A PLEA FILLED ON CHALLENGING THE CONSTITUTIONALITY OF IBC PROVISIONS RELATING TO THE PERSONAL GUARANTORS; SUPREME COURT ISSUES NOTICE

The Supreme Court in the case Gurmeet Sodhi Versus Union of India & Or’s observed the provisions under the Insolvency & Bankruptcy Code, 2016 Code and the court issued notice on a petition filed by a personal guarantor which raises a constitutional challenge to the personal insolvency.

the Court to examine the issue of right to personal hearing, privacy and other related issues as stated in the matter The case will have considerable significance for personal guarantors. The impugned provisions denude the personal guarantors of the opportunity to raise objections on jurisdictional issues such as double dipping, period of limitation, inconsistent, illegal & false claims, quantum, suppression of facts, etc. at the very threshold, the Adjudicating Authority has not provided n opportunity of being heard in favour of the affected party before the initiation of the insolvency process. Section 95, 96, 97, 99 & 100 of the IBC Code, 2016 has been challenged and with its constitutional validity in the above-mentioned grounds.

The petitioner in the plea contended that as a personal guarantor the petitioner is entitled to notice and hearing by the Adjudicating Authority before appointment of resolution professional and initiation of interim moratorium under sections 95, 96 and 97 of the IBC Code, 2016. A writ petition has been filled under Article 32 of the Constitution of India by the personal guarantor, the petition contended that the impugned provisions do not provide for the personal guarantor’s right to be heard before entertaining the insolvency petition filed by the creditor and appointment of a resolution professional, thus violating the fundamental right to natural justice.

The bench comprising of Justice Vineet Siran and the justice JK Maheshwari observed and further directed that the petitioner shall not transfer, alienate, encumber or dispose of any of his assets or his legal rights or beneficial interest therein and thereafter the bench noted while issuing a notice in the writ petition filled and restrained the resolution professional in the personal guarantor’s insolvency proceedings from submitting the statutory report before the adjudicating authority.

The bench concluded that the resolution Professional officer shall not proceed with filling of the report until the further directions are received with the same.

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