IBC Provisions for Individuals Deemed Constitutional: Right to Privacy Balanced with Resolution Process Needs
Case Title: Dilip B Jiwrajka v. Union of India & Ors.
Case No.: Writ Petition (Civil) No 1281 of 2021
Decided On: 09.11.2023
Coram: Hon’ble Mr. Justice Dr. Dhananjaya Y. Chandrachud, Hon’ble Mr. Justice Manoj Misra and Hon’ble Mr. Justice J.B. Pardiwala
Facts of the Case:
A three-judge bench of the Hon’ble Supreme Court (“the Court”) recently dismissed a batch of 384 petitions (collectively, “Writ Petitions”) filed under Article 32 of the Constitution of India, 1950 (“the Constitution”) challenging the constitutionality of Sections 95, 96, 97, 99, and 100 (collectively, “Impugned Provisions”) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) regarding the commencement of insolvency proceedings against individuals and partnership firms as codified in Part III of the IBC.
Legal Provisions
The Insolvency and Bankruptcy Code (IBC)’s contested provisions apply to individuals and partnership firms. They include Section 95, which gives creditors the authority to start insolvency resolution procedures, Section 96, which places an interim moratorium on debtor obligations, Sections 97 and 98, which specify how resolution professionals are appointed and replaced, and Section 99, which describes the resolution professional’s role in reviewing insolvency applications. Furthermore, Section 100 requires the adjudicating body to decide whether to accept or reject the application within 14 days, allowing creditors to file for bankruptcy if the application is denied due to fraud or resulting in insolvency resolution if accepted.
Issues
The Writ Petitions contend that the Disputed Provisions are unconstitutional because they contravene Articles 14 and 21 of the Constitution. The lack of a court finding of debt and default before designating a resolution expert, the debtor’s lack of a chance to be heard prior to important steps, and the debtor’s severe and permanent repercussions in the event that due process is not followed are among the concerns. The petitioners contend that the authority bestowed by resolution specialists is capricious and goes against the fundamental tenets of natural justice.
Courts analysis and decision
The Writ Petitions were denied by the Supreme Court on many grounds, upholding the validity of the contested provisions of the Insolvency and Bankruptcy Code. It said that the adjudicating authority’s judicial decision makes the final decision and that the resolution professional’s duty is facilitative rather than adjudicatory. The court emphasised the reasonableness of obtaining personal financial information and the necessity of striking a balance between privacy rights and the justifiable goal of creating a comprehensive framework for individual insolvency. It also made it clear that the temporary moratorium is protective in nature, not intended to harm debtors but rather to safeguard them from forced creditor activities. Consequently, the court determined that there is no violation of Articles 14 and 21 of the Constitution by the contested provisions.
“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”
Written by- Aastha Ganesh Tiwari