Delhi HC issues notice in Sanjay Singal's challenge to IBC provisions on insolvency proceedings against personal guarantors

The Delhi High Court yesterday issued notice in petition by ex-Chairman of Bhushan Power and Steel Ltd, Sanjay Singal challenging the provisions on personal insolvency proceedings against personal guarantors under the Insolvency & Bankruptcy Code, 2016..Singal has sought the striking down of Sections 95, 96, 97, 99, 100 and 101 of IBC, insofar as they apply to personal guarantors of corporate debtors, and the consequent rules. .Notice to the Central Government, Insolvency and Bankruptcy Board of India and State Bank of India was issued by a Division Bench of Chief Justice DN Patel and Justice Prateek Jalan. .The Court, however, refused to pass any order of stay in respect to SBI's notice to Singal under the impugned provisions. .Notwithstanding the pendency of the corporate insolvency resolution process of Bhushan Power and Steel, SBI had initiated recovery proceedings before the Debt Recovery Tribunal against Singal in relation to several guarantees. .In the meantime, the Central Government notified the provisions on personal insolvency against personal guarantors to corporate debtors and a notice was issued by SBI to Singal under them. .Singal has pleaded that the enforcement of Sections in relation to personal guarantors to corporate debtors was wholly impermissible in law as it was an unconstitutional usurpation of legislative power by the executive..The Notification notifying the Sections in relation to personal guarantors to corporate debtors is per se without jurisdiction and ex facie arbitrary, discriminatory and unconstitutional, Singal has submitted. .It is further asserted that Part III IBC governed "Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms" and that no provision in Part III IBC permitted the initiation of the insolvency resolution process against a personal guarantor to a corporate debtor..After hearing the parties, the Court listed the matter for further hearing on October 6. .Senior Advocate Sandeep Sethi appeared for Singal. SBI was represented by Solicitor General Tushar Mehta with Advocate Bishwajit Dubey. .Delhi HC stays IBC proceedings Anil Ambani for being personal guarantor; Issues notice in challenge to provisions on personal insolvency.Recently, the High Court had also issued notice in Anil Ambani's petition challenging the law on personal insolvency of personal guarantors.