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The release or discharge of a principal borrower from the debt owed by it due to insolvency does not absolve the surety/guarantor of his or her liability

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Court :
Supreme Court of India

Brief :
This judgment will dispose of common questions of law, which arise in various proceedings preferred under Article 32 of the Constitution of India, as well as transferred cases under Article 139A; those causes were transferred to the file of this court, from various High Courts , as they involved interpretation of common questions of law, in relation to provisions of the Insolvency and Bankruptcy Code,2016 (hereafter “the Code”).I The Petitions and Common Grievances.

Citation :
TRANSFERRED CASE (CIVIL) NO. 245/2020

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION

TRANSFERRED CASE (CIVIL) NO. 245/2020

LALIT KUMAR JAIN ….PETITIONER(S)

VERSUS

UNION OF INDIA & ORS. …..RESPONDENT(S)

WITH

W.P.(C) No. 117/2021, W.P.(C) No. 1371/2020, W.P.(C) No. 1420/2020, W.P.(C) No. 1353/2020, T.P.(C) No. 1252/2020, W.P.(C) No. 1276/2020, W.P.(C) No. 1287/2020, T.P. (C) No. 1285/2020, T.P.(C) No. 1325/2020, W.P.(C) No. 1364/2020, T.C.(C) No. 257/2020, W.P.(C) No. 1434/2020, W.P.(C) No. 38/2021, W.P.(C) No. 1419/2020, T.P.(C) No. 1202/2020, T.P.(C) No. 1220/2020, T.P.(C) No. 1203/2020, T.P.(C) No. 1193/2020, T.P.(C) No. 1196/2020, T.P.(C) No. 1289/2020, T.P.(C) No. 1323/2020, T.P.(C) No. 1333/2020, T.P.(C) No. 1292/2020, T.P.(C) No. 1299/2020, T.P.(C) No. 1331/2020, W.P. (C) No. 1342/2020, T.P.(C) No. 1339/2020, W.P.(C) No. 1348/2020, W.P.(C) No. 1344/2020, W.P.(C) No. 1343/2020, T.C.(C) No. 250/2020, T.C.(C) No. 251/2020, T.C. (C) No. 247/2020, T.C.(C) No. 253/2020, T.C.(C) No. 252/2020, T.C.(C) No. 248/2020, T.C.(C) No. 254/2020, T.C.(C) No. 246/2020, T.C.(C) No. 256/2020, T.C.(C) No. 249/2020, T.C.(C) No. 255/2020, W.P.(C) No. 62/2021, W.P.(C) No. 32/2021, W.P.(C) No. 106/2021, W.P.(C) No. 97/2021, W.P.(C) No. 142/2021, W.P.(C) No. 135/2021, W.P.(C) No. 131/2021, W.P.(C) No. 122/2021, W.P.(C) No. 138/2021, W.P.(C) No. 146/2021, W.P. (C) No. 207/2021, W.P.(C) No. 160/2021, W.P.(C) No. 168/2021, W.P.(C) No. 205/2021, W.P.(C) No. 209/2021, W.P.(C) No. 194/2021, W.P.(C) No. 187/2021, W.P.(C) No. 180/2021, W.P.(C) No. 182/2021, W.P.(C) No. 203/2021, W.P.(C) No. 220/2021, W.P.(C) No. 229/2021, W.P.(C) No. 217/2021, W.P.(C) No. 221/2021, W.P.(C) No. 225/2021, W.P. (C) No. 239/2021, W.P.(C) No. 240/2021, W.P.(C) No. 228/2021, W.P.(C) No. 224/2021, W.P.(C) No. 234/2021, W.P.(C) No. 260/2021 and W.P.(C) No. 262/2021, W.P. (C) No. 283/2021.

J U D G M E N T

S. RAVINDRA BHAT, J.

1. This judgment will dispose of common questions of law, which arise in various proceedings preferred under Article 32 of the Constitution of India, as well as transferred cases under Article 139A; those causes were transferred to the file of this court, from various High Courts , as they involved interpretation of common questions of law, in relation to provisions of the Insolvency and Bankruptcy Code,2016 (hereafter “the Code”).I The Petitions and Common Grievances.

2. The common question which arises in all these cases concerns the vires and validity of a notification dated 15.11.2019 issued by the Central Government (hereafter called “the impugned notification”). Other reliefs too have been claimed concerning the validity of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 issued on 15.11.2019. Likewise, the validity of regulations challenged by the Insolvency and Bankruptcy Board of India on 20.11.2019 are also the subject matter of challenge. However, during the course of submissions, learned counsel for the parties stated that the challenge would be confined to the impugned notification.

3. All writ petitioners before the High Courts, arrayed as respondents in the transferred cases before this Court, as well as the petitioners under Article 32 claim to be aggrieved by the impugned notification. At some stage or the other, these petitioners (compendiously termed as “the writ petitioners”) had furnished personal guarantees to banks and financial institutions which led to release of advances to various companies which they (the petitioners) were associated with as directors, promoters or in some instances, as chairman or managing directors. In many cases, the personal guarantees furnished by the writ petitioners were invoked, and proceedings are pending against companies which they are or were associated with,and the advances for which they furnished bank guarantees.

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on 03 June 2021
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