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Supreme Court allows transfer of Writ Petition on IBBI's Request

The Insolvency and Bankruptcy Board of India had filed the transfer petitions seeking transfer of the Writ Petitions challenging IBC provisions related to insolvency of personal guarantors to corporate debtors filed before various High Courts to the Supreme Court.

By a Notification dated 15.11.2019, Ministry of Corporate Affairs, Government of India in exercise of its power conferred under Section 1(3) of the Insolvency and Bankruptcy Code, 2016 brought into force the various provisions of the Insolvency and Bankruptcy Code, 2016 insofar as they related to 'personal guarantors to corporate debtors' with effect from 01.12.2019. Writ Petitions were filed in the High Court of Delhi and other High Courts challenging the Notification dated 15.11.2019 and the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019. The Writ Petitioners also sought a declaration that Section 95, 96, 99, 100, 101 of the Insolvency and Bankruptcy Code, 2016 are unconstitutional in so far as they apply to personal guarantors of corporate debtors.

A three-member bench comprising Justices L Nageswara Rao, Hemant Gupta and Ajay Rastogi, on 29 October 2020, opined that the Writ Petitions that are pending in the High Courts pertaining to the challenge to the Notification dated 15.11.2019 and related issues have to be transferred to the Supreme Court. Transfer of the Writ Petitions to the Apex Court would avoid conflicting decisions by the High Courts which are in seisin of the Writ Petitions.

The Insolvency and Bankruptcy Code is at a nascent stage and it is better that the interpretation of the provisions of the Code is taken up by the Supreme Court to avoid any confusion, and to authoritatively settle the law. Considering the importance of the issues raised in the Writ Petitions which need finality of judicial determination at the earliest, it is just and proper that the Writ Petitions are transferred from the High Courts to the Supreme Court.

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