The petitioners’ main contention was that the personal guarantor is not given a chance to argue his position, contest the start of the insolvency resolution proceedings, or object to the designation of the resolution professional in accordance with the IBC.

But the court held that these provisions (Sections 95 to 100 IBC) cannot be deemed unconstitutional as a moratorium is automatically imposed on personal guarantors once the insolvency petition is filed. “The statute (IBC) does not suffer from any manifest arbitrariness to violate Article 14 of the Constitution”, said a bench led by Chief Justice DY Chandrachud. The bench had issued notices to the union government and others in July.

On Wednesday, senior counsel AM Singhvi said in court that a proper hearing is not held under Section 95 of the IBC, which deals with the presence of debt, and a resolution professional is appointed without giving the alleged guarantor an chance to state their case. He underlined the importance of including concepts of ‘natural justice’ in this area.

Singhvi argued that resolution professionals primarily handle organisational aspects and that their intrusive questioning regarding personal information raises concerns about individual privacy and rights. The court said in this regard that the information that resolution professionals seek from third parties cannot be of a “roving nature”. “The task of the RP is not to adjudicate but to collate information before submitting any report,” Chief Justice Chandrachud said.

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Updated: 09 Nov 2023, 02:24 PM IST