Appointment Of Resolution Professional: Rajasthan HC Issues Notice On Plea Challenging Constitutionality Of Sections 95, 97 & 99 Of IBC

The petition is filed by one Hemant Bohra, who is a guarantor and against whom the proceedings under the Insolvency and Bankruptcy Code, 2016 have been instituted.

It alleges that the scheme under Chapter III of the IBC and in particular Sections 95 (1), 95(4) read with 95(6), 95(7), 95(5), 97(1) read with Section 97(3), 97(4) to 97(6), Section 99(1), 99(2), 99(3), 99(4) to 99(10), Section 100 and other provision for appointment of Resolution Professional are violative of Article 14, 19 and 21 of the Constitution of India.

The counsel for the petitioner argued that Resolution Professional has personal interest, who himself at the instance of the creditors files application under Section 95 of the IBC.

The plea also states that the statutory demand notice issued by the Respondent, State Bank of India, is illegal in as much as the petitioner has specifically disputed its liabilities under the underlying purported deeds of guarantee, which is sub-judice before the Debt Recovery Tribunal – I, New Delhi in separate proceedings.

The plea further adds, "However, the Impugned Provisions do not provide for any opportunity to the Petitioner and other such personal guarantors to place these objections before the Ld. Adjudicating Authority and instead, it is only after the Resolution Professional forwards its opinion for acceptance/rejection of the petition under Section 95 of the Code, that an opportunity to place a defence may arise."

Petitioner is represented by Advocates Dhruv Dewan, Shreyansh Mardia and Shaambhavi Bhansali.

Challenge Before Karnataka High Court

In a similar plea, the division bench of Karnataka High Court comprising Chief Justice Ritu Raj Awasthi and Justice Sachin Shankar Magadum had issued notice on Dec 8, 2021. The plea stated that section 95, 99, 100 of IBC are arbitrary, discriminatory and violative of Article 14. It was argued, "The procedure prescribed thereunder authorises the Resolution Professional to sit in judgement of his own application. The same is against one of the basic tenets of natural justice."

The petition filed by one Babu A Dhammanagi also seeks to declare section 95 (1) of the IBC as unconstitutional to the extent of permitting filing of application through resolution professional.

It was also claimed that the entire process prescribed under section 95, 99 and 100 are absurd and the adjudicating authority has no role rather the entire power to decide on the claim of the creditor is vested with the IRP. Thus a trial is allowed to be conducted by IRP to pass a judgement and decree for accepting and rejecting the claim made in its own application.

Case Title: Hemant Bohra v. Union of India; Civil Writ Petition No. 17148/2021