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Challenging IBC Provisions on Personal Guarantor in Apex Court

Challenging IBC Provisions on Personal Guarantor in Apex Court

The Bench of Justices L Nageswara Rao, Hemant Gupta, and Ajay Rastogi issued a notice in a batch of over 11 transfer petitions filed by IBBI. IBBI was represented by Additional Solicitor General Madhavi Divan with Advocates Vikas Mehta, Apoorv Khator, and Sahil Monga.

The Supreme Court recently agreed to consider the plea filed by Insolvency and Bankruptcy Board of India (IBBI) seeking transfer of a batch of petitions challenging the IBC provisions relating to insolvency of personal guarantors (Insolvency and Bankruptcy Board of India v. Lalit Kumar Jain & Ors).

The Bench of Justices L Nageswara Rao, Hemant Gupta, and Ajay Rastogi issued a notice in a batch of over 11 transfer petitions filed by IBBI. 
In its petition seeking transfer of these pending cases, IBBI has submitted that "various writ petitions have been filed in more than one High Court which raises substantial questions of law of general importance". All of these pending writ petitions challenge the constitutional validity of Part III of the IBC, which deals with insolvency resolution for individuals and partnership firms. Sections 95, 96, 99, 100, and 101 along with rules frames by Central Government in 2019 under IBC are challenged in these petitions. 

The Delhi High Court recently stayed the insolvency proceedings against Anil Ambani in his capacity as a guarantor. This stay was declined to be vacated by the Supreme Court and thus remains to be in force currently. IIBI claims that certain more such petitions from the High Court could be transferred in the future. IBBI has prayed for the Supreme Court to transfer all the petitions to itself and hear the challenge to the vires of the provisions itself.

Moreover, the Delhi High Court, where a large chunk of these petitions remain pending, earlier this month directed that the interim moratorium under Section 96 of IBC shall continue to be in effect in all cases where applications under Sections 94 and 95 have been filed. This prayer is also made to ease the confusion possibly arising due to conflicting judgments passed by different constitutional courts.

 

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