SECTION 3,4 AND 10 of IBC (Amendment) Act, 2020 are Constitutionally Valid: SC


THE SUPREME COURT recently talks about the constitutional validity of Section 3, 4, and 10 of the Insolvency and Bankruptcy Code (Amendment) Act, 2020.

With this, the Supreme Court exercises Article 142 of the Constitution of India and Article137 of the Limitation Act.

  1. If any petitioner moves the application with the period of two months of the default, with reference to Section 7(1)of the Act, then the court will exempt him from the court fees.
  2. Secondly, if the application moved under Section 7 of the Act will be barred by Article 137 of the Limitation Act, on the default alleged in the applications, which were already filed under Section 5 of the Limitation Act, 1963, which talks about an extension of prescribed period in certain cases.
  3. The court makes it clear that the exemption of two months will only be applicable for exemption of court fee; and consonance of delay caused by the application pending before the adjudicating authority.

Section 3 of IBC (Amendment) 2020

It adds on some conditions for homebuyers to go on with the insolvency proceedings against the defaulted builders. Section 3 of the Amendment Act introduces changes under section 7 of the existing act.

Amendment by the court also mentioned that the application moved under Section 3 of the Amendment Act shall be retrospective, affecting pending applications.

In the case of Pioneer Urban Land and Infrastructure, the court made an interim order directing status quo on the pending applications filed by homebuyers against the defaulting builders.

Section 4 of IBC (Amendment) 2020

Section 4 inserted the explanation to Section 11, through the amendment.

“Explanation II: For the purpose of this section, it is hereby clarified that nothing in this section shall prevent a corporate debtor referred to in clause (a) to (d) from initiating corporate insolvency resolution process against another corporate debtor.


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