The Delhi High Court on Monday issued notice in a petition challenging Section 10A of the Insolvency and Bankruptcy Code 2016. The petition was filed by Getamber Anand, the Chairman and Managing Director of the ATS Group, through Advocate Kartik Nayar, KN LEGAL, Advocates and Solicitors.
On December 2020, the petitioner received a notice from Xander Finance Pvt Ltd which sought to initiate insolvency resolution process against the petitioner in his capacity as the personal guarantor to a loan provided by Xander Finance to ATS Infrastructure.
Senior Advocate Rajiv Nayar, who appeared for the petitioner, contended that the demand is incorrect and untenable while challenging Section 10A of the Insolvency and Bankruptcy Code 2016 insofar as it allows insolvency proceedings against persons and personal guarantors.
The Counsel stated that Section 10A leads to an absurd consequence that while the corporate creditors remain free, personal guarantors are made liable for the same alleged debt/defaults.
The petitioner has further argued that a personal guarantor cannot be held liable for any debt/default in the absence of the principal liability and, therefore, no proceedings can be initiated against a personal guarantor under the IBC .
The Amendment is wholly ultravires and unconstitutional insofar as it violates Article 14, 21 of the Constitution by discriminating between corporate debtors and personal guarantors without any reasonable justification and intelligible difference, the petition reads.
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The Division Bench of Chief Justice D.N. Patel and Justice Jyoti Singh sought response from the Central government and Insolvency and Bankruptcy Board of India while fixing the matter for further hearing on February 18.