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Sanjay Singhal to raise arguments against the notice of SBI to invoke Personal Guarantee

Sanjay Singhal to raise arguments against the notice of SBI to invoke Personal Guarantee

Ex-Chairman of Bhushan Power and Steel Ltd Sanjay Singhal had filed petition challenging the validity of the Insolvency and Bankruptcy Code and has further sought relief on similar grounds as that of the relief granted to Anil Ambani and striking sections 95, 96, 97, 99, 100 and 101 from the Insolvency and Bankruptcy Code. The counsel appearing for Singhal submitted that it was wholly impermissible to enforce sections in relation to personal guarantors to corporate debtors as it was unconstitutional.

The Notification notifying the Sections in relation to personal guarantors to corporate debtors is per se without jurisdiction and ex facie arbitrary, discriminatory and unconstitutional, Singal has submitted. It is further asserted that Part III IBC governed "Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms" and that no provision in Part III IBC permitted the initiation of the insolvency resolution process against a personal guarantor to a corporate debtor.

Delhi High court refused to stay, at this stage, a notice issued by SBI to Singal seeking to invoke personal guarantee under the provisions. The matter is listed for early October.

Notice to the Central Government, Insolvency and Bankruptcy Board of India and State Bank of India was issued by a Division Bench of Chief Justice DN Patel and Justice Prateek Jalan. 

It may be recalled that SBI had recently invoked the personal guarantees of Sanjay Singhal and sent him a demand notice for recovery of ?12,275.91 crore as the guarantor of various loans availed by the company. This development came after the Finance Ministry had asked Public Sector Banks s to put in place a mechanism for monitoring cases, which may require initiation of insolvency proceedings against personal guarantors of corporate debtors. SBI had initiated recovery proceedings before the Debt Recovery Tribunal against Singal in relation to several guarantees. 

It will be interesting how the court takes up this matter with Anil Ambani’s case in the backdrop. 

 

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