HC seeks centre’s stand on bankruptcy code

Telangana High Court has sought the stand of Union ministry of corporate affairs, apart from ministry of law and justice, on a petition challenging the ministry’s notification of November

15, 2019, notifying all provisions relating to “personal guarantors to corporate debtors” under Insolvency and Bankruptcy Code (IBC)

2016 and Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 of the Insolvency and Bankruptcy Board of India.

The division bench comprising Chief

Justice Raghavendra Singh Chauhan and Justice B. Vijaysen Reddy was dealing with a petition stating that issuing of notification by ministry of corporate affairs was outside its ambit and is the vice of excessive delegation.

Vikram Posarla, the counsel for petitioner, contended that rules and provisions merely grant the power to notify the date on which provisions of IBC, 2016, come into force, but not to select the class of persons to which the provisions will apply. The impugned notification selected “personal guarantors to corporate debtors” as a class of persons to which the provisions would apply. But such power was never delegated to the ministry, the counsel pointed out.

He further underlined that the notification creates a situation where the creditor can unjustly enrich itself by making a claim in Insolvency Process of Guarantor without accounting for the amount realised by it in the Corporate Insolvency Resolution Process of the Corporate Debtor under Part II of the code. The court issued notices to the Union ministry of corporate affairs and law and justice to respond within four weeks on contentions raised by the petitioner.

● THE COURT issued notices to the Union ministry of corporate affairs and law and justice to respond within four weeks on contentions raised by the petitioner.