Owning a home is a dream that is common to many Indians. It is the ultimate security. Unfortunately for most, the path to owning a home is treacherous and cumbersome. It's an uphill battle that begins with saving enough for the down payment and then continues into finding a house that matches your dreams; one that is often just a picture in a brochure. After signing many agreements (on the dotted line) with the builder and the lender bank, and making payments (in all sorts of colours), the wait begins. The fate of under-construction projects is almost always destined to be delayed. The builder/developer blames everyone but itself. The homebuyer waits patiently. Like all Indians accustomed to inefficient services, she hopes that this too will sort itself out. When, finally, it becomes clear that she has no alternative but to knock the doors of the court, she realizes that justice is going to take its own course – sometimes after multiple trips to the Apex Court.
The experience of homebuyers and getting relief under the Insolvency and Bankruptcy Code, 2016 ("the Code") has been difficult and exhausting since the inception of the Code. Initially, their entitlement to get relief under the Code as financial creditors was questioned. This was statutorily resolved through a clarificatory amendment, the constitutional validity of which was then challenged by real estate developers in Pioneer Urban Land & Infrastructure Limited & Anr. v. Union of India & Ors. (hereinafter 'Pioneer'). The Hon'ble Supreme Court upheld the constitutional validity of the amendments.
It was suggested during the course of the hearings in Pioneer, that the homebuyers ought to come to the Tribunal as a group, satisfying a minimum number of homebuyers before any insolvency application could be filed by them (Para 64). These suggestions were put forward by the real estate developers and were intended to persuade the Court to read down the amendments that clarified that homebuyers were financial creditors. It was held that these arguments were based on the presumption that some allottees may want to back out of the transaction and that a reading down of the provisions would obviate such a problem. Further, it was held that in an application made by an allottee, the NCLT's "satisfaction" will be with both eyes open i.e. the NCLT will not turn a Nelson's eye to the legitimate defenses by a real estate developer and thus there was no necessity to read down any of the provisions.
Thereafter, in December 2019, The Insolvency & Bankruptcy Code (Amendment) Ordinance, 2019 was brought into force, which brought in the minimum threshold for a homebuyer to institute insolvency proceedings. It provided that at least 100 allottees/homebuyers or 10% of the total number of allottees/homebuyers (whichever is lesser) of a real estate project must jointly file for the purposes of an application under Section 7 of the Code. Further, it gave 30 days to pending applications to comply with the minimum threshold requirement, lest the application would be dismissed.
On 20.02.2020, the Insolvency Law Committee gave its report, in which it recommended that there should be a requirement for a minimum threshold number of certain financial creditors in a class for initiation of the CIRP. Interestingly, the report came after the promulgation of The Insolvency & Bankruptcy Code (Amendment) Ordinance, 2019, which had already incorporated the said change.
On 13.03.2020, the Insolvency and Bankruptcy Code (Amendment) Act, 2020 was passed by the Parliament formalizing the increased threshold. Prior to the amendments being approved by Parliament, the matter was referred to a Standing Committee on Finance. In March 2020, it gave its 6th Report, which had 3 dissents to the introduction of the amendment.
Even prior to all this, certain homebuyers had challenged the constitutional validity of the amendments brought about by The Insolvency & Bankruptcy Code (Amendment) Ordinance, 2019.
This article focuses on analyzing the reasons given by the Insolvency Law Committee (February 2020) for proposing the amendment. In the author's view, the reasons do not justify the introduction of the amendment. While some of these reasons had been explicitly dealt with in Pioneer, others fail to show intelligible differentia qua operational creditors. The amendments are also devoid of any accompanying rules and makes misplaced comparisons to other class-action remedies.
The following table illustrates this:
Reasoning in ILC Report
"….there was a concern that the CIRP can be initiated by only one or few such financial creditors following minor disputes. This may exert undue pressure on the corporate debtor, and has the potential to jeopardise the interests of the other creditors in the class who are not in favour of the initiation of CIRP."
"This may also impose additional burden upon the Adjudicating Authority to hear objections to heavily disputed applications. The Committee noted that this may be antithetical to the value of a time-bound resolution process, as the already over-burdened Adjudicating Authorities are unable to list and admit all such cases filed before them."
"However, it was acknowledged that initiation of CIRP by classes of similarly situated creditors should be done in a manner that represents their collective interests. It was felt that a CIRP should be initiated only where there is enough number of such creditors in a class forming a critical mass that indicates that there is in fact large- scale agreement that the issues against a corporate entity need to be resolved by way of a CIRP under the Code. This may well be a more streamlined way of allowing a well-defined class of creditors to agree upon initiating what is a collective process of resolution under the Code."
"In this regard, and specific to the interests of homebuyers, the Committee also noted that in cases where a homebuyer cannot file an application for initiation of CIRP for having failed to reach the aforesaid critical mass, she would still have access to alternative fora under the RERA and under consumer protection laws. For instance, as recognised by the Supreme Court in the case of Pioneer Urban Land and Infrastructure Limited and Ors. v Union of India, the remedies under the Code and under the RERA operate in completely different spheres. The Code deals with proceedings in rem, under which homebuyers may want the corporate debtor's management to be removed and replaced so that the corporate debtor can be rehabilitated. On the other hand, the RERA protects the interests of the individual investor in real estate projects by ensuring that homebuyers are not left in the lurch, and get either compensation or delivery of their homes. Thus, if there is a failure to reach a critical mass for initiation of CIRP, it may indicate that in such cases another remedy may be more suitable."
"In this regard, the Committee considered if a cue may be taken from the requirements for filing of class actions suits as provided under the Companies Act, 2013. Class action suits may inter alia be filed by a hundred members or depositors or by at least 5 per cent of the total number of members or depositors of the company. Similar to this requirement, and keeping with the extant situation of classes of creditors under the Code, it was suggested that Section 7 of the Code could be amended in respect of such classes of creditors to allow initiation by a collective number of at least a hundred such creditors or at least ten percent of the total number of such creditors forming part of the same class."
The cue taken from Section 245 of the Companies Act, 2013 is misplaced:
"The Committee also noted that the collective number of homebuyers that form the threshold amount for initiation of a CIRP, should belong to the same real estate project. This would allow homebuyers that have commonality of interests, i.e. allottees under the same real estate project, to come together to take action for initiating CIRP against a real estate developer."
"However, to ensure that there is no prejudice to the interests of any such creditor in a class whose application has already been filed but not admitted by the Adjudicating Authority, the Committee agreed that a certain grace period may be provided within which such creditor in a class may modify and file its application in accordance with the above-stated threshold requirements. However, if the creditor is unable to fulfil the threshold requirements to file such modified application within the grace period provided, the application filed by such creditor would be deemed withdrawn."
The issues raised by the Insolvency Law Committee had already been thoroughly ironed out by the Hon'ble Supreme Court in Pioneer. After Pioneer, there did not remain any pending concerns regarding insolvency applications by homebuyers/allottees. In the author's view, to refer to the issues raised by the Petitioners in Pioneer, after they had been rejected by the Hon'ble Supreme Court, to justify the minimum threshold amendment would be manifestly arbitrary. It would imply that the amendments had been unreasonably enacted and without adequate determining principle, as the justifications for the amendment had already been dealt with in Pioneer. As pointed above, some of the justifications for the amendment are contrary to the Union of India's own submissions in Pioneer, when in fact there has been no change in the circumstances since Pioneer and the promulgation of The Insolvency & Bankruptcy Code (Amendment) Ordinance, 2019. This is, of course, not the first time that the Hon'ble Supreme Court has laid down the legal position with great clarity, only for the legislature to pass legislation to the contrary by referring to the report of a committee; after which the Hon'ble Supreme Court has had to strike down the amendment as manifestly arbitrary and violative of Article 14 of the Constitution of India.
In addition, in the author's view, the minimum threshold amendment also makes the position of individual homebuyer financial creditor inferior to individual operational creditor in respect of initiation of CIRP and therefore is violative of Article 14 of the Constitution of India on that ground as well.
 See the Report of The Insolvency Law Committee (March 2018) – Para 1.3
Nikhil Mehta & Sons v. AMR Infrastructure 2017 SCC OnLine NCLAT 377
 Insolvency & Bankruptcy Amendment Ordinance, 2018 (06.06.2018) followed by Insolvency & Bankruptcy (Second Amendment) Act, 2018 (17.08.2018)
 (2019) 8 SCC 416
 The paragraph numbering is as per the Report of the Supreme Court Cases (SCC)
 Clause 3
 Manish Kumar v. Union of India - Writ Petition 26 of 2020
 See Para 41 of Pioneer
 Interestingly, there appears to be a disconnect between the thresholds provided under Section 244 and 245 of the Companies Act, 2013. Section 244 provides that a petition u/s 241-242 for oppression/mismanagement can be filed by 100 members or 1/10th of the total number of members or members holding 10% shares. However, Section 245 (and the rules made thereunder) provide that a class action petition for oppression/mismanagement can be filed by 100 members or 5% of the total number of members or members holding 5% shares. Significantly, while the thresholds in Section 244 have been provided by the statute, the thresholds under Section 245 are provided in the rules by way of delegated legislation. Whether thresholds to institute the same nature of proceedings given by the legislature in one case can be different from that given by the executive in another, is an article for another day.
 See Section 242 of the Companies Act, 2013. This phraseology is not explicitly incorporated in Section 245. However, Section 245(1)(h) provides the Tribunal has the power to pass any order that it may deem fit, which, in the author's opinion should take colour from Section 242.
 See Rule 3 of The Companies (Management and Administration) Rules, 2014, which provides the Form of the Register of Members, which includes contact details.
 See Section 94 of the Companies Act, 2013
 (1888) 38 Ch. D. 92 at page 107
 Rule 14 of The Companies (Acceptance of Deposits) Rules, 2014
 See the judgment in Bikram Chatterji & Ors v. Union of India & Ors. (2019) 8 SCC 527 (Amrapali), Interestingly, the Hon'ble SC remarked that the banks (i.e.: the 'other' financial creditors) had been mute spectators to the diversion of the funds; Also see the order-dated 18.12.2009 in Civil Appeal No. 10856 of 2016 – Bhupinder Singh v. Unitech Ltd.
 See Para 61 of Pioneer
 Interestingly, this is contrary to the Union of India's submission in Pioneer that each project is usually carried out by a SPV, being a corporate entity on its own, and that it would not be correct to say that the admission of an insolvency application filed by an allottee would destabilize the management which has brought in large funds for many projects (Para 12).
 The NCLAT in its judgment-dated 04.02.2020 in Flat Buyers Association Winter Hills-77, Gurgaon v. Umang Realtech Ltd. & Ors. Company Appeal (AT) (Insolvency) No. 926 of 2019 held that if allottees or banks or operational creditors of one project initiated CIRP against the Corporate Debtor, then it shall be confined to that particular project and would not affect any other project(s). With respect, in author's view, while the principle is laudatory, there is no statutory provision permitting breaking up of the corporate personality of the Corporate Debtor into various projects and restricting the application of the Code to a particular project of a company. Of course, it would be a different matter if the CoC were to decide how individual projects will be handled. Project-wise CIRP is a discussion for another time.
 Hindustan Construction Company Ltd. & Anr. v. Union of India & Ors. (2019) SCC OnLine SC 1520
 Uncorrected Verbatim Debates – Rajya Sabha (12.03.2020). Relevant extract: "Primarily, this is to avoid frivolous litigation, that we have come up with a hundred or ten, whichever is the lowest, because we have had several issues of one home buyer who would probably go rightly asking for justice, but, in the process, the Resolution itself gets delayed and the time and the value of money has got to be kept in mind."