Guarantors liable if firms fail to repay: SC
NEW DELHI : Promoters, managing directors and chairmen, who stand as personal guarantors to corporate loans, can also be proceeded against before the company law tribunal if their firms are unable to repay debts, ruled the Supreme Court on Friday as it declared “legal and valid” a November 15, 2019, notification issued by the Union government under the Insolvency and Bankruptcy Code (IBC).
“It is held that the impugned notification was issued within the power granted by Parliament, and in valid exercise of it. The exercise of power in issuing the impugned notification is therefore, not ultra vires; the notification is valid,” a bench of justices L Nageswara Rao and S Ravindra Bhat held.
Affirming the government’s mandate, the bench dismissed a clutch of 75 petitions, including the ones filed by industrialists Anil Ambani, Venugopal Dhoot, and Kapil Wadhawan who had personally guaranteed corporate debt, and who challenged the validity of the 2019 notification that sought to make them personally liable for remaining debts not settled in the resolution plan of the companies under insolvency.
Friday’s ruling means that in keeping with the government notification that activated the IBC
har Mehta, while pointing out the flaws in the judgment, felt that a solution lay by ensuring that all Covid-19 related PILs got listed only before the chief justice-headed bench.
In Allahabad high court itself, several benches were hearing PILs related to issues surrounding Covid-19 management in the state that led to passing of different set of orders, Mehta pointed out.
“Let only chief justice-led bench take up Covid-19 related issues. Similar situation is there in other high courts too. There are inter-state issues involved in these cases as some issues dealt by Kerala high court can have repercussions in Karnataka,” the solicitor general said. The bench reminded Mehta that he was representing the UP government in this matter.
Moreover, the bench observed, “We will not pass general orders. The constitution of benches is the prerogative of the Chief Justice. It is up to them to pass orders (on allocation of cases). We cannot demoralize the high courts.”
At the same time, the bench reminded the high courts to avoid pitfalls in their anxiety to serve the greater good concerning the patients and common public. For instance, the Allahabad HC had ordered the state to provide two ambulances with ICU facility in every village within a month.
“This was humanly impossible as the state has more than 97,000 villages,” solicitor general Tushar Mehta said.
Also, there was another direction to equip all nursing homes with oxygen facilities and ICU beds with ventilator support and BiPAP machines. Similar directions with regard to procurement of vaccines and upgrading medical colleges in the state were also issued in the May 17 order.
“High courts should avoid passing orders in matters concerning national and trans-international ramifications, more so when the Supreme Court is dealing with such issues,” said a vacation bench of Justice Vineet Saran and Justice BR Gavai.
The bench refused to stay the ongoing proceedings before the Allahabad high court but observed, “In dealing with such matters and anxiety of courts to give relief to patients who are suffering, sometimes, unwittingly, the courts overstep and pass orders that are not capable to be implemented.”