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Supreme Court on Interpretation of Insolvency and Bankruptcy Code

Supreme Court on Interpretation of Insolvency and Bankruptcy Code

FromLegal Talks by Desikanoon


Supreme Court on Interpretation of Insolvency and Bankruptcy Code

FromLegal Talks by Desikanoon

ratings:
Length:
15 minutes
Released:
Jun 6, 2021
Format:
Podcast episode

Description

Brief Background In the present case, a Notification dated 15.11.2019 issued by the Central Government was challenged. Vide this Notification, certain provisions of the IBC were brought into force only as far as they relate to personal guarantors of corporate debtors, under the exercise of powers under Section 1 (3) of the IBC. Section 1 (3) states that: - “It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint: Provided that different dates may be appointed for different provisions of this Code and any reference in any such provision to the commencement of this Code shall be construed a reference the commencement of that provision.” The impugned Notification provided for as follows: - “NOTIFICATIONNew Delhi. the 15th November, 2019S.O. 4126(E).- ln exercise of the powers conferred by sub-section (3) of section I of the Insolvency and Bankruptcy Code. 2016 (31 of 2016). the Central Government hereby appoints the 1st day of December, 2019 as the date on which the following provisions of the said Code only in so far as they relate to personal guarantors to corporate debtors. shall come into force:(1) clause (e) of section 2;(2) section 78 (except with regard to fresh start process) and section 79;(3) sections 94 to 187 (both inclusive);(4) clause (g) to clause (i) of sub-section (2) of section 239;(5) clause (m) to clause (zc) of sub-section (2) of section 239;(6) clause (zn) to clause (zs) of’ sub-section (2) of section 240; and(7) Section 249.[F. No. 30/21/2018-Insolvency Section]GYANESHWAR KUMAR SINGH, Jt. Secy.” Important Grounds of the Petitioners It was pleaded that the impugned Notification suffers from the vice of excessive delegation and bringing into force certain provisions only in relation to personal guarantors is ultra vires the powers granted to the Central Government. It was also contended that the power delegated under S. 1 (3) is with respect to the points in time when different provisions of the IBC can be brought into effect and there is no power to the Government to notify parts of provisions of the Code or to limit the application of the provisions to certain categories of persons. Basically, certain provisions of Part III of the IBC and other parts were made applicable to personal guarantors of corporate debtors only. The heading of Part III of the IBC is “INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUALS AND PARTNERSHIP FIRMS.” It was contended that: - “There is no intelligible differentia or rational basis on which personal guarantors to corporate debtors have been singled out for being covered by the impugned provisions, particularly when the provisions of the Code do not separately apply to one sub-category of individuals, i.e., personal guarantors to corporate debtors. Rather, Part III of the Code does not apply to personal guarantors to corporate debtors at all.” It was further argued that Section 1 (3) merely empowers the Central Government to bring into force the provisions of the IBC on such date by a Notification in the Official Gazette and the Proviso specifically provides that different dates may be appointed for bringing different provisions into force. There is no scope for amending any provision or curtailing the powers of any provision under Section 1 (3). The only function assigned to the Central Government under S. 1 (3) is to bring the law into operation at such as it might decide. Exercise of power in any other manner would mean unconstitutional delegation of power. Another argument was that by applying the provisions only to personal guarantors to corporate debtors, the impugned Notification has the effect of modifying the text of the actual provisions of the IBC. Various landmark case-laws such as Delhi Laws Act, 1912, In re v. Part ‘C’ States (Laws) Act, 1950, 1951 SCR 747, Hamdard Dawakhana v. Union of India, (1960) 2 SCR 671, State of Bombay v. Narothamdas Jethabhai, (1951) 2 SCR 51 etc., were cited to buttress the a
Released:
Jun 6, 2021
Format:
Podcast episode

Titles in the series (100)

This show talks about the general legal news and affairs taking place in India as well as the world, analysis of interesting case-laws and upcoming fields of law. The aim is to make legal aspects as simple as possible so that everybody could understand.