SC upholds provisions relating to personal guarantors under IBC

Case Details: Lalit Kumar Jain v. Union Of India - [2021] 127 taxmann.com 368 (SC)

Judiciary and Counsel Details

• • L. Nageswara Rao and S. Ravindra Bhat, JJ.
  • K.K. Venugopal, Ld. AG, Tushar Mehta, Ld. AG, Mohammed Akhil Nazeer, Kannu Aggarwal, Navanjay Mahapatra, Advs., Arvind Kumar Sharma, AOR, K.V. Vishwanathan, Rakesh Dwivedi, Sr. Advs., Sanjay Kapur, AOR, Ms. Megha Karnwal, V.M. Kannan, Sambit Panja, Arjun Bhatia, Ms. Monali, Advs., Gopal Subramanium, Dhruv Mehta, Sr. Advs., Jayavardhan Singh, Hitesh Kumar Saini, Shankh Sengupta, Siddharth Ranade, Vividh Tandon, Nishi Bhankharia, Kaazvin Kapadia, Ms. Saloni Gupta, Advs., Syed Jafar Alam, AOR, Ninad Laud, Adv., Sahil Tagotra, AOR, Annanya Mazumdar, Advs., Vikas Mehta, AOR, Apoorv Khator, Sahil Monga, Arvind Kumar Gupta, Advs., Anindita Pujari, AOR, Ms. Purti Gupta, Ms. Henna George, Om Narayan, Ms. Harpreet Kaur, Arjun Syal, Shreyan Das, Zeeshan Hashmi, Salman Hashmi, Advs., Ms. Mithu Jain, AOR, Alok Dhir, Ms. Jayashree Shukla Dasgupta, Ms. Varsha Banerjee, Ashu Kansal, Ms. Swati Sharma, Ashish Pyasi, Milan Singh Negi, Advs., Karan Batura, AOR, Harish Salve, Sudipto Sarkar, P.S. Narsimha, Sr. Advs., Mahesh Agarwal, Ms. Shally Bhasin, Ankur Saigal, Kamaldeep Dayal, Prateek Gupta, Ms. Madhavi Agrawal, Ankit Banati, Ms. Saloni Mahajan, Advs., E.C. Agrawala, AOR, Sandeep S. Ladda, Adv., Soumik Ghosal, AOR, Gaurav Singh, Adv., Abhay Anand Jena, Deepayan Mandal, AORs, S.R. Raghunathan, S. Santanam Swaminadhan, Ms. Abhilasha Shrawat, Advs., Mrs. Aarthi Rajan, AOR, Vikram Pooserla, Tadimalla Bhaskar Gowtham, Abhinay Reddy M., Nitish Bandary, Jeevan Kumar Nandam, Gautham Polusany, Keertivardhan Kommareddy, Ms. Aahana Madhyala, Ms. Krishma Nedungadi, Ms. Achala Siri Doddala, Ms. Shreya Devaki, Jyoti Kumar Singh, P.R. Rajhans, Chandhala Devi, Mrs. Paroma Sengupta, Advs., Sandeep Singh, Vishal Arun, AORs, Ms. Shivani, Adv., Ravindra S. Chingale, Yashraj Singh Deora, AORs, Ms. Sonal Mashankar, Ms. Shivangi Sud, Ms. Prakriti Roy, Advs., P.S. Narasimha, Sr. Advs., M. Srinivas R. Rao, Sarath S. Janardanan, Ms. Aditi Tripathi, Ms. Sindoora VNL, P. Kailash and MukundaKailashnath PSS, Advs., Abid Ali Beeran P., Krishna Dev Jagarlamudi, Anish R. Shah, AORs, Pradeep Aggarwal, Ms. Soumya Sharma, Lal Pratap Singh, Umesh Pratap Singh, Bhaskar Aditya, Arjun Aggarwal, Advs., Ms. Ruchi Kohli, AOR, Anirudh Wadhwa, Ms. Anandna Handa Wadhwa, Atul Shankar Vinod, Karthikeya Asthana, Vikash Pathak, Vipul Kumar, Bhargav Thali, Keshav Madhav Gulati, Sriram Venkatavardan, M.P. Vinod, Rohit Sharma, Pranav Bhaskar, Rounak Nayak , Atul Agarwal, Ms. Arju Chaudhary, Advs., Kumar Dushyant Singh, AOR, Vikas Kumar, Manish Paliwal, Sandeep Bajaj, Soayib Quershi, Advs., Nidhi Mohan Parashar, AOR, Ms. Aditi Pundhir, Uttam Datt, Rajiv Singh, Ms. Srujana Suman Mund, Ms. Sonakshi Singh, Advs., Rishi Raj Sharma, AOR, Siddhartha Dave, Sr. Adv., Ms. Pallavi Langar, AOR, Ms. Gauri Rishi, Ms. Srishti Juneja, Advs., Yadav Narender Singh, AOR, V. Lakshmikumaran, Adv., Ms. Charanya Lakshmikumaran, AOR, Yogendra Aldak, Gopal Machiraju, Puneeth Ganpathy, Aaditya Bhattacharya, Ms. Apeksha Mehta, Advs., Ms. Mounica Kasturi, Ms. Ishita Mathur, Advs., Malak Manish Bhatt, AOR, Ms. Neeha Nagpal, Udbhav Nanda, Advs., Soayib Qureshi, AOR, Ms. Pallavi Singh, Ms. Sangya Gupta, G.S. Makker, Advs., Ritin Rai, Sr. Adv., Sidhartha Barua, Sharan Thakur, Ms. Aditi Gupta, Advs., Ms. Jasmine Damkewala, AOR, Ms. Ritika Sinha, Ms. Gunjan Mathur, Ms. Vaishali Sharma, Dinesh Chander Trehan, Advs., Ramji Srinivasan, Sr. Adv., Ms. Anindita Roy Chowdhary, Ms. Vansala Rai, Raj Kanwar Singh, Paresh Lal, Shivam Singh, Harpreet Singh Gupta, Sahil Raveen, Advs., Manish Kumar, AOR, Ms. Aditi Mittal, Aayush Agarwala, Siddhant Tripathi, Aditya Narayan Mahajan, Advs., Arnav Narain, AOR, Alok Kumar, Ms. Somya Yadava, Ms. Drishti Harpalani, Uday Arora, Advs., G.N. Reddy, Deepayan Mandal, AORs, Sumesh Dhawan, Ms. Vatsala Kak, Ms. Geetika Sharma, Abhishek Anand, Adv., Ms. Mithu Jain, Kunal Godhwani, Rahul Adlakha, Mohak Sharma, Viren Sharma, Pathik Choudhury, Vinod Kumar, M.D. Srinivasan, Ms. Avni Sharma, Advs., Dheeraj Nair, AOR, Ms. Anjali Anchayil, Ms. Vishrutyi Sahni, Vinam Gupta, AOR, R. Sudhinder, Nikhil Singh, Rahul Dev, Ranjit Shetty, Advs., Ashok Mathur, Vikas Mehta, AORs, D. Bharat Kumar, Aman Shukla, Hathindra Manda, Advs., Gopal Jha, AOR, Ms. Misha, Vaijayant Paliwal, Ms. Charu Bansal, Ms. Jasveen Kaur, Advs., S.S. Shroff, AOR, Ms. Misha, Anoop Rawat , Ms. Mahima Sareen, Ms. Moulshree Shukla, Ms. Prabh Simran Kaur, Advs., Shardul S. Shroff, Ms. Praveena Gautam, AORs, Pawan Shukla, Ms. Sweety Pandey, Aman Sharma, Raja Ram, Vivek Sarin, Ms. Astha Sehgal, Satish C. Kaushik, Advs., Aakarshan Aditya, Arun Aggarwal, AORs, Ms. Anshika Aggarwal, Ms. Ekjot Bhasin, Advs., Mritunjay Kumar Sinha, AOR, Ankit, Adv., Ms. Kavita Jha, AOR, Ms. Sandhya Iyer, Udit Naresh, Ms. Shweta Prabhakar, Utsav Kumar, Advs., O.P. Gaggar, AOR, Ms. Astha Prasad, Aditya Gaggar, Advs., Ankit Anandraj Shah, Brijesh Kumar Tamber, AORs, Kinshuk Chatterjee, Kushal Bansal, Ms. Srishti Gupta, Advs., Sujoy Chatterjee, AOR, Atul Sharma, Abhishek Sharma, Ms. Ashly Cherian, Indraprateek Naidu, Advs., Gautam Talukdar, AOR, Ateev Mathur, Sanjay Gupta, Ajay Monga, Amol Sharma, Advs., Gagan Gupta, Abishek Jebaraj, AORs, Ms. Nupur Raut, Adv., Vivek A. Vashi, AOR, Shaheda Madrawala, Ms. Shikha Dharia, Ms. Shilpa Sengar, Biswajit Dubey, Madhav Kanoria, Ms. Surabhi Khattar, Prafful Goyal, Ms. Vani Sharma, Advs., Sumit Attri, Ravindra Sadanand Chingale, Malak Manish Bhatt, Yadav Narender Singh, Mithu Jain, Deepayan Mandal, Ms. Charanya Lakshmikumaran, Vishal Arun, Yashraj Singh Deora, Soayib Quershi, Ms. Nidhi Mohan Parashar, Rishi Raj Sharma, Ms. Ruchi Kohli, Kumar Dushyant Singh, Arnav Narain, Dheeraj Nair, Rishi Raj Sharma, Deepayan Mandal,G.N. Reddy, Vinam Gupta, Ashok Mathur, Vikas Mehta,Vivek A. Vashi, Gopal Jha, Aakarshan Aditya, Arun Aggarwal, Mritunjay Kumar Sinha, Manish Kumar, Ms. Kavita Jha, Ankit Anandraj Shah, Sujoy Chatterjee, Gautam Talukdar, Gagan Gupta, Syed Jafar Alam and Abishek Jebaraj, AORs for the Appearing Parties.

Facts of the Case

In the instant case, writ petitions were filed in the Delhi High Court and other High Courts challenging the 2019 notification and the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019 as well as many similar Rules. Writ petitions challenged the constitutional validity of Part III of the IBC, which deals with insolvency resolution for individuals and partnership firms.

Supreme Court Held

Considering the importance of the issues raised in the writ petitions, which needed finality of judicial determination, the Apex Court transferred all writ petitions from the High Court to itself.

Case Review

• • Koteswar Vittal Kamath v. K. Rangappa Baliga & Co. [1969] 1 SCC 255 (para 88);
  • Vijay Kumar Jain v. Standard Chartered Bank [2019] 102 taxmann.com 14/152 SCL 56 (SC) (para 108);
  • Committee of Creditors of Essar Steel (I) Ltd. v. Satish Kumar Gupta [2019] 111 taxmann.com 234 (SC) (para 108)
  • Industrial Finance Corpn. of India Ltd. v. Cannanore Spg. & Wvg. Mills Ltd. [2002] 5 SCC 54 (para 111) followed.

List of Cases Referred to

• • State Bank of India v. V. Rama Krishnan [2018] 96 taxmann.com 271/149 SCL 107 (SC) (para 8)
  • Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC) (para 12)
  • Delhi Laws Act, 1912, In re [1951] SCR 747 (para 16)
  • State of Tamil Nadu v. K. Sabanayagam [1998] 1 SCC 318 (para 16)
  • Vasu Dev Singh v. Union of India [2006] 12 SCC 753 (para 16)
  • R. v. Burah [1878] 3 App. Cases 889 (para 18)
  • State of Bombay v. Narottamdas Jethabai [1951] 2 SCR 51 (para 20)
  • Sardar Inder Singh v. State of Rajasthan AIR 1957 SC 570 (para 20)
  • Hamdard Dawakhana (Wakf) Lal v. Union of India AIR 1960 SC 554 (para 20)
  • Babulal Vardharji Gurjar v. Veer Gurjar Aluminum Industries (P.) Ltd. [2020] 118 taxmann.com 323 (SC) (para 23)
  • Jatindra Nath Gupta v. Proince of Bihar [1949-50] 11 FCR 595 (para 26)
  • Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta [2019] 111 taxmann.com 234 (SC) (para 28)
  • Kundanmal Dabriwala v. Haryana Financial Corpn. [2012] 22 taxmann.com 274/114 SCL 609 (Punj. & Har.) (para 29)
  • Dr. Vishnu Kumar Agarwal v. Piramal Enterprises Ltd. [2019] 101 taxmann.com 464/151 SCL 555 (NCL – AT) (para 30)
  • Chettian Veetil Ammad v. Taluk Land Board [1980] 1 SCC 499 (para 34)
  • Basant Kumar Sarkar v. Eagle Rolling Mills Ltd. [1964] 6 SCR 913 (para 36)
  • Biswambhar Singh v. State of Orissa AIR 1954 SC 139 (para 36)
  • Embassy Property Developments (P.) Ltd. v. State of Karnataka [2019] 112 taxmann.com 56/[2020] 157 SCL 445 (SC) (para 39)
  • J. Mitra & Co. (P.) Ltd. v. Assistant Controller of Patents & Designs [2008] 10 SCC 368 (para 42)
  • Lalit Narayan Mishra Institute of Economic Development & Social Change v. State of Bihar [1988] 2 SCC 433 (para 42)
  • Javed v. State of Haryana [2003] 8 SCC 369 (para 42)
  • Gopilal J. Nichani v. Trac Industries & Components Ltd. AIR 1978 Mad. 134 (para 43)
  • Bank of Bihar Ltd. v. Dr. Damodar Prasad [1969] 1 SCR 620 (para 43)
  • State Bank of India v. Index Port Registered AIR 1992 SC 1740 (para 43)
  • Industrial Investment Bank of India v. Biswanath Jhunjhunwala [2009] 9 SCC 478 (para 43)
  • Maharashtra State Electricity Board Bombay v. Official Liquidator, High Court, Ernakulum [1982] 3 SCC 358 (para 44)
  • Punjab National Bank v. State of U.P. [2002] 5 SCC 80 (para 44)
  • Gouri Shankar Jain v. Punjab National Bank [2020] 117 taxmann.com 613 (Cal.) (para 45)
  • PAFCO 2916 Inc. v. Kingfisher Airlines Ltd. 2016 SCC Online Kar. 5991 (para 45)
  • Kaupthing Singh & Friedlander Ltd. (In administration), In re [Co. 2012 (1) All ER 883] (para 45)
  • Lachmi Narain v. Union of India [1976] 2 SCC 953 (para 47)
  • Raghubar Swarup v. State of U.P. AIR 1951 SC 909 (para 48)
  • Tulsipur Sugar Co. Ltd. v. Notified Area Committee [1980] 2 SCC 295 (para 48)
  • Bangalore Woollen Cotton & Silk Mills Co. Ltd. v. Corporation of the City of Bangalore [1961] 3 SCR 698 (para 48)
  • ITC Bhadrachalam Paperboads v. Mandal Revenue Officer [1996] 6 SCC 634 (para 48)
  • Edward Mills Co. Ltd. v. State of Ajmer [1955] 1 SCR 735 (para 49)
  • State of West Bangal v. Union of India [1964] 1 SCR 371 (para 50)
  • Chairman Board of Mining Examination v. Ramjee AIR 1977 SC 965 (para 51)
  • Directorate of Enforcement v. Deepak Mahajan [1994] 3 SCC 440 (para 51)
  • Arcelor Mittal India (P.) Ltd. v. Satish Kumar Gupta [2018] 98 taxmann.com 99/150 SCL 354 (SC) (para 51)
  • Western Coalfield Ltd. v. Special Area Development Authority [1982] 1 SCC 125 (para 53)
  • Baleshwar Dayal Jaiswal v. Bank of India [2015] 61 taxmann.com 104/132 SCL 129 (SC) (para 53)
  • Nagpur Improvement Trust v. Vasantrao [2002] 7 SCC 657 (para 53)
  • Brij Sunder Kapoor v. First Additional Judge [1989] 1 SCC 561 (para 55)
  • Raghubar Sarup Nawab Jamshed Ali Khan v. State of U.P. AIR 1959 SC 909 (para 56)
  • Khargram Panchayat Samiti v. State of West Bengal [1987] 3 SCC 82 (para 56)
  • Koteswar Vittal Kamath v. K. Rangappa Baliga & Co. [1969] 1 SCC 255 (para 87)
  • Rajendra K. Bhutta v. Maharashtra Housing & Area Development Authority [2020] 114 taxmann.com 655/160 SCL 95 (SC) (para 88)
  • Pannalal Bansilal Pitti v. State of A.P. [1996] 2 SCC 498 (para 90)
  • Vijay Kumar Jain v. Standard Chartered Bank [2019] 102 taxmann.com 14/152 SCL 56 (SC) (para 105)
  • Industrial Finance Corpn. of India Ltd. v. Cannanore Spg. & Wvg. Mills Ltd. [2002] 5 SCC 54 (para 109)
  • Punjab National Bank v. State of U.P. [2002] 5 SCC 80 (para 109).