Supreme Court Weekly Round Up May 17 to May 23, 2021

JUDGMENTS THIS WEEK1. Supreme Court Upholds IBC Provisions Applicable To Personal Guarantors Of Corporate DebtorsCase: Lalit Kumar Jain vs. Insolvency and Bankruptcy Board of India Citation: LL 2021 SC 257The Supreme Court this week upheld the provisions of Insolvency and Bankruptcy Code, 2016 which applies to personal guarantors of corporate debtors. The bench comprising Justices L. Nageswara Rao and S. Ravindra Bhat approval of a resolution plan relating to a corporate debtor does not operate so as to discharge the liabilities of personal guarantors (to corporate debtors).The bench dismissed the petition challenging 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 had 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. Last year, the Court had transferred to itself the petition which was originally filed before the Delhi High Court and other High Courts. "It is held that approval of a resolution plan does not ipso facto discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the contract of guarantee. As held by this court, the release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process, i.e. by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract." The Court held.2. Doctrine Of Impossibility Applicable To Court Orders; Possibility Of Implementation Should Be Considered : Supreme CourtTitle : State of Uttar Pradesh versus In Re Inhuman Condition at Quarantine Centres and for Providing Better Treatment to Corona Positive Citation : LL 2021 SC 258"Doctrine of impossibility is applicable to Court orders as well", said the Supreme Court on Friday stayed the directions issued by Allahabad High Court on May 17 for upgradation of medical facilities in the State of Uttar Pradesh on a war-scale footing.Stating that High Courts should avoid passing orders that are not capable of being implemented, a Bench of Justices Vineet Saran and BR Gavai noted, "…we are of the opinion that the High Court should normally consider the possibility of the implementation of the directions given by it, and such directions which are incapable of being implemented should be avoided".The Bench went on to note that the "Doctrine of Impossibility" was equally applicable to Court orders as well. It was further recorded that High Courts should normally refrain from issuing directions matters which have transnational and international ramifications, especially when such matters of national level were being considered by the Top Court in separate proceedings."...we may also mention that in matters which have transnational and international ramifications, the High Court should normally refrain from issuing directions in such matters,especially when such matters of national level are being considered by this Court in separate proceedings", the Court said in the order.3. IBC - Approval Of Resolution Plan Does Not By Itself Discharge Liabilities Of Personal Guarantor Of Corporate Debtor: Supreme CourtCase: Lalit Kumar Jain vs. Insolvency and Bankruptcy Board of India Citation: LL 2021 SC 257The Supreme Court has held that the approval of a resolution plan does not ipso facto discharge a personal guarantor of a corporate debtor.The release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process, i.e. by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract, the bench comprising Justices L. Nageswara Rao and S. Ravindra Bhat observed in the judgment in which it upheld the provisions of Insolvency and Bankruptcy Code, 2016 which applies to personal guarantors of corporate debtors. Tthe bench, while referring to recent judgments in State Bank of India v. V. Ramakrishnan, Committee of Creditors of Essar Steel (I) Ltd. v. Satish Kumar Gupta, observed that the sanction of a resolution plan and finality imparted to it by Section 31 does not per se operate as a discharge of the guarantor's liability. It said that an involuntary act of the principal debtor leading to loss of security, would not absolve a guarantor of its liability.IMPORTANT APEX COURT UPDATES1. COVID Is Not Panacea For All Cases Of Arrest To Get Bail, Regardless Of Nature Of Accusation: Supreme CourtThe Supreme Court this week observed that apprehension of COVID cannot be cited as a ground for bail in all cases, regardless of the nature and gravity of the offence.The vacation bench of Justices Dinesh Maheshwari and...

Supreme Court Weekly Round Up May 17 to May 23, 2021

Nupur Thapliyal

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