Resolution Professional: A Mere Facilitator The judgment upholds the principle of co-extensive liability of the personal guarantor under the contract law, while recognizing the distinct nature and objectives of the IBC. This ensures that the personal guarantor does not escape the consequences of his or her guarantee, while also respecting the contractual rights and obligations of...
Resolution Professional: A Mere Facilitator
The judgment upholds the principle of co-extensive liability of the personal guarantor under the contract law, while recognizing the distinct nature and objectives of the IBC. This ensures that the personal guarantor does not escape the consequences of his or her guarantee, while also respecting the contractual rights and obligations of the parties.
The Hon’ble Supreme Court of India while dismissing the batch of writ petitions (382) upheld the constitutional validity of provisions in the Insolvency and Bankruptcy Code, 2016 (“IBC”), paving the way for continuation and allowing creditors to initiate insolvency against personal guarantors of Corporate Debtors. By way of this article, we have provided our overview of the judgement along with conclusion.
Overview:
1. Chapter III of Part III of IBC which is titled “Insolvency Resolution Process” (“IRP”) comprises of Sections 94 to 120 and deals with insolvency resolution and bankruptcy for individuals and partnership firms. The Central Government in exercise of the powers conferred by Section 1(3) has issued a notification on 15 November 2019 wherein notified the provisions that apply to personal guarantors to corporate debtors. The notification brought into force Section 2(e), Section 78 (except with regard to fresh start process), Section 79, Section 94 to 187, Sections 239(2)(g), (h) and (i), Sections 239(2)(m) to (zc); Section 239(2)(zn) to (zs) and Section 249.
2. Part I of the IBC deals with preliminary matters, such as its application and definitions. Part II deals with insolvency resolution and liquidation for corporate persons. Part III deals with insolvency resolution and bankruptcy for individuals and partnership firms. Part IV provides for the regulation of insolvency professionals, agencies and information utilities. Part V contains miscellaneous provisions.
3. Chapter I of Part III contains preliminary provisions, including definitions. Section 78 indicates that the Part shall apply to matters relating to “fresh start, insolvency and bankruptcy of individuals and partnership firms where the amount of the default is not less than one thousand rupees”. However, the Central Government is empowered to specify a higher threshold not exceeding one lakh rupees. Section 79(1) indicates that the adjudicating authority for the purpose of Part III “means the Debt Recovery Tribunal constituted under sub-section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993”. Chapter II, which is yet to be brought into force, contains provisions in relation to the “fresh start process”.
4. Chapter III provides for the insolvency resolution process. Under Chapter III, the insolvency resolution process can be initiated by a debtor or a creditor. Section 94(1) of IBC enables a debtor who commits a default to apply, either personally or through a resolution professional, to the adjudicating authority for initiating the insolvency resolution process.
5. Section 95 enables the creditor to apply for the initiation of the insolvency resolution process either by himself, or jointly with other creditors or through a resolution professional. Under sub-section (2), a creditor may apply under sub-section (1) in relation to any partnership debt owed to him for initiating a resolution process against any one or more partners of the firm; or the firm. Section 95(4) stipulates the requirements of an application made by a creditor for the initiation of the insolvency resolution process. The application is governed by the form and manner as prescribed by Rules framed by the Central
Government under Section 239. A copy of the application is required to be furnished to the debtor. Immediately on the filing of an application under Section 94 or Section 95, an interim moratorium operates by virtue of the statutory provisions of Section 96 and the adjudicating authority is required to appoint a resolution professional.
6. Where the application has been filed through a resolution professional, the adjudicating authority has to direct the Insolvency and Bankruptcy Board of India (Board) to confirm within seven days that there are no disciplinary proceedings pending against the resolution professional. Thereafter, the Board has to either confirm the appointment of the resolution professional or to reject it and nominate another resolution professional for conducting the resolution process within seven days. Alternatively, where the application has been filed by the debtor or creditor without a resolution professional, the adjudicating authority has to direct the Board within seven days to nominate a resolution professional to conduct the process. The Board then has a period of ten days to make a nomination. Section 97(5) states that “the adjudicating authority shall by order appoint the resolution professional recommended under sub-section (2) or as nominated by the Board under sub¬section (4). The resolution professional, upon appointment, is provided a copy of the application for the insolvency resolution process.
7. Section 98 contains provisions for the replacement of the resolution professional. Section 99 contains provisions for the submission of a report by the resolution professional to the adjudicating authority. The scheme of Section 99 is that the resolution professional is required to examine the application which has been preferred by the debtor or the creditor within ten days of appointment and to submit a report to the adjudicating authority “recommending for approval or rejection of the application”. In other words, the resolution professional under sub-section (1) of Section 99 performs a three-fold function:
i. The duty to examine the application submitted by the debtor or the creditor;
ii. The submission of a report; and
iii. The incorporation of recommendations in the report either for the approval or the rejection of the application which has been submitted by the debtor or the creditor.
8. Where an application has been filed by the creditor, the resolution professional, as sub-section (2) indicates, “may require the debtor to prove repayment of the debt claimed as unpaid by the creditor”. The debtor may be required to furnish:
i. Evidence of the electronic transfer from the bank account of the debtor repaying the unpaid amount;
ii. Evidence of the encashment of a cheque issued by the debtor; or
iii. An acknowledgement signed by the creditor accepting receipt of dues.
9. In terms of sub-section (3), the debtor is not entitled to dispute the validity of debts which are registered with the information utility and form the subject matter of the application for the insolvency resolution process. Section 99(4) enables the resolution professional to seek further information or an explanation “in connection with the application”, as may be required from the debtor or the creditor or any other person for the purposes of examining the application. The person from whom such a request is made is under an obligation to supply it within seven days. Sub-section (6) clarifies the limited ambit entrusted to the resolution professional. In terms of the provision, the resolution professional has to examine the application and ascertain that the application satisfies the requirement of Section 94 or Section 95; and the applicant has provided information and furnished an explanation which has been sought from him under sub-section (4).
10. The Resolution Professional, after carrying out the process, may recommend the acceptance or rejection of the application in a reasoned report. A copy of the report is required to be provided to the debtor or creditor under sub-section (10). The jurisdiction of the adjudicating authority, upon the submission of the report, is stipulated in Section 100.
11. In terms of Section 100, the adjudicating authority has a timeline of fourteen days from the submission of the report to either admit or reject the application for insolvency resolution process. If the adjudicating authority admits an application, it is empowered, on the request of the resolution professional, to require that negotiations be conducted between the debtor and the creditor for the purpose of arriving at a repayment plan. The adjudicating authority is required to provide a copy of its order together with the report of the resolution professional and the application to the creditors within seven days of the order. If the application is rejected by the adjudicating authority on the ground that it was made with an intent to defraud the creditors or the resolution professional, the order of the adjudicating authority is to record that the creditor is entitled to file for a bankruptcy under Chapter IV.
12. The interim moratorium under Section 96 commences from the application filed under Sections 94 or 95 and ceases to have effect on the date of the admission of the application. Consequently, Section 101 contains provisions for a statutory moratorium with effect from the admission of an application under Section 100. The moratorium remains in force for a period of 180 days or when an order approving the repayment plan is passed, whichever is earlier. The effect of the statutory moratorium is that the any pending legal action in respect of the debt is stayed; no new action may be initiated by the creditors in respect of the debt; and the debtor shall not transfer or alienate his assets or legal rights or beneficial interest therein.
13. The remaining provisions of Chapter III relate to the issuance of public notices and inviting claims from the creditors, registration of their claims, preparation of the list of creditors, a repayment plan, meetings of creditors, the rights of secured creditors, approval of the repayment plan by creditors and the order of the adjudicating authority on the repayment plan. Consequential provisions have been made in the remaining provisions of Part III, inter alia, for the completion of the repayment plan (Section 117) and a discharge order (Section 119).
14. In exercise of the powers conferred by Section 239, the Central Government has notified the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules 2019. The rules specify the form in which the applications have to be submitted under Sections 94 and 95.
15. Submissions and Counter-submissions: In a nutshell
Submissions | Counter Submissions |
|---|---|
| - IBC is an invasive in rem proceeding. - There must be a determination by a judicial body of the existence of a debt before the appointment of resolution professional for before taking any action. - Applicability of automatic interim moratorium. - The power to seek information not only from a guarantor but also from third parties which is made available to the resolution professional is untrammeled and is being routinely exercised. - Common law consistently provides natural justice unless explicitly prohibited by statute. Any statutory exclusion is subject to review and may be invalidated, except in cases related to special reasons like national security. - Sought natural justice by a judicial body at the stage of Section 97(1) similar to the exercise of the adjudicating authority which discharges its functions under Section 7 or 9 of the IBC. - A judicial aspect is involved even before the resolution professional begins the task outlined in Section 99, for determining the jurisdictional requirements for the existence and continuity of a debt. - Without incorporating a requirement for a hearing before the adjudicating authority prior to the appointment of a resolution professional, the provisions of Sections 95 to 100 would be arbitrary and violative of Article 14. - A person as an applicant under Section 95 claims to be a creditor to whom a debt is owed. The existence of a debt which is owed is a jurisdictional fact which has to be determined by the adjudicating authority at the very threshold. | - Moratorium under Section 96, unlike Section 14, is for the benefit of the guarantor or, as the case may be, the debtor. - At the stage of an application under Section 94 or Section 95, no adjudication takes place. The interim moratorium under Section 96 does not impose an embargo on alienation of assets, legal rights or beneficial interest of the debtor. - Hence, the moratorium under Part II under Section 14 is markedly different in its nature and character from the interim-moratorium under Section 96 in Part III. - The function of a resolution professional under Section 99 is not of an adjudicatory nature. The purpose of a resolution professional under Part III is only to collate facts. - Section 99, in any event, does contemplate a sufficient opportunity to the debtor in the process of formulating the recommendation of the resolution professional to the adjudicatory body. - The process which is followed by the resolution professional in Section 99 only results in a report containing a recommendation either that the application should be accepted or rejected. Such a report does not have a binding character on the adjudicating authority. - The requirement of observing the principles of natural justice arises at the adjudicatory stage under Section 100. - The object of CIRP in Part II and in Chapter III of Part III is entirely distinct: The distinct statutory features of Part II, on one hand, and Part III, on the other, Chapter III of Part III has contemplated appointment of a resolution professional straightaway preceding the performance of an adjudicatory function by an adjudicatory body. - The debtor is involved at every stage of the process. The statute has provided for sufficient compliance with the principles of natural justice. Moreover, there is a valid classification in law between CIRP for the corporate debtors and the provisions of insolvency resolution process of individuals. - The procedure outlined under Chapter III serves the avowed purpose of the IBC to work towards rehabilitation. - The provisions of Part III of Chapter III eventually lead to the creation of a repayment plan and, only if that fails, to a bankruptcy. The adjudicatory role of the interim resolution professional under Section 18 is sought to be distinguished from the role of the liquidator who discharges certain adjudicatory functions if an order of liquidation is passed in view of the provisions of Sections 40 and 42. - The actual process of judicial adjudication takes place at the stage of Section 100 before the adjudicating authority. |
16. Analysis:
The Hon’ble Supreme Court divided the judgement into three distinct parts:
a) Part A dealt with functional analysis comprising of:
i. A comparison between the stages of Part II and Part III of the IBC;
ii. The role of the resolution professional in corporate as opposed to individual insolvency;
iii. The impact of a moratorium under Section 14 of Part II, on one hand, and an interim moratorium under Section 96 of Chapter III of Part III, on the other; and
iv. The role of the adjudicating authority in applications under Part II and Part III.
b) Part B dealt with analysis on the applicability of principles of natural justice.
c) Part C dealt with the constitutional validity of the statutory provisions of Sections 95 to 100 which are challenged in these proceedings.
17. Part A:
a) Part II and Part III of IBC have distinct processes for the resolution of insolvencies. The former deals with resolution of insolvencies of corporate entities, whereas the latter deals with the resolution of insolvencies of individuals and partnership firms.
b) Role of Resolution Professional:
❖ The provisions of Part II contain a material difference from those of Part III relating to the role and functions of a resolution professional. Section 5(27) provides that a resolution professional, for the purposes of Part II, means an insolvency professional appointed to conduct the CIRP or the pre-packaged insolvency resolution process and to include an interim resolution professional. Upon the admission of an application which has been filed by the financial creditor or operational creditor or the debtor, the provision for the appointment of an interim resolution professional is triggered. Upon the appointment of the interim resolution professional, Section 17 postulates that:
a) The management of the affairs of the corporate debtor shall vest in the interim resolution professional;
b) The powers of the Board of Directors or partners of the corporate debtor shall stand suspended and be exercised by the interim resolution professional;
c) The officers and managers of the corporate debtor shall report to the interim resolution professional and provide access to all documents and records and the financial institutions maintaining accounts of the corporate debtor shall act on the instructions of the interim resolution professional in relation to the accounts and furnish information relating to the corporate debtor to the interim resolution professional.
❖ The duties of the interim resolution professional are specified in Section 18. The interim resolution professional under Section 20, has a mandate to make every endeavour to “protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern”.
❖ The above role of resolution professional contra-distinguished from the role which is ascribed to a resolution professional in Part III, who is appointed for the purpose of resolving insolvencies and bankruptcies for individuals and partnership firms. Sections 94 and 95 provide for applications by the debtor or the creditor for the initiation of the insolvency resolution process in relation to these entities. The appointment of a resolution professional takes place under Section 97. Under sub-section (5) of Section 97, the adjudicating authority has to appoint the resolution professional who is either recommended under sub-section (2) or nominated by the Board under sub¬section (4).
❖ The duties of a resolution professional in a process under Chapter III of Part III are contained in Section 99. The resolution professional is required, firstly, to examine the application within ten days of appointment. Secondly, they may require the debtor to prove that the repayment of the debt which is claimed to be unpaid by the creditor has taken place. The debtor may do so by evidence of an electronic transfer of the unpaid amount from a bank account of the debtor or produce evidence of the encashment of a cheque issued by a debtor or a signed acknowledgement by the creditor of the receipt of the dues.
❖ The provisions of sub-section (3) of Section 99, operate on the resolution professional alone and cannot be construed to be a bar qua the adjudicatory function of the adjudicating authority under Section 100. The resolution professional is empowered by sub-section (4) of Section 99 to seek further information or an explanation in connection with the application from the debtor, creditor or any other person who in the opinion of the resolution professional may provide information. The information which the resolution professional is empowered to seek is in aid to his duty to examine the application and submit a report either recommending the approval or the rejection of the application.
❖ The resolution professional is required to examine the application and to ascertain two things: firstly, that the application satisfies the requirement of Section 94 or Section 95 and, secondly, that the applicant has provided the information and furnished the explanation which is sought under sub-section (4). Having carried out the process of examination and ascertainment as specified in sub-section (6), the resolution professional may either recommend the acceptance or the rejection of the application by submitting a report. The report has to record reasons and a copy of the report has to be furnished to the debtor or the creditor, as the case may be. The role of the resolution professional prior to the adjudication process by the adjudicating authority comes to a conclusion with the submission of a report.
❖ Upon the submission of the report, the matter then lies within the jurisdiction of the adjudicating authority. This is evident from the fact that Section 100(1) stipulates that the adjudicating authority has to pass an order either admitting or rejecting the application within fourteen days from the date of the submission of the report under Section 99.
❖ The salient aspect which emerges from the above analysis is that the resolution professional does not possess an adjudicatory function in terms of the provisions of Section 99. The resolution professional does not have the kind of power which their counterpart has in Part II. No provision has been made in Part III empowering the resolution professional to take over the assets or the business which is being carried on by the individual or the partnership. The role under Section 99 which is ascribed to the resolution professional is that of a facilitator and is to gather relevant information on the basis of the application which has been submitted under Section 94 or Section 95 and after carrying out the process which is referred to in sub-section (2), sub-section (4) and sub-section (6) of Section 99, to submit a report recommending the acceptance or rejection of the application. The role of the resolution professional is purely recommendatory in nature and cannot bind the creditor, the debtor or, the adjudicating authority.
c) Moratorium:
❖ Section 96 deals with an “interim moratorium”. In terms of Section 96, the interim moratorium takes effect on the date of the application. In other words, the very submission of an application under Section 94 or Section 95 triggers the interim moratorium which then ceases to have effect on the date of the admission of the application (under Section 100). The impact of the interim moratorium under Section 96 is that a legal action or proceeding pending in respect of any debt is deemed to have been stayed and the creditors or the debtors shall not initiate any legal action or proceedings in respect of any debt. The crucial words which are used both in clause (b)(i) and clause (b)(ii) of sub-section (1) of Section 96 are “in respect of any debt”.
❖ There is contra-distinguished from the provisions for moratorium which are contained in Section 14 in relation to the CIRP under Part II. The moratorium under Section 14 operates on the order passed by an adjudicating authority. The purpose of the moratorium under Section 96 is protective. The object of the moratorium is to insulate the corporate debtor from the institution of legal actions or the continuation of legal actions or proceedings in respect of the debt.
d) Role of Adjudicating Authority:
❖ The resolution professional submits a report to the adjudicating authority. The report is purely recommendatory in nature and does not bind the adjudicating authority. Section 100(1) requires the adjudicating authority to pass an order either admitting or rejecting the application within fourteen days from the date of the submission of the report under Section 99. The adjudicating authority has the power to instruct the debtor and the creditor to enter into negotiation if it admits the application. The provisions dealing with moratorium under Section 101(2)(c) correspond broadly to the provisions of Section 14(1)(b) in relation to Part II. Significantly, clause (c) of Section 101(2) which places a restraint on the transfer, alienation or disposal of assets does not find a place in Section 96(1)(b).
❖ It consequently operates only after the admission of an application under Section 100. The adjudicatory function of the adjudicating authority commences, under Part III, after the submission of a recommendatory report by the resolution professional.
18. Principles of Natural Justice:
a) The principle of law that natural justice postulates two requirements: firstly, audi alterum partem i.e. an opportunity of being heard to a person who is liable to be affected by an investigation, enquiry, proceeding or action; and secondly, nemo judex in causa sua, which means that the person should not be a judge in their own cause.
b) The nature of natural justice is liable to vary with the exigencies of the situation. It may extend to a fully-fledged evidentiary hearing while, on the other hand, the principles of natural justice may require that a bare minimum opportunity should be given to an individual who is liable to be affected by an action, to furnish an explanation to the allegations or the nature of the enquiry.
c) The Parliament has provided for an engagement of the debtor with the resolution professional at various stages. The expression “in connection with the application” indicates that Parliament has not contemplated a roving enquiry by the resolution professional but an enquiry for the purpose of making the ultimate recommendation in the report on the nature of the application itself. The resolution professional, after carrying out the process which is evidenced in sub-sections (2) and (4) is then required to make an ascertainment in terms of sub-section (6). It is thereafter that the resolution professional would submit a report either recommending the acceptance or rejection of the application together with the reasons in support of the report.
d) The provisions of Section 99 thus leave no manner of doubt that the process which takes place before the resolution professional is not an ex parte process in the absence of a debtor against whom the insolvency resolution process is sought to be initiated. Though, the ultimate report of the resolution professional has only a recommendatory value, the legislature has ensured that the recommendation is made after taking into account the information or, as the case may be, the explanation that is furnished by the debtor. Thus, it cannot be said that there is any element of bias in a report submitted by an RP who is nominated by the creditor.
e) The resolution professional, operating under the regulatory oversight of the Board, plays a vital role in the effective functioning of the insolvency process and contributes significantly to its efficiency. Firstly, the resolution professional is only entitled to seek information which is strictly relevant to the examination of the application for IRP; and secondly, regulation 7(2)(h) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 read with para 21 of the First Schedule, casts an obligation on the resolution professional to ensure confidentiality of all information relating to the insolvency process. The BLRC also acknowledges the information imbalance between debtors and creditors, necessitating the resolution professional’s investigative role in individual insolvency. Therefore, Section 99 empowers the resolution professional to seek information.
f) The appointment of a resolution professional is for the purpose of a facilitative exercise which is contemplated by Section 99 which, as we have noted, eventually ends in a report either recommending the acceptance or rejection of the application. Bearing in mind the statutory scheme, it would be impermissible for this Court to allow for the adjudicatory intervention of the adjudicating authority in adjudicating what is described as a jurisdictional question at the stage of Section 97(5).
g) Section 100(1) stipulates that the adjudicating authority must issue an order within fourteen days of receiving the report, either admitting or rejecting the application filed under Sections 94 or 95, depending on the circumstances. Importantly, the adjudicating authority does not mechanically accept or reject applications based solely on the resolution professional's report. Instead, it must actively engage in a fair process, affording the debtor a fair opportunity to present their case. The adjudicating authority arrives at its determination by considering arguments supported by relevant material particulars. In essence, the adjudicating authority conducts an independent assessment, not solely relying on the resolution professional's report, to decide the fate of applications under Section 94 or 95 of the IBC.
19. Constitutional Validity:
a) The task before the resolution professional is not to adjudicate but to collate and collect information on the application under Section 94 or Section 95 before submitting a report to the adjudicating authority. When interpreting Part II of the IBC, the Courts have inferred the necessity of granting an opportunity to a debtor before initiating the insolvency resolution process against them. This includes the provision of a copy of the application and all relevant documents.
b) Section 100 of the IBC does not explicitly mention a hearing for a debtor, the requirement of a hearing has to be read into Section 100. In legal interpretation, when a statute is silent on a specific aspect, like a hearing, and there is no explicit prohibition, the courts may imply or read in such a requirement. The key point is that the lack of explicit mention of a hearing in a provision does not automatically make it unconstitutional because such a requirement can be read into the statute.
c) The process under Section 100 before the adjudicating authority must be compliant with the principles of natural justice. The adjudicating authority is duty bound to hear the person against whom an application has been filed under Section 94 or Section 95 before it comes to the conclusion as to whether the application should be admitted or rejected. The duty of the adjudicating authority to furnish a hearing attach to its role and function as an authority which is entrusted to decide questions of law and fact and to arrive at a conclusion on either to admit or reject the application filed by the debtor or the creditor under Chapter III of Part III.
d) The nature of the resolution professional’s role, the powers, and its nexus with the legitimate aim of the legislation also lead us to the conclusion that the impugned provisions are compliant with Article 14 of the Constitution. Accordingly, Sections 95 to 100 of the IBC were held as not unconstitutional.
20. Ultimate findings:
i. No judicial adjudication is involved at the stages envisaged in Sections 95 to Section 99 of the IBC.
ii. The resolution professional appointed under Section 97 serves a facilitative role of collating all the facts relevant to the examination of the application for the commencement of the insolvency resolution process which has been preferred under Section 94 or Section 95. The report to be submitted to the adjudicatory authority is recommendatory in nature on whether to accept or reject the application.
iii. The submission that a hearing should be conducted by the adjudicatory authority for the purpose of determining ‘jurisdictional facts’ at the stage when it appoints a resolution professional under Section 97(5) of the IBC is rejected.
iv. No such adjudicatory function is contemplated at that stage. To read in such a requirement at that stage would be to rewrite the statute which is impermissible in the exercise of judicial review.
v. The resolution professional may exercise the powers vested under Section 99(4) of the IBC for the purpose of examining the application for insolvency resolution and to seek information on matters relevant to the application in order to facilitate the submission of the report recommending the acceptance or rejection of the application.
vi. There is no violation of natural justice under Section 95 to Section 100 of the IBC as the debtor is not deprived of an opportunity to participate in the process of the examination of the application by the resolution professional.
vii. No judicial determination takes place until the adjudicating authority decides under Section 100 whether to accept or reject the application. The adjudicatory authority must observe the principles of natural justice when it exercises jurisdiction under Section 100 for the purpose of determining whether to accept or reject the application.
viii. The purpose of the interim moratorium under Section 96 is to protect the debtor from further legal proceedings; and
ix. The provisions of Section 95 to Section 100 of the IBC are not unconstitutional as they do not violate Article 14 and Article 21 of the Constitution.
21. Epilogue:
-This judgment is a much needed one as it clears the legal uncertainty on the applicability of the IBC to personal guarantors, who are often the promoters or directors of the defaulting companies. It also paves the way for a holistic and comprehensive resolution of the corporate insolvency cases, as the creditors can now pursue the recovery of their dues from both the corporate debtor and the personal guarantor simultaneously before the same adjudicating authority.
-The judgment also upholds the principle of co-extensive liability of the personal guarantor under the contract law, while recognizing the distinct nature and objectives of the IBC. This ensures that the personal guarantor does not escape the consequences of his or her guarantee, while also respecting the contractual rights and obligations of the parties.
-The judgment is a positive development for the banking industry, as it will enhance the credit discipline and deter the willful defaulters from abusing the insolvency process. It will also facilitate the speedy and effective recovery of the outstanding loans, thereby improving the financial health and stability of the banks. Several aspects have also been clarified, especially on the role of the Resolution Professional as a ‘facilitator’ and not an ‘adjudicator’ and applicability of Principles of Natural Justice.
-The Personal Guarantor now cannot claim ignorance and is required to follow the rigors of timelines provided for Insolvency of Individuals and such personal guarantors. Promoters are required to think twice and exercise prudence when extending personal guarantees for the Corporate Debtor.
-We hope that this judgment will serve as a catalyst for the implementation of the IBC in its true spirit and foster a culture of responsible borrowing and lending in the country.