SC Transfers Pending Petitions Challenging IBC Provisions On Personal Insolvency To Itself From Various HCs

What is the decision of the Supreme Court?

• A bench of three Judges of the Supreme Court on Thursday decided to transfer to itself a batch of writ petitions filed against provisions concerning personal guarantee under the Insolvency and Bankruptcy Code (IBC) which are pending before various High Courts in the country.
• The bench comprising Justices L Nageswara Rao, Hemant Gupta, and Ajay Rastogi asked the various High Courts to not entertain any fresh writ petitions on the subject and said that all interim orders of the High Court would operate till the passing of any further orders.
• The case will be again heard at length on 2nd December.
• The Supreme Court observed that it is just and proper to transfer the said writ petitions to this court from the High Courts in view of the importance of the issues raised in the petitions which need immediate adjudication.

What did the apex court say in its order?

• The apex court stated in its order, “Transfer of the writ petitions to this court would avoid conflicting decisions by the HCs... The IBC is at a nascent stage and it is better that the interpretation of the provisions of the Code is taken up by this court to avoid any confusion, and to authoritatively settle the law.”
• The top court further stated, “The interim orders passed by the HCs, if any, shall continue till further orders.”

What is the plea raised by the Bankruptcy Board of India (IBBI)?

• The IBBI has said in its plea that various writ petitions are pending before different High Courts which raise substantial questions of law of general importance. These writ petitions are same and relate to the provisions of IBC.
• Additional Solicitor General Madhavi Divan during the course of hearing argued that it would be just and proper to transfer all such petitions to the Supreme Court for final decision in order to avoid any conflict of opinion in the orders of different High Courts.

Background of the decision

• The verdict is pronounced by the apex court in response to a transfer petition moved by the Insolvency and Bankruptcy Board of India (IBBI) seeking to transfer all writ petitions challenging the IBC provisions regarding insolvency of personal guarantors to corporate debtors which are pending before different High Courts.
• The writ petition regarding the personal insolvency of businessman Anil Ambani is one such writ petition which is sought to be transferred from the Delhi High Court.
• In August, 2020 the Chairman of ADA Group, Anil Ambani appealed against the petition of the State Bank of India (SBI) seeking to recover the loan of Rs 1,200 crore granted to two of his companies. The plea seeking to resume insolvency proceedings against Ambani raised by SBI were rejected by the top court. The Supreme Court further directed the Delhi High Court to hear Ambani’s challenge to the IBBI (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019.
• These rules were introduced by the Central government in November 2019 with the object to empower the creditors to get the under-recovered sum from a personal guarantor through the process of resolution of corporate insolvency.
• Apart from Anil Ambani’s case, the list of pending insolvency proceedings also include the case of Sanjay Singal, the former managing director of Bhushan Power & Steel Limited (BPSL).
• Though the provisions to initiate the process of resolution of corporate insolvency remains suspended till December, the lenders can initiate insolvency proceedings of personal guarantors to corporate debtors.

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