[Challenge to IBC provisions] Supreme Court clubs pleas, extends protection to personal guarantor

The Supreme Court on Thursday granted interim protection to a personal guarantor in a plea challenging several provisions of the Insolvency and Bankruptcy Code, 2016 (IBC) for being violative of the principles of natural justice, and the rights to property and a fair hearing [Gaurav Garg v. Union of India and ors]..A Vacation Bench of Justices Dinesh Maheshwari and Krishna Murari extended the same protection given to other petitioners in similar pleas, given the same questions of law involved. The present order accordingly, as in the Court's previous orders, stated:"In the meanwhile, petitioner(s) shall not transfer, alienate, encumber or dispose of any of their assets or legal rights or beneficial interest therein; and the Resolution Professional shall not proceed with filing of the report."Notice was also issued to the Central government, and their reply to the same sought in weeks. .The present petition said that Sections 95(1), 96(1), 97(5), 99(1), 99(2), 99(4), 99(5), 99(6), and 100 of the IBC are mechanical and exclude the right of a personal guarantor to defend itself through hearings, and therefore 'subsumes' their personal assets. "No opportunity is contemplated in favour of the affected party by the Impugned Provisions to be heard by the Adjudicating Authority before the initiation of the insolvency resolution process," the plea said. The petitioner is one of the personal guarantors of a real estate developer's loan towards executing a project in Gurugram. It was contended that on the default of the corporate debtor (developer), legal notices were served on the petitioner and the corporate insolvency resolution process (CIRP) was initiated for recovery of the amount.The National Company Law Tribunal (NCLT) Kolkata thereafter appointed a resolution professional, allegedly "without giving a single opportunity to the Petitioner to file a reply or raise and objection". The plea contends that such appointments are made "without adjudicating the central jurisdictional fact of the existence of a debt, determination of quantum of debt, legality of the claim etc", and thus violates the right to procedural due process. Coupled with this, the imposition of interim moratoriums by means of the provisions under challenge make it susceptible to 'routine abuse' by debtors or individuals with the intention of defrauding creditors, the petitioner claimed.The plea also sought a stay on further IBC proceedings in the present matter before the NCLT Kolkata Bench as well as all proceedings under the provisions being challenged..The plea was filed by through Advocate Abhinav Agrawal. Senior Advocate PS Patwalia appeared for the petitioner in a connected writ petiton. [Read order]