SC upholds provisions relating to personal guarantors under IBC

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  • Last Updated on 11 January, 2022

Insolvency and Bankruptcy Code 2016 - Application of Code

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 NazeerKannu AggarwalNavanjay Mahapatra, Advs., Arvind Kumar Sharma, AOR, K.V. VishwanathanRakesh Dwivedi, Sr. Advs., Sanjay Kapur, AOR, Ms. Megha KarnwalV.M. KannanSambit PanjaArjun BhatiaMs. Monali, Advs., Gopal SubramaniumDhruv Mehta, Sr. Advs., Jayavardhan SinghHitesh Kumar SainiShankh SenguptaSiddharth RanadeVividh TandonNishi BhankhariaKaazvin KapadiaMs. Saloni Gupta, Advs., Syed Jafar Alam, AOR, Ninad Laud, Adv., Sahil Tagotra, AOR, Annanya Mazumdar, Advs., Vikas Mehta, AOR, Apoorv KhatorSahil MongaArvind Kumar Gupta, Advs., Anindita Pujari, AOR, Ms. Purti GuptaMs. Henna GeorgeOm NarayanMs. Harpreet KaurArjun SyalShreyan DasZeeshan HashmiSalman Hashmi, Advs., Ms. Mithu Jain, AOR, Alok DhirMs. Jayashree Shukla DasguptaMs. Varsha BanerjeeAshu KansalMs. Swati SharmaAshish PyasiMilan Singh Negi, Advs., Karan Batura, AOR, Harish SalveSudipto SarkarP.S. Narsimha, Sr. Advs., Mahesh AgarwalMs. Shally BhasinAnkur SaigalKamaldeep DayalPrateek GuptaMs. Madhavi AgrawalAnkit BanatiMs. Saloni Mahajan, Advs., E.C. Agrawala, AOR, Sandeep S. Ladda, Adv., Soumik Ghosal, AOR, Gaurav Singh, Adv., Abhay Anand JenaDeepayan Mandal, AORs, S.R. RaghunathanS. Santanam SwaminadhanMs. Abhilasha Shrawat, Advs., Mrs. Aarthi Rajan, AOR, Vikram PooserlaTadimalla Bhaskar GowthamAbhinay Reddy M.Nitish BandaryJeevan Kumar NandamGautham PolusanyKeertivardhan KommareddyMs. Aahana MadhyalaMs. Krishma NedungadiMs. Achala Siri DoddalaMs. Shreya DevakiJyoti Kumar SinghP.R. RajhansChandhala DeviMrs. Paroma Sengupta, Advs., Sandeep SinghVishal Arun, AORs, Ms. Shivani, Adv., Ravindra S. ChingaleYashraj Singh Deora, AORs, Ms. Sonal MashankarMs. Shivangi SudMs. Prakriti Roy, Advs., P.S. Narasimha, Sr. Advs., M. Srinivas R. RaoSarath S. JanardananMs. Aditi TripathiMs. Sindoora VNLP. Kailash and MukundaKailashnath PSS, Advs., Abid Ali Beeran P.Krishna Dev JagarlamudiAnish R. Shah, AORs, Pradeep AggarwalMs. Soumya SharmaLal Pratap SinghUmesh Pratap SinghBhaskar AdityaArjun Aggarwal, Advs., Ms. Ruchi Kohli, AOR, Anirudh WadhwaMs. Anandna Handa WadhwaAtul Shankar VinodKarthikeya AsthanaVikash PathakVipul KumarBhargav ThaliKeshav Madhav GulatiSriram VenkatavardanM.P. VinodRohit SharmaPranav BhaskarRounak Nayak Atul AgarwalMs. Arju Chaudhary, Advs., Kumar Dushyant Singh, AOR, Vikas KumarManish PaliwalSandeep BajajSoayib Quershi, Advs., Nidhi Mohan Parashar, AOR, Ms. Aditi PundhirUttam DattRajiv SinghMs. Srujana Suman MundMs. Sonakshi Singh, Advs., Rishi Raj Sharma, AOR, Siddhartha Dave, Sr. Adv., Ms. Pallavi Langar, AOR, Ms. Gauri RishiMs. Srishti Juneja, Advs., Yadav Narender Singh, AOR, V. Lakshmikumaran, Adv., Ms. Charanya Lakshmikumaran, AOR, Yogendra AldakGopal MachirajuPuneeth GanpathyAaditya BhattacharyaMs. Apeksha Mehta, Advs., Ms. Mounica KasturiMs. Ishita Mathur, Advs., Malak Manish Bhatt, AOR, Ms. Neeha NagpalUdbhav Nanda, Advs., Soayib Qureshi, AOR, Ms. Pallavi SinghMs. Sangya GuptaG.S. Makker, Advs., Ritin Rai, Sr. Adv., Sidhartha BaruaSharan ThakurMs. Aditi Gupta, Advs., Ms. Jasmine Damkewala, AOR, Ms. Ritika SinhaMs. Gunjan MathurMs. Vaishali SharmaDinesh Chander Trehan, Advs., Ramji Srinivasan, Sr. Adv., Ms. Anindita Roy ChowdharyMs. Vansala RaiRaj Kanwar SinghParesh LalShivam SinghHarpreet Singh GuptaSahil Raveen, Advs., Manish Kumar, AOR, Ms. Aditi MittalAayush AgarwalaSiddhant TripathiAditya Narayan Mahajan, Advs., Arnav Narain, AOR, Alok KumarMs. Somya YadavaMs. Drishti HarpalaniUday Arora, Advs., G.N. ReddyDeepayan Mandal, AORs, Sumesh DhawanMs. Vatsala KakMs. Geetika SharmaAbhishek Anand, Adv., Ms. Mithu JainKunal GodhwaniRahul AdlakhaMohak SharmaViren SharmaPathik ChoudhuryVinod KumarM.D. SrinivasanMs. Avni Sharma, Advs., Dheeraj Nair, AOR, Ms. Anjali AnchayilMs. Vishrutyi SahniVinam Gupta, AOR, R. SudhinderNikhil SinghRahul DevRanjit Shetty, Advs., Ashok MathurVikas Mehta, AORs, D. Bharat KumarAman ShuklaHathindra Manda, Advs., Gopal Jha, AOR, Ms. MishaVaijayant PaliwalMs. Charu BansalMs. Jasveen Kaur, Advs., S.S. Shroff, AOR, Ms. MishaAnoop Rawat Ms. Mahima SareenMs. Moulshree ShuklaMs. Prabh Simran Kaur, Advs., Shardul S. ShroffMs. Praveena Gautam, AORs, Pawan ShuklaMs. Sweety PandeyAman SharmaRaja RamVivek SarinMs. Astha SehgalSatish C. Kaushik, Advs., Aakarshan AdityaArun Aggarwal, AORs, Ms. Anshika AggarwalMs. Ekjot Bhasin, Advs., Mritunjay Kumar Sinha, AOR, Ankit, Adv., Ms. Kavita Jha, AOR, Ms. Sandhya IyerUdit NareshMs. Shweta PrabhakarUtsav Kumar, Advs., O.P. Gaggar, AOR, Ms. Astha PrasadAditya Gaggar, Advs., Ankit Anandraj ShahBrijesh Kumar Tamber, AORs, Kinshuk ChatterjeeKushal BansalMs. Srishti Gupta, Advs., Sujoy Chatterjee, AOR, Atul SharmaAbhishek SharmaMs. Ashly CherianIndraprateek Naidu, Advs., Gautam Talukdar, AOR, Ateev MathurSanjay GuptaAjay MongaAmol Sharma, Advs., Gagan GuptaAbishek Jebaraj, AORs, Ms. Nupur Raut, Adv., Vivek A. Vashi, AOR, Shaheda MadrawalaMs. Shikha DhariaMs. Shilpa SengarBiswajit DubeyMadhav KanoriaMs. Surabhi KhattarPrafful GoyalMs. Vani Sharma, Advs., Sumit AttriRavindra Sadanand ChingaleMalak Manish BhattYadav Narender SinghMithu JainDeepayan MandalMs. Charanya LakshmikumaranVishal ArunYashraj Singh DeoraSoayib QuershiMs. Nidhi Mohan ParasharRishi Raj SharmaMs. Ruchi KohliKumar Dushyant SinghArnav NarainDheeraj NairRishi Raj SharmaDeepayan Mandal,G.N. ReddyVinam GuptaAshok MathurVikas Mehta,Vivek A. VashiGopal JhaAakarshan AdityaArun AggarwalMritunjay Kumar SinhaManish KumarMs. Kavita JhaAnkit Anandraj ShahSujoy ChatterjeeGautam TalukdarGagan GuptaSyed 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

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).

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