings under IBC to Rs. 1 Crore from its earlier threshold amount of Rs. 1 Lac.
It was listed today before the bench headed by the Hon’ble Chief Justice of Delhi High Court, which has issued notice to Union of India. The next date of hearing in the matter is 19.10.2020.
Petitioner submitted that proviso to S. 4(1) of the IBC, 2016 is violative of Article 14 of the Constitution of India as it confers arbitrary power upon the Central Government to set/fix the threshold for initiation of corporate insolvency process for corporate persons.
The reason for such contention is that there is no guidelines set under this proviso for the Central Government to follow while fixing the threshold amount; Petitioner said.
This arbitrary power vested in the Central Government has resulted in the issuance of the Impugned MCA Notification No. S.O. 1205(E) dated 24.03.2020 which is also arbitrary, unreasonable and violative of Article 14 of the Constitution of India.
– Petitioner
Petitioner contended that the Notification No. S.O. 1205(E) dated 24.03.2020 fails to achieve the object sought to by the IBC, 2016.
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