LALIT KUMAR JAIN versus UNION OF INDIA & ORS.

Citation: [2021] 3 S.C.R. 1075 · Decided: 21-05-2021 · Supreme Court of India · Bench: L. NAGESWARA RAO · Disposal: Dismissed

Cited by 2 judgment(s) · cites 19 · see the full citation network in Lexace

Judgment (excerpt)

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1075
LALIT KUMAR JAIN
v.
UNION OF INDIA & ORS.
(Transferred case (Civil) No. 245 of 2020)
MAY 21, 2021
[L. NAGESWARA RAO AND S. RAVINDRA BHAT, JJ.]
Insolvency and Bankruptcy Code, 2016 – ss.1(3), 2(e), 5(22),
60, 179, 234, 235, 238 and 243 – Vires and validity of notification
dated 15.11.2019 issued by the Central Government – Whether the
impugned notification was an exercise of excessive delegation; and
inasmuch as it notified various provisions of the Code only in so
far as they related to personal guarantors to corporate debtors, it
was therefore, ultra vires – Held: The impugned notification was not
an instance of legislative exercise, nor amounted to impermissible
and selective application of provisions of the Code – 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 –
Sufficient indication in the Code- by s.2(e), s.5(22), s.60 and s.179
indicating that personal guarantors, though forming part of the
larger grouping of individuals, were to be, in view of their intrinsic
connection with corporate debtors, dealt with differently, through
the same adjudicatory process and by the same forum (though not
insolvency provisions) as such corporate debtors – Notifications u/
s.1(3), (issued before the impugned notification was issued) disclose
that the Code was brought into force in stages, regard being had to
the categories of persons to whom its provisions were to be applied
– The impugned notification, similarly inter alia makes the provisions
of the Code applicable in respect of personal guarantors to
corporate debtors, as another such category of persons to whom
the Code has been extended – The impugned notification was issued
within the power granted by Parliament, and in valid exercise of it
– The exercise of power in issuing the impugned notification under
s.1(3) is therefore, not ultra vires; the notification is valid.
Insolvency and Bankruptcy Code, 2016 – Whether once a
resolution plan is accepted, the corporate debtor is discharged of
liability; and as a consequence, the guarantor whose liability is co-
[2021] 3 S.C.R. 1075
1075
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SUPREME COURT REPORTS
[2021] 3 S.C.R.
extensive with the principal debtor, i.e. the corporate debtor, too is
discharged of all liabilities – Held: Approval of a resolution plan
relating to a corporate debtor does not ipso facto discharge a
personal guarantor (of the corporate debtor) of his liabilities under
the contract of guarantee – 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.
Maxims – Maxim “reddendo singular singulis” – Applicability
– Where a sentence in a statute contains several antecedents and
several consequences, they are to be read distributively, that is to
say, each phrase or expression is to be referred to its appropriate
object – When s.60(2) of the Code alludes to insolvency resolution
or bankruptcy, or liquidation of three categories, i.e. corporate
debtors, corporate guarantors (to corporate debtors) and personal
guarantors (to corporate debtors) they apply distributively, i.e. that
insolvency resolution, or liquidation processes apply to corporate
debtors and their corporate guarantors, whereas insolvency
resolution and bankruptcy processes apply to personal guarantors,
(to corporate debtors) who cannot be subjected to liquidation –
Insolvency and Bankruptcy Code, 2016 – s.60(2).
Dismissing the writ petitions, transferred cases and transfer
petitions, the Court
HELD:1.1. The Central Government followed a stage-by-
stage process of bringing into force the provisions of the Code,
regard being had to the similarities or dissimilarities of the subject
matter and those covered by the Code. [Para 81][1149-B]
1.2. Insolvency proceedings relating to individuals is
regulated by Part-III of the Code. Before the amendment of 2018,
all individuals (personal guarantors to corporate debtors, partners
of firms, partnership firms and other partners as well as
individuals who were either partners or personal guarantors to
corporate debtors) fell under one descriptive description under
the unamended Section 2(e). The unamended Section 60
contemplated that the adjudicating authority in respect of personal

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