[Personal guarantor under IBC] Anil Ambani moves Supreme Court challenging IBC provisions

Reliance ADA Group chairman Anil Ambani has moved the Supreme Court challenging several provisions of the Insolvency and Bankruptcy Code, 2016 (IBC) for being in teeth of the cardinal principle of natural justice and thus, arbitrary and violative of the petitioner's fundamental rights under Article 14..A Bench led by Justice DY Chandrachud will hear the case along with other connected petitions tomorrow..In his plea, filed through advocate EC Agarwala, Ambani has challenged Sections 95 (application by creditor to initiate insolvency resolution process), 96 (interim-moratorium), 97 (appointment of resolution professional), 99 (submission of report by resolution professional), 100 (admission or rejection of application) of the code..The petition contended that the provisions are manifestly arbitrary, unconstitutional, and violative of fundamental rights. It is submitted that they arbitrarily vest unfettered power in the resolution professional to be a judge in his own cause. Additionally, it was stated that the personal guarantor is left remediless and at the resolution professional's mercy..The provision requiring the adjudicating authority to decide on the insolvency application based on the resolution professional's report without any opportunity to the debtor or personal guarantor to examine or respond to it, was also contended to be unconstitutional. "The petitioner submits that this goes against every grain of the 'principle of natural justice'. The petitioner and other debtors therefore are deprived of their right to know the basis and reasons for recommending admission or rejection of the application filed under Section 95 of the IBC," read the plea. .Further, it was submitted that Section 96 allows an interim moratorium to be framed against personal guarantors immediately after a creditor files a Section 95 application, "without any application of mind by the quasi-judicial or judicial authority". .The insolvency process leaves personal guarantors no opportunity to raise objections including those regarding jurisdiction, prior to any interim moratorium being imposed, it was stated. The plea listed forum shopping and suppression of material facts as being grounds that can be cited to oppose any such application..It was also contended that apart form a resolution professionals' primary function, they are vested with omnibus discretion to call for and consider information that is deemed relevant for forming their opinion. However, no safeguards or legal recourse is provided for the personal guarantor."The Petitioner submits that the inherent possibility and likelihood of bias being directly involved in the outcome of the proceedings under Section 100 of IBC negates fairness in the process and makes the procedure contemplated under Sections 95-100 manifestly arbitrary and presents the Personal Guarantor with a fait accompli," the plea said..The petition filed by Ambani was triggered after an insolvency application was filed by the State Bank of India (SBI) towards his personal guarantee against loans taken by Reliance Communications Limited and Reliance Infratel Limited..The Supreme Court in July this year had granted interim protection to a personal guarantor in a plea challenging several provisions of the IBC for being violative of the principles of natural justice, and the rights to property and a fair hearing..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 Supreme Court had in May last year upheld the provisions of the Insolvency and Bankruptcy Code relating to insolvency of personal guarantors, that were brought into force in 2019.A bench of Justices L Nageswara Rao and Ravindra Bhat had held that parliamentary intent was to treat personal guarantors differently from other categories of individuals..Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.