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IB – 05 P

1st National IBC Moot Court

Competition, 2022

Manu Bhai Sharma

(Petitioners)
v
Union of Bharat
(Respondent)

Before the Hon’ble

Supreme Court of Bharat
Writ Petition No.: _____/2022
Under Article 32 of The Constitution of Bharat

Memorial for the Petitioners

Memorial on behalf of Petitioner

TABLE OF CONTENT

LIST OF ABBREVIATION………………………………………………………………….3
INDEX OF AUTHORITIES………………………………………………………………….4
STATEMENT OF JURISDICTION………………………………………………………….6
STATEMENT OF FACTS……………………………………………………………………7
ISSUES RAISED……………………………………………………………………………...9
SUMMARY OF ARGUMENTS……………………………………………………………..10
ARGUMENTS ADVANCED………………………………………………………………..11
ISSUE 1: WHETHER THE IBC (AMENDMENT) ACT 2020 IS UNCONSTITUTIONAL?.11
1.1 THAT SEC. 7(1) CREATES A CLASS WITHIN THE CLASS AMONG THE
FINANCIAL CREDITORS………………………………………………………………….11
1.2 THAT THE CONDITIONS ARE UNREASONABLE AND UNWORKABLE………..12
1.3 THAT IBC, 2020 VIOLATES ARTICLE 21…………………………………………….13
ISSUE 2: WHETHER THE RETROSPECTIVE APPLICATION UNDER SEC. 3 OF IBC,
2020 VIOLATES THE VESTED AND SUBSTANTIVE RIGHTS OF ALLOTEES?...........14
2.1 THAT THE RIGHT OF ACTION UNDER SEC. 7 OF IBC, 2016 IS A SUBSTANTIVE
RIGHT………………………………………………………………………………………..14
2.2 THAT THIS SUBSTANTIVE RIGHT IS VESTED TO THE ALLOTEES; SEC. 3
VIOLATES THE SAID RIGHTS……………………………………………………………15
2.3 RETROSPECTIVE EFFECT OF SEC. 3 VIOLATES THE GENERAL PRINCIPLE OF
LAW………………………………………………………………………………………….16
2.4 SEC. 3 ALSO VIOLATES A BINDING JUDICIAL PRONOUNCEMENT……………17
ISSUE 3: WHETHER THE IBC, 2016 CAN OVERRIDE RERA ACT, 2016?......................17
3.1 THAT RERA MEET THE REQUIRMENTS FOR OVERRIDING……………………..18
3.2 THAT RERA IS A SPECIAL ENACTMENT……………………………………………19
3.3 THE THRESHOLD REQUIREMENT IN IBC AS A HINDRANCE……………………19
ISSUE 4: WHETHER THE ALTERNATIVE FORUMS PROVIDE THE REMEDIES IN THE
BEST INTEREST OF ALLOTTEES?.....................................................................................20
4.1 REAL ESTATE (REGULATION & DEVELOPMENT) ACT, 2016……………………20
4.2 CONSUMER PROTECTION ACT, 1986………………………………………………..21
4.3 INSOLVENCY & BANKRUPTCY CODE, 2016……………………………………….22
PRAYER……………………………………………………………………………………..23

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Memorial on behalf of Petitioner

LIST OF ABBREVIATIONS

Abbreviation Full Form

IBC, 2020 Insolvency & Bankruptcy Code
(Amendment) Act 2020
CIRP Corporate Insolvency Resolution Process
SCC Supreme Court Cases
AIR All India Reporter
Anr. Another
v. Versus
Ors. Others
IBC Insolvency & Bankruptcy Code, 2016
RERA Real Estate (Regulation and Development)
Act
Ltd Limited
i.e. That is
CPA Consumer Protection Act
Sec. Section
CPC Civil Procedure Code

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Memorial on behalf of Petitioner

INDEX OF AUTHORITTIES

STATUTES
1. Constitution of India
2. The CPC, 1908
3. The CPA, 1986
4. The IBC, 2016
5. The IBC, (Amendment) Act, 2020
6. The RERA, 2016

BOOKS

1. M P Jain, Indian Constitutional Law, 7th edition, 2014, Lexis Nexis.

2. Justice G.P. Singh Principles of Statutory Interpretation, 14TH Edition
3. V.D. Mahajan, Jurisprudence and Legal Theory, 5TH Edition, 1993, EBC
4. John W. Salmond, Jurisprudence, 4th Edition, 1913, Ballantyne Press London

CASES

1. Pioneer Urban Land and Infrastructure Ltd v. Union of India, (2019) 8 SCC 416
(India).
2. State of Uttar Pradesh v. Committee of Management, Mata Tapeshwari Saraswathi
Vidya Mandir, (2010) 1 SCC 639 (India).
3. Sansar Chand Atri v. State of Punjab and Others, (2002) 4 SCC 154 (India).
4. Shayara Bano v. Union of India, AIR (2017) 9 SCC (India).
5. K S Puttaswamy v. Union of India, (2017) 10 SCC 1 (India).
6. S. Giridhari Lal & Son and Co v. B Kappini Gowder, (1938) 2 MLJ 44 (India).
7. Smt. Radhi Raney & Anr v. Mrs. Nanki Feroze, (2013) (5) ALD 223 (India).
8. Akash Singh Tomar v. Union of India, (2021) SCC OnLine MP 1243 (India)
9. Madhusudan Tantia v. Amit Choraria, (2020) SCC OnLine NCLAT 713 (India)
10. Commissioner of Income Tax v. Vatika Township Pvt. Ltd., 2010 SCC Online Del
3103 (India)

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Memorial on behalf of Petitioner

11. Beadling v Goll, (1992) 39 TLR 128 (England).

12. Chandrasingh v Surjital, 2003 (4) SCR 543 (India).
13. Venugopala v Krishnaswami, AIR 1971 Mad 262 (India).
14. Karnataka v. The Karnataka Pawn Brokers Association, (1998) 7 SCC 707 (India).
15. Sanwarmal Kejriwal v. Vishwa Coop. Housing Society Ltd., (1990) 2 SCC 288
(India)
16. Jain Ink Mfg. Co. v. LIC, (1980) 4 SCC 435 (India)
17. Anvar P.V. v. P.K. Basheer, (2014) 10 SCC 473 (India)
18. Imperia Structures Ltd. v. Anil Patni, (2020) 10 SCC 783 (India)

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Memorial on behalf of Petitioner

STATEMENT OF JURISDICTION

The Petitioners have approached the Hon’ble Supreme Court of Bharat under Article 32 of the
Constitution of Bharat by filing a writ of Mandamus, challenging the constitutional validity of
the IBC (Amendment) Act, 2020. The petitioner humbly submits to the jurisdiction of this
Hon’ble Court.

Article 32 in the Constitution of Bharat – Remedies for enforcement of rights conferred by this
Part –

The right to move the Supreme Court by appropriate proceedings for the enforcement of the
rights conferred by this Part is guaranteed

(2) The Supreme Court shall have power to issue directions or orders or writs, including writs
in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari,
whichever may be appropriate, for the enforcement of any of the rights conferred by this Part

(3) Without prejudice to the powers conferred on the Supreme Court by clause ( 1 ) and ( 2 ),
Parliament may by law empower any other court to exercise within the local limits of its
jurisdiction all or any of the powers exercisable by the Supreme Court under clause ( 2 )

(4) The right guaranteed by this article shall not be suspended except as otherwise provided
for by this Constitution

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Memorial on behalf of Petitioner

STATEMENT OF FACTS

1. Union of Bharat even though at the time of attaining independence was an agrarian
economy, it had provisions to make laws on IBC under the 3rd List of the Constitution.
Accordingly, the Government of Bharat has over the years brought a legislation to
regulate corporate sector of the country namely Companies Act, 1956.
2. In order to encourage the growth and establishment of businesses various financial
institutions provided loans to businesses. It was later observed that the financial
facilities availed by a number of corporate giants turned out to be ‘Bad Loans’ for
financial entities, leading to creation of immense financial burden on the financial
institutions.
3. Companies Act, 1956 was later replaced with the revised and amended Companies Act,
2013. However, the government did not provide for any mechanism through which a
Corporate Person unable to cater to its debt, could be subject to such mechanism to
enable its revival. Therefore, the Government enacted the IBC, 2016, thereby
consolidating, amending and repealing all the earlier laws in this aspect, giving the
financial creditors or the corporate debtors the right to initiate CIRP (CIRP) and provide
for a time bound process to resolve such Corporate Debtor before choosing liquidation.
4. The late 90’s era witnessed the development of wide and varied number of businesses
such as Builders and Realtors and in order to establish themselves in Bharat they
approached various financial entities of Bharat to avail financial facilities which they
keenly facilitated in order to meet their annual targets. Eventually, there was a surge in
the establishment of financial institution who provided finances to individual home
buyers at cut throat rates of interest by mortgaging the unbuilt property on papers. With
the passage of time, 6 out of 10 builders or realtors became defaulters and siphoned the
funds to their personal accounts which led to the abandoning of projects at an unfinished
stage. The demonetization led to further deterioration in the financial condition of all
the Realtors and Builders and pushed them into financial crisis.
5. As a result, the National Company Law Tribunal (NCLT) benches were being
overloaded with Petitions to initiate CIRP against Corporate Debtors by financial
institutions. The legislative intent behind drafting the Code was questioned by many
for reasons of it having an overriding effect on other laws governing the recovery
procedures for the time being in force leading to the Code being further challenged of

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Memorial on behalf of Petitioner

being violative of the Constitution of Bharat. During the judicial review of the
provisions of the Code the judgement passed by the Hon’ble Apex Court of in the
Pioneer Urban case accredited an individual home unit buyer with the right of being
financial creditor as the money invested by such homebuyer to have the commercial
effect of borrowing.
6. Soon thereafter, the NCLT’s across Bharat witnessed a number of Petitions being filed
under the Code, for the initiation of CIRP against the builders who happened to avail
huge investments from these creditors and had kept them waiting since time
immemorial to be granted possession of their booked units.
7. As a result of these circumstances the President of Bharat promulgated The IBC
(Amendment) Ordinance, 2019 making key amendments to the existing Code, the most
important of which was the amendment to Sec. 7 of the Code, through which it
regulated the rights of individual home/unit buyers towards initiation of CIRP against
the Corporate Debtor by fixing a minimum threshold of 100 or 10% of real estate
allottees (whichever is lesser) in the same project to approach the National Company
Law Tribunals as co-applicants for initiation of the CIRP process.
8. The passing of the Ordinance was criticized by a number of real estate allottees.
Therefore, a group real estate allottees approached the Hon’ble Apex Court of Bharat
through a Writ Petition, challenging the vires of the Ordinance as being violative of
Article 14 of the Constitution of Bharat. The Hon’ble Apex Court upon hearing the
submissions of parties to the petitions inter-alia directed status quo to be maintained
upon the applications pending adjudication before the respective benches and posted
the matter for final hearing. In the interim, the Government of Bharat passed the IBC
(Amendment) Act, 2020 negating the effect of the Ordinance. The relevant portion
pertaining to the rights of the real estate allotees as amended by the Ordinance was
verbatim in the amendment as well.
9. Aggrieved of the actions of the Government, the Petitioner Manu Bhai Sharma, a real
estate allottee along with several other such allotees approached the Hon’ble Apex
Court of Bharat, through a Writ Petition challenging the said amendment to be violative
of the Constitution of Bharat.

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Memorial on behalf of Petitioner

ISSUES RAISED

1. Whether the Insolvency Bankruptcy Code (Amendment) Act 2020 is unconstitutional?

2. Whether the Insolvency Bankruptcy Code, 2016 can override RERA Act, 2016?

3. Whether the retrospective application under Sec. 3 violates substantive and vested
rights of allotees?

4. Whether the alternate forums provide remedies in the best interest of allotees?

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Memorial on behalf of Petitioner

SUMMARY OF ARGUMENTS
Issue I

Whether the IBC (Amendment) Act 2020 is unconstitutional?

It is contended that the impugned amendment i.e., The IBC (Amendment) Act, 2020, is ultra
vires to the Indian Constitution as there is breach of the guarantee of equal protection of law.
This argument is substantiated on the grounds- (i) class within class, (ii) unreasonable and
unworkable and (iii) violation of Article 21.

Issue II

Whether the IBC, 2016 can override RERA Act, 2016?

It is contended that the home buyers would not fall within the category of ‘financial creditor’
or ‘operational creditor’ and should therefore be subsumed only with RERA, which is a
complete code dealing with real estate industry. RERA being a special act as opposed to the
Code, which is general act and ought, therefore RERA has to prevail.

Issue III

Whether the retrospective application under Sec. 3 violates substantive and vested rights
of allotees?

It is contended that the Sec. 3 of the impugned amendment violates the substantive rights of
allottees, i.e., financial creditors as it restricts their right of action to approach the adjudicating
authority and retrospective application of the Sec. brings out the vice of manifest arbitrariness.

Issue IV

Whether the alternate forums provide remedies in the best interest of allotees?

It is contended that the alternate forums for allottees are not providing remedies which are in
the best interest of allottees and while IBC which provides a holistic remedy and bestows
special rights within the remedy to the financial creditor is being restricted due to the impugned
amendment.

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Memorial on behalf of Petitioner

ARGUMENTS ADVANCED
ISSUE I

WHETHER THE IBC (AMENDMENT) ACT 2020 IS UNCONSTITUTIONAL?

It is contended that the impugned amendment i.e., The IBC (Amendment) Act, 20201
hereinafter referred to as IBC, 2020, is ultra vires to the Indian Constitution as there is breach
of the guarantee of equal protection of law.

This argument is justified on the basis of the following grounds:

1.1 That Sec. 7(1) creates a class within the class among the financial creditors.

Article 14 of the Constitution2 guarantees all its citizens equality before law and equal
protection before law.

The Supreme Court in the case of Pioneer Urban Land and Infrastructure v. Union of India3
concluded that the debt owed to home owners under real estate projects constitutes financial
debt within the meaning of Sec. 5(8) of the Code and effectively brings them in the ambit of
“financial creditors”.

However, the amendment to the Code brought a new rule that, irrespective of their claim
amount, a home buyer will have to comply with the condition given in the amended Sec. 7(1),
i.e., to bring 100 real estate allottees or 10% of the total allottees under a real estate project in
order to approach the Adjudicating Authority.

This amendment has led to the implication that it separates financial creditors under Sec. 7 into
two classes i.e., real estate allottees, and other financial creditors. This is because while other
financial creditors will have to satisfy only the claim amount under Sec. 4 of the Code to file
an application, real estate allottees will also have to find the requisite number of applicants and
ensure that the said number remain intact until the filing of the Petition and final adjudication
of the Petition.

There is no intelligible differentia between these two classes which have been created amongst
financial creditors. As mentioned in Pioneer Urban Land and Infrastructure v. Union of India
that the money owed to home allotees constitutes as financial debt under Sec. 5(8) of the Code

1
IBC (Amendment) Act, 2020.
2
Constitution of India, 1950.
3
Pioneer Urban Land and Infrastructure Ltd v. Union of India, (2019) 8 SCC 416 (India).

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Memorial on behalf of Petitioner

and brings them under the ambit of financial creditors. Therefore, the sub-class created among
the class of financial creditors and the conditions imposed on one of them is in violation of
Article 14.

The Supreme Court has in State of U.P v. Committee of Management, Mata Tapeshwari
Saraswathi Vidya Mandir4; frowned upon such legislative instruments that seek to create a
“class within a class.” While adjudicating upon the validity of a notification that created a class
within a class of Junior High Schools that would disentitle them from receiving any aid, the
Court ruled that “creation of a class within a class was unconstitutional and arbitrary, thus
making it ultra vires the Constitution.”

Hon’ble Supreme Court in the case of Sansar Chand Atri v. State of Punjab and Ors.5, quashed
a notification that created a class within a class of already existing military personnel drawing
pension by denying pensionary benefits to those who voluntarily retired. The Hon’ble Supreme
Court held that Military pensioners already formed a class within the broader definition of
“pensioners” and further sub-classifying them would be unconstitutional.

The supposed protection sought to be accorded to the real estate developer, cannot form the
premise for inflicting violation of constitutionally protected freedom under Article 14.
Therefore, the home owners even though given the title of a financial creditor are being
discriminated as compared to the other financial creditors as the amendment makes it difficult
for the former to approach the tribunal for redressal whereas the latter could easily approach
the tribunal as a single party.

1.2 That the conditions are unreasonable and unworkable.

The condition of gathering 100 or 10% of the home allotees to file for CIRP from the same real
estate project is unreasonable. Home allotees who have sunk their hard-earned money in real
estate projects do not have access to any system under which they could obtain data or
information regarding the persons similarly circumstanced and whose co-operation and support
is necessary under the impugned amendment to initiate the resolution process.

4
State of Uttar Pradesh v. Committee of Management, Mata Tapeshwari Saraswathi Vidya Mandir, (2010) 1
SCC 639 (India).
5
Sansar Chand Atri v. State of Punjab and Others, (2002) 4 SCC 154 (India).

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Memorial on behalf of Petitioner

There are various other legislations which makes provisions for collectively filing petitions
where there are several parties on the same side suing another party or defending themselves.
However, these legislations do not impose conditions for filing petitions.

For instance, Order 1 Rule 8 of Code of Civil Procedure6 provides the people to file
representative suit which enables one or more persons to file a suit on behalf of themselves and
others having same interest in the suit. However, there is no numerical stipulation or threshold
one has to meet as there are in the impugned Provisos.

Sec. 12 of the CPA7 which also captures and embodies the principle of Order 1 Rule 8 ensures
the protection of class interest and also protect class interest without putting stiff barriers as
threshold limits as done by the impugned amendment.

It is also important to note that the real estate owners raise most of their capital exclusively
from the allottees virtually. In such circumstances, to put this threshold limit is clearly
impermissible.

Another anomaly to take into account is that the dates of the agreements of different home
allotees would be different. Depending on the dates of the agreements being different, it is
undeniable, he points out that the date of default would be different. He would pose the question
as to how in such circumstances the law could insist upon a home buyer assembling together
other homebuyers and that too one hundred in number or one-tenth of the total number of
allottees.

1.3 That IBC, 2020 violates Article 21.

Sec. 3 is manifestly arbitrary in light of the test laid down by this Hon’ble Court in the
Judgement of Shayara Bano v. Union of India8 which is as follows:

“The test of manifest arbitrariness, therefore, as laid down in the aforesaid judgments would
apply to invalidate legislation as well as subordinate legislation under Article 14. Manifest
arbitrariness, therefore, must be something done by the legislature capriciously, irrationally

6
Code of Civil Procedure, 1908
7
CPA, 1986
8
Shayara Bano v. Union of India, AIR (2017) 9 SCC (India).

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Memorial on behalf of Petitioner

and/or without adequate determining principle. Also, when something is done which is
excessive and disproportionate, such legislation would be manifestly arbitrary.”

The aforesaid threshold imposed on the allottees is unreasonable, irrational, without adequate
determining principle and disproportionate and hence, manifestly arbitrary.

The law that is not just, fair or reasonable is no law under the Constitution. The leading opinion
of DY Chandrachud, J., in K.S. Puttaswamy v. Union of India9, held that

“…. Article 14, as a guarantee against arbitrariness, infuses the entirety of Article 21. The
interrelationship between the guarantee against arbitrariness and the protection of life and
personal liberty operates in a multi-faceted plane. First, it ensures that the procedure for
deprivation must be fair, just and reasonable. Second, Article 14 impacts both the procedure
and the expression “law”. A law within the meaning of Article 21 must be consistent with the
norms of fairness which originate in Article 14. As a matter of principle, once Article 14 has a
connect with Article 21, norms of fairness and reasonableness would apply not only to the
procedure but to the law as well…”

Since Sec. 3 is arbitrary and is in violation of Article 14, based on what was held in K.S.
Puttaswamy case it becomes violative of Article 21.

It is thus contended that the impugned amendment i.e., The IBC (Amendment) Act, 2020 is
violating Article 14 and 21 of the Constitution of Bharat. The amendment seeks to create new
thresholds requirements restricting allottees rights to receive proper redressal. Moreover, it
discriminates between classes by creating sub bifurcation under financial creditors and is
arbitrary and unreasonable in nature.

ISSUE II

WHETHER THE IBC, 2016 CAN OVERRIDE RERA ACT, 2016?

2.1 That RERA meet the requirements for overriding

The IBC (herein referred to as Parent Act) was passed on May 11, 2016 to provide a route for
creditors to seek relief against defaulting borrowers. Sec. 238 of this code provides for-

9
K S Puttaswamy v. Union of India, (2017) 10 SCC 1 (India).

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Memorial on behalf of Petitioner

Provisions of this Code to override other laws- It specifies that the legislation shall be in
addition to, and not in derogation of the provisions of any other law for the time being in force.

The amendments further made to this code were notwithstanding to the fact that there exists a
separate legislation namely, the Real Estate (Regulation & Development) Act, 2016 (RERA)
which deals in detail with real estate sector and provides for adjudication between the allottees
and promoters, with large number of safeguards for the allottees.

Moreover, RERA under Sec. 89 also provides for a non-obstante clause which states that the
Act should have an overriding effect—The provisions of this Act shall have effect,
notwithstanding anything inconsistent therewith contained in any other law for the time being
in force.

However, when two legislations purport to affect the same field, each containing an overriding
clause stating that its provisions will have effect ‘notwithstanding anything inconsistent
therewith contained in any other law for the time being in force’, the conflict between their
respective overriding clauses is roughly addressed on two grounds - later and former
legislation; special and general law.

Conventionally, a later legislation takes precedence over a former legislation for the reason that
the Parliament while making such laws are already aware of the existing laws dealing with a
similar subject matter. However, there have been a few exceptions to this where a special act
being a former legislation (both being central legislations) have been held to override a later
general legislation.

2.2 That RERA is a special enactment

Referring to the case of Sanwarmal Kajriwal v. Vishwa Co-operative housing society Ltd.10
1990, the SC held that "it is also relevant to consider as to whether any of the two enactments
can be described as a special one; in that case the special one may prevail over the more general
one notwithstanding that the general one in latter in time.

Moreover, in the case of Jain Ink Manufacturing Company vs Life Insurance Corporation,
198011, the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 (‘Premises Act’)

10
Sanwarmal Kejriwal v. Vishwa Coop. Housing Society Ltd., (1990) 2 SCC 288 (India)

11
Jain Ink Mfg. Co. v. LIC, (1980) 4 SCC 435 (India)

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Memorial on behalf of Petitioner

was a special which was held to prevail over the general Delhi Rent Control Act, 1958 even
though both the enactments contained non obstante clauses.

Applying this principle in the present case, it can be argued that as RERA is a special enactment
passed to protect the interests of homeowners across the country aggrieved by the constant
project delays faced at the hands of developers it would prevail over the IBC, even though it is
the earlier enactment. As the purpose of RERA is to protect the interests of these homeowners,
who were otherwise rendered helpless as result of delays in delivery at the hands of builders,
it can be argued that RERA is a special enactment which should override the IBC.

2.3 The threshold requirement in IBC as a hindrance

It is in the light of the special provisions of Sec. 31 and 32 of the RERA which allows a real
estate allottee to approach the forum in case of any violation of the rules and regulation,
however under Sec. 7 of the IBC, which is a later legislation, certain thresholds have been laid
down in order to initiate the proceedings which hinders the propagation of the process.

In Anvar PV v PK Basheer12, the Supreme Court held that Sec. 65-A and 65-B of the Evidence
Act, 1872, introduced by the amendments made to the Evidence Act by the Information
Technology Act, 2000, are special provisions relating to proof of electronic records, and will
prevail over the general law on Secondary evidence under Sec. 63 and 65 of the Evidence Act
because of the principle generalia specialibus non derogant.

The principle expressed in the above maxim generalibus specialia derogant i.e., if a special
provision is made on a certain matter, that matter is excluded from the general provision is
clearly attracted in the instance case. The above principle is well known adopted to harmonize
the two apparently conflicting provisions.

The application of this principle to the current assessment produces an interesting outcome.
The purpose and intent of RERA is to protect the interest of consumers acquiring real estate,
whereas the IBC was legislated to consolidate and amend the laws relating to insolvency
resolution and to promote entrepreneurship through recovery of funds for credit. In such a
conflicting situation, the provisions of RERA will override the provisions of IBC, since it is

12
Anvar P.V. v. P.K. Basheer, (2014) 10 SCC 473 (India)

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Memorial on behalf of Petitioner

specific to the situation of protecting the interests of homeowners in connection with

construction projects.

ISSUE III

WHETHER THE RETROSPECTIVE APPLICATION UNDER SEC. 3 OF IBC, 2020

VIOLATES THE VESTED AND SUBSTANTIVE RIGHTS OF ALLOTEES?

3.1 That the right of action under Sec. 7 of IBC, 2016 is a substantive right

It is submitted that a substantive law refers to a body of rules that create, defines and regulates
rights and liabilities. A substantive right is right with respect to any specific subject matter
which can be exercised against the State. It is a general principle of construction of statues that
the any statue which affects substantive rights of individuals are presumed to be prospective
unless there is absence of express enactment or necessary implication.

“Provisions which touch a right in existence at the passing of the statute are not to be applied
retrospectively in the absence of express enactment or necessary intendment.”13 The reasoning
behind such a presumption is the legal maxim, “nova constitutio futuris forman imponere debet
non praeteritis” which roughly translates to a new law ought to regulate what is to follow, not
the past.” Moreover, numerous cases have expounded on the principle of presumption against
retrospectivity. However, it is pointed in the CPC declares that procedural laws are
retrospective in nature unless there are good reasons to the contrary. Statute affects procedural
rights are retrospective in nature unless that is contextually impossible.

The court has held that statute which not only changes the procedure but also new rights and
liabilities shall be constructed to be prospective in operation, unless otherwise provided. It has
also been held that law relating to forum and limitation is procedural and laws relating to right
of action and appeal which is even though remedial are substantive in nature. It can also be
illustrated by “Whether I have a right to recover certain property is a question of substantive
law,… but in what courts and within what time I must institute proceedings are questions of

13
Lord Blanesburg (IOS)

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Memorial on behalf of Petitioner

procedural law.”14 Justice Pandrang Row in the case of S. Giradhari Lal & Son and Co. v B.
Kappini Gowder15, held that right of action is a substantive right.

In the present case, inferences can be drawn from the above statements, that Sec. 3 of the IBC
(Amendment) Act, 2020, which amends Sec. 7 of the IBC, 2016, which in turn allows for
initiation of CIRP by a financial creditor, that there existed a substantive right for the financial
creditor, i.e., homebuyers/allotees, being a right of action, was a substantive right given to the
allotees.

3.2 That this substantive right is vested to the allotees; Sec. 3 violates the said rights

“A vested right is a right in respect of which all events necessary to vest it completely in the
owner have happened. No other condition remains to be satisfied.” 16 In Smt. Radhi Raney &
Anr v Mrs. Nanki Feroze17, it was held that the rights of parties which get crystallized on the
date of which lis or a suit is commenced and becomes vested rights which ordinarily should
not be disturbed unless a course otherwise would lead to failure of justice18. The vested right
to file an application under IBC, 2016 gets vested on the date of institution of proceedings. 19

It is submitted to this Hon’ble Court that the Sec. 3 of the IBC, 2020 provides that an application
which is pending admission by the Adjudicating Authority before the commencement of the
said amendment would need to comply with the requirements laid down in the aforementioned
Sec. which provide that financial creditor who are allotees need to be 100 or 10% of a real
estate project in order to initiate a CIRP. Additionally, it would be considered withdrawn if the
application is not modified before a period of 30 days.

The imposition of the said threshold requirement is capricious, irrational and afflicted with the
vice of manifest arbitrariness owing to the fact that it retrospectively vitiates the substantive
and vested rights which were bestowed on individuals to initiate a CIRP. A retrospective statute
which affects right in existence is not readily construed to affect adjudication of pending
proceedings, since the pending applications were to be governed by the unamended statute, and

14
John W. Salmond, Jurisprudence, 438, (4 th ed., 1913) (ebook)
15
S. Giridhari Lal & Son and Co v. B Kappini Gowder, (1938) 2 MLJ 44 (India).
16
V.D. Mahajan, Jurisprudence & Legal Theory, 320, (5th ed., 1993) (ebook)
17
Smt. Radhi Raney & Anr v. Mrs. Nanki Feroze, (2013) (5) ALD 223 (India).
18
Akash Singh Tomar v. Union of India, (2021) SCC OnLine MP 1243 (India)
19
Madhusudan Tantia v. Amit Choraria, (2020) SCC OnLine NCLAT 713 (India)

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Memorial on behalf of Petitioner

the amended statute’s clear incursion into vested right violates the general principles of law,
which should not be permitted.

3.3 Retrospective effect of Sec. 3 violates the general principle of law

The general principle of law states that a retrospective legislation by which the conduct of
mankind is to be regulated when introduced for the first time to deal with future acts ought not
to change the character of past transactions carried on upon the faith of the then existing laws.
20

In various cases, the court has held that retrospective imposition of an amended Sec. need not
disturb the pending application or affect them in any manner whatsoever if the retrospective
effect is violating the substantive rights of the people. In a case21, the Gaming Act 1922, which
had repealed a Sec. of an earlier Gaming Act, was held not to terminate a pending action even
though it had enacted that “no action for the recovery of money under the said Sec. shall be
entertained by any court.” In Chandrasingh v Surjital22, the Sec. 12(2) of the Bombay Rents
Hotel and Lodging House rates Control Act, 1947, which enacted that “no suit for recovery of
possession shall be instituted” was held to be prospective not affecting a suit commenced
earlier to the passing of the Act. Similarly, in Venugopala v Krishnaswami23, Sec. 46(2) of the
Government of India Act, 1935, which enacted that Burma shall cease to be part of India was
construed not to affect the continuance of pending action in an Indian court which related to
properties situated in Burma.

3.4 Sec. 3 also violates a binding judicial pronouncement

The legislation also alters the decision of this Hon’ble Supreme Court in Pioneer Urban24 by
providing additional qualification to approach the adjudicating authority as a financial creditor
to seek relief, which also vitiates the well settled principle of law that a binding judicial
pronouncement between the parties cannot be made ineffective with the aid of any legislative
power by enacting a provision which in substance overrules such judgement.

20
Commissioner of Income Tax v. Vatika Township Pvt. Ltd., 2010 SCC Online Del 3103 (India)
21
Beadling v Goll, (1992) 39 TLR 128 (England).
22
Chandrasingh v Surjital, 2003 (4) SCR 543 (India).
23
Venugopala v Krishnaswami, AIR 1971 Mad 262 (India).
24
Pioneer Urban Land and Infrastructure Limited v Union of India (2019) 8 SCC 416 (India).

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Memorial on behalf of Petitioner

In Cauvery Water Dispute Tribunal Re, emphasised this point of law by stating that the “the
legislature can change the basis on which a decision is given by the Court and thus change the
law in general, which will affect a class of persons and events at large. It cannot, however, set
aside an individual decision inter parties and affect their rights and liabilities alone.”

In Karnataka v The Karnataka Pawn Brokers Association25, observed that the “the Legislature
cannot set at nought the judgments which have been pronounced by amending the law, not for
the purpose of making corrections or removing anomalies but to bring in new provisions which
did not exist earlier.”

It is contended that the amended law does not take into account the principles of limited
retrospectivity and without hesitation hugely impacts the substantive right of those individuals
whose applications are pending before the Hon’ble Adjudicating Authority. This is manifestly
erroneous and a major roadblock in the process of ensuring a logical and legal conclusion to
the vested rights of people. Retrospective effect on pending lis is unjust because it disappoints
the justified expectations of those who, in acting, having relied on the assumption that the legal
consequences of their acts will be determined by the known state of the law established at the
time of their acts.

ISSUE IV

WHETHER THE ALTERNATE FORUMS PROVIDE THE REMEDIES IN THE BEST

INTEREST OF ALLOTTEES?

4.1 Real Estate (Regulation & Development) Act, 2016

It is submitted that the homebuyers aggrieved by the delay in handling over of possession of
their real estate have several forums to approach in order to receive a remedy for the same. Post
the commencement of the RERA, 2016, their rights have been crystallized and the dispute
resolution machinery was established to streamline the process.

Sec. 44 of the RERA provides for application for settlement of disputes and the Sec. 71 gives
the authority to adjudicate upon matters and it also guarantees the disposal of any matter within
a span of 60 days with the aggrieved party to be paid compensation in the form of penalty upon
the Developer.

25
Karnataka v. The Karnataka Pawn Brokers Association, (1998) 7 SCC 707 (India).

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Memorial on behalf of Petitioner

However, post the adjudication of the case, the case is transferred to the Authority as mentioned
in the Sec. 20(1) who therefore calculates the compensation to be given along with the interest.
As per Sec. 40, if the Promoter or the Developer fails to compensate the allottees, the same is
construed to be land arrears which then would be retrieved by the Collector of the district. Once
the compensation transforms into land arrears, the execution of such an order goes into the
hands of the administrative body, which generally fails in realising the objective of the RERA
as the compensation rarely comes through.

It is argued that failure to comply with the order/decree passed by a Civil Court, amounts to
Contempt of Court under the Contempt of Court Act, 1971, and the said Act lays down another
remedy for the same under Sec. 12 which extends to punishment for the offender. However,
such a remedy for the non-compliance with the order of the Real Estate Tribunal is non-existent
and fails in actually working for the best interest of allottees.

4.2 Consumer Protection Act, 1986

The CPA, 1986 which seeks to provide for better protection of the interests of consumers and
for the purpose, to make provision for the establishment of Consumer Councils and other
authorities for the settlement of consumer disputes and for matters connected therewith. Since
the CPA provides remedies in the form of compensation to the aggrieved consumer, it has
jurisdiction over all the matters as long as the complainant fulfils the criteria of Consumer as
per the CPA

In a significant case of Imperial Structures Limited v Surinder Anil Patni & Anr26. this Hon’ble
Court had adjudicated that the homebuyers are consumers within the meaning of Sec. 2(1)(d)
of the CPA since the developer had failed to prove that home-buyer (complainant) is indulged
in the business of sale and purchase of flats and additionally the bench also held that the
availability of an alternative remedy under RERA would not bar them from initiating a
complaint under CPA. Based on the pecuniary value of the flat/house, the homebuyer can
approach the jurisdiction of the district forum as mentioned in the Sec. 11, the State
Commission under Sec. 17, or the National Commission under Sec. 21 of the CPA.

26
Imperia Structures Ltd. v. Anil Patni, (2020) 10 SCC 783 (India)

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Memorial on behalf of Petitioner

4.3 Insolvency and Bankruptcy Code, 2016

The IBC, 2016, on the other hand has been interpreted to include homebuyers as financial
creditors, which meant that they can originate and initiate CIRP at the forum of the
Adjudicating Authority. This economic legislation also brings forth a wider array of rights to
these financial creditors, instance under Sec. 30 of the IBC, 2016, which provides for
submission of Resolution Plan by the financial creditor, i.e., home buyer. Sec. 21 provides for
them to be part of Committee of Creditors which gives them more autonomy and self-
sufficiency.

The impugned amendment which violates and restricts the substantive rights given for the
allottees to approach the appropriate authority results in the allottees being deprived of these
privileges which only the IBC, 2016 provides and the alternative forums fail in this regard.
Apart from these rights under this remedy, the real estate projects require the change in
management mostly which can only be done by the remedy under IBC, 2016 and not the
alternate forums. Therefore, the impugned amendment mandating the minimum threshold
requirement does not work in the best interest of the allottees, i.e., financial creditors and fails
to achieve the object of the Preamble of the Code.

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Memorial on behalf of Petitioner

PRAYER
Wherefore, in the light of facts stated, the cases cited, issues raised, arguments advanced and
authorities cited, it is most humbly prayed and implored before the Hon’ble Supreme Court
of Bharat, that it may be graciously pleased to:

1. Remove the threshold imposed on home allotees in Sec. 3.

2. Remove the imposition of minimum threshold requirement under Sec. 3 on impending

cases.

Also, pass any other order that the court may deem fit in the favour of Petitioner to meet the
ends of Equity, Justice and Good Conscience.

For this act of Kindness, the Petitioner shall duty bound forever pray.

Place: Union of Bharat Respectfully submitted,

Dated: 25th March 2022. Counsel for Petitioner

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