IBC RULING KOMIC TOWN
Ambani, Venugopal Dhoot, Kapil Wadhawan, Sanjay Singal and Atul Punj -- each one of whom stood as personal guarantors to corporate debts, and 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.
After the court ruling on Friday, if that debt owed by a company is not repaid under the resolution plan, the personal guarantor would not stand discharged, but could be forced into bankruptcy proceedings by the creditors.
Reacting to the verdict, Faisal Sherwani, Partner, L&L Partners law firm, said: “It is time for promoters who furnish personal guarantees lightly to wake up and smell the roses. From a jurisprudential perspective, it is now clear that mere approval of a resolution plan relating to a corporate debtor would not mean that the personal guarantor is also off the hook. After all, the object sought to be achieved by the amendment was permissible and aimed at maintaining the financial health of the banking sector.”
However, advocate Soumya Dharwa, who represented one of the petitioners in the matter, apprehended that the judgment may result in further concentration of powers with the lender banks by opening another avenue for recovery of their loans apart from SARFAESI Act, debt recovery proceedings, and other civil remedies already available with them. This, the lawyer said, will also open the floodgates for multiple litigations between the lenders and corporate borrowers and their personal guarantors.
While the petitions alleged that the Centre did not have the power to bring in IBC provisions selectively to personal guarantors of corporate debtors, the top court underscored that “there is no compulsion in the Code that it should, at the same time, be made applicable to all individuals (including personal guarantors), or not at all”.
“The intimate connection between such individuals and corporate entities to whom they stood guarantee, as well as the possibility of two separate processes being carried on in different forums, with its attendant uncertain outcomes, led to carving out personal guarantors as a separate species of individuals, for whom the adjudicating authority was common with the corporate debtor to whom they had stood guarantee,” said the bench.
Citing various pertinent provisions of IBC, the bench noted that there was “sufficient legislative guidance” for the central government to distinguish and classify personal guarantors separately from other individuals and provide the National Company Law Tribunal (NCLT) as a common forum for the financial institutions and other lenders to seek recovery of their debts.
“The NCLT would be able to consider the whole picture, as it were, about the nature of the assets available, either during the corporate debtor’s insolvency process, or even later; this would facilitate the Committee of Creditors (COC) in framing realistic plans, keeping in mind the prospect of realizing some part of the creditors’ dues from personal guarantors,” highlighted the bench, finding justification in merger of proceedings against personal guarantors with that of corporate debtors.
It shot down another contention by the petitioners that since an approved resolution plan in respect of a corporate debtor amounted to extinction of all outstanding claims against that debtor, the liability of the personal guarantor must also extinguish.
Referring to a few judicial precedents as well as provisions of the Contract Act, the bench held that the approval of a resolution plan did not ipso facto discharge a personal guarantor 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,” it said.
Representing the Centre, attorney general KK Venugopal and solicitor general Tushar Mehta had defended the November 15, 2019 notification that came into force from December 1 that year on the grounds that the objective was to have a unified adjudication through the same forum (NCLT) for resolution of issues concerning corporate resolution processes, as well as bankruptcy and insolvency processes in relation to personal guarantors.
The notification, said the law officers, would ensure a more optimal resolution process and the total debt servicing of the corporate debtor might be lowered if the personal guarantor’s assets were also taken into account to mitigate the corporate debtor’s liabilities.
In June 2020, State Bank of India moved NCLT, Mumbai to recover more than Rs 1,200 crore from Anil Ambani as he had given a personal guarantee for loans extended to Reliance Communications Ltd and Reliance Infratel Ltd. Soon thereafter, several promoters and directors challenged the 2019 notification, prompting the Supreme Court to transfer all matters to itself last year.
In view of the nationwide challenges to the notification, the top court, in October 2020 asked the high courts across the country not to pass any order in such cases. It had also passed an interim order, staying the insolvency and bankruptcy proceedings against the personal guarantors, which will revive after the verdict on Friday.
SUNDERLAL BAHUGUNA
extraordinary energy and intelligence, and a wonderful speaker too. “I have vivid memories of my meetings and interviews with him. With Chandi Prasad Bhatt, Gaura Devi, Dhoom Singh Negi, & many others, he made the Chipko Andolan what it was,” he tweeted.
The Chipko movement was launched against the allocation of a hornbeam forest plot in the Alaknanda Valley to a sports goods company. A few months earlier, the Gandhian Dashauli Gram Swarajya Sangha had been refused permission by the forest department to fell trees in the same forest. This prompted the Sangha-led villagers to hug the trees to prevent them from being felled by the company. The movement spread to other parts of what is now Uttarakhand as villagers stopped felling operations and disrupted the auction of forest coupes. “The movement has received wide publicity and its two main leaders, Chandi Prasad Bhatt and Sunderlal Bhauguna have emerged as among the best-known environmentalists in India,” wrote Guha and Gadgil Madhav in their book “The Use And Abuse of Nature”.
Rights activist Medha Patkar said Bahuguna’s work has inspired many. “He fasted for 75 days against Tehri Dam [in Uttarakhand]. He and his wife Vimla never compromised on their views on the dam... The then [Atal Bihari] Vajpayee government of course did not pay attention to what Bahuguna had to say. I think the way Uttarakhand is suffering today with extreme disasters every year could have been averted if Bahuguna and Vimla’s views were taken on board.”
Rajendra Singh, a water conservationist, said Bahuguna symbolised Ganga’s holiness and Himalaya’s greenery as well as environmental ethos. “The Chipko movement was started by Gaura Devi and other women from Raini village in Chamoli. But Bahuguna took their struggle to the world. Europe, the UK, the US... they were in awe of the movement.” Singh said Bahuguna was against dams and feared Tehri Dam will destroy the Himalayas. Singh said he met Bahuguna last on April 28, when the two sang together.
Ravi Chopra, the director of People’s Science Institute, said when all environmental regulation and caution has been abandoned by those in power, Bahuguna’s voice was a great encouragement to those struggling for the environment. “His passing is, therefore, a setback to environmental struggles across the country.”
Vijay Jhardhari, a member of the Chipko movement, said Bahuguna shaped his vision. “He has taught many of us the way of life. How can I sum him up in a few words? In a way, he instilled the willpower to fight in all of us who worked with him--the fight to protect our forests. We found success in all our Chipko campaigns except the Tehri Dam movement.”
BLACK FUNGUS
larly known as black fungus, the ministry said in a statement.
There is also a reported shortage of Amphotericin-b, it stated.
The five manufacturers which have been given the license to produce the Amphotericin-b within the country are NATCO Pharmaceuticals, Hyderabad; Emcure Pharmaceuticals, Pune; and Alembic Pharmaceuticals,
Gufic Biosciences Ltd and Lyka Labs in Gujarat.
There are five existing manufacturers of Amphotericin-b in the country and one importer -Bharat Serums & Vaccines Ltd, BDR Pharmaceuticals Ltd, Sun Pharma Ltd, Cipla Ltd, Life Care Innovations and Mylan Labs (importer).
On Thursday, The Union government said that states should declare the disease notifiable under the Epidemic Diseases Act, 1897, making it mandatory for all medical facilities to report infections to a central disease surveillance network.
On Friday, the Uttar Pradesh government declared black fungus as a notifiable disease after around 300 Covid-19 patients suffering from black fungus were admitted to hospitals in the state.
In Delhi, health minister Satyendar Jain said there were 197 cases of mucormycosis in hospitals across Delhi till Wednesday night. Puducherry Lt Governor Tamilisai Soundararajan said 20 people were affected by the black fungus in the UT and were receiving treatment, adding that it too would notify the disease under the epidemic act.
Andhra Pradesh has so far reported 32 cases of mucormycosis, the state health department said.
At least 7,250 people are confirmed to have mucormycosis in India, with the highest in Maharashtra (1,500) and Gujarat (1,163), but the actual spread may be much wider.
Mucormycosis is a fungal infection with a fatality rate of at least 50%. Typically a rare disease, experts and doctors say thousands have now contracted it because of an overuse of steroids or due to suppression of their immune system, which is often a fallout of attempts to stop the life-threatening immune overreaction due to Covid-19.
ICMR director-general Balram Bhargava said these infections are of fungal spores that typically exist in abundance in the environment. “If a person’s immunity is suppressed, it will infect them. If the spores have access to high sugar, it will grow. We have seen this happen with Covid-19 patients with diabetes and uncontrolled sugar, or who are immuno-compromised or have been given immune-suppressants,” he added.
Several states are scrambling to place orders for the life-saving drugs required for it. Four people from Damoh and Balaghat districts in Madhya Pradesh died to the disease on Friday, officials said.
becomes difficult for them to log on to the Co-win portal to get registered,” says Padma, the ASHA worker who has been visiting the area. Kaza additional district magistrate Gian Sagar Negi says the state was requested this month to permit offline registration, and it was allowed.
“People have no hesitancy in getting inoculated as they know that the health infrastructure in the region is limited. Everyone here wants to be protected from the virus,” says Padma.