Supreme Court Weekly Round Up May 17 to May 23, 2021

JUDGMENTS THIS WEEK

1. Supreme Court Upholds IBC Provisions Applicable To Personal Guarantors Of Corporate Debtors

Case: Lalit Kumar Jain vs. Insolvency and Bankruptcy Board of India

Citation: LL 2021 SC 257

The Supreme Court this week upheld the provisions of Insolvency and Bankruptcy Code, 2016 which applies to personal guarantors of corporate debtors.

The bench comprising Justices L. Nageswara Rao and S. Ravindra Bhat approval of a resolution plan relating to a corporate debtor does not operate so as to discharge the liabilities of personal guarantors (to corporate debtors).

The bench dismissed the petition challenging notification dated 15.11.2019 and the Insolvency and Bankruptcy(Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019. The Writ Petitioners had also sought a declaration that Section 95, 96, 99, 100, 101 of the Insolvency and Bankruptcy Code, 2016 are unconstitutional in so far as they apply to personal guarantors of corporate debtors. Last year, the Court had transferred to itself the petition which was originally filed before the Delhi High Court and other High Courts.

"It is held that approval of a resolution plan does not ipso facto discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the contract of guarantee. As held by this court, 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." The Court held.

2. Doctrine Of Impossibility Applicable To Court Orders; Possibility Of Implementation Should Be Considered : Supreme Court

Title : State of Uttar Pradesh versus In Re Inhuman Condition at Quarantine Centres and for Providing Better Treatment to Corona Positive

Citation : LL 2021 SC 258

"Doctrine of impossibility is applicable to Court orders as well", said the Supreme Court on Friday stayed the directions issued by Allahabad High Court on May 17 for upgradation of medical facilities in the State of Uttar Pradesh on a war-scale footing.

Stating that High Courts should avoid passing orders that are not capable of being implemented, a Bench of Justices Vineet Saran and BR Gavai noted, "…we are of the opinion that the High Court should normally consider the possibility of the implementation of the directions given by it, and such directions which are incapable of being implemented should be avoided".

The Bench went on to note that the "Doctrine of Impossibility" was equally applicable to Court orders as well. It was further recorded that High Courts should normally refrain from issuing directions matters which have transnational and international ramifications, especially when such matters of national level were being considered by the Top Court in separate proceedings.

"...we may also mention that in matters which have transnational and international ramifications, the High Court should normally refrain from issuing directions in such matters,especially when such matters of national level are being considered by this Court in separate proceedings", the Court said in the order.

3. IBC - Approval Of Resolution Plan Does Not By Itself Discharge Liabilities Of Personal Guarantor Of Corporate Debtor: Supreme Court

Case: Lalit Kumar Jain vs. Insolvency and Bankruptcy Board of India

Citation: LL 2021 SC 257

The Supreme Court has held that the approval of a resolution plan does not ipso facto discharge a personal guarantor of a corporate debtor.

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, the bench comprising Justices L. Nageswara Rao and S. Ravindra Bhat observed in the judgment in which it upheld the provisions of Insolvency and Bankruptcy Code, 2016 which applies to personal guarantors of corporate debtors.

 Tthe bench, while referring to recent judgments in State Bank of India v. V. Ramakrishnan, Committee of Creditors of Essar Steel (I) Ltd. v. Satish Kumar Gupta, observed that the sanction of a resolution plan and finality imparted to it by Section 31 does not per se operate as a discharge of the guarantor's liability. It said that an involuntary act of the principal debtor leading to loss of security, would not absolve a guarantor of its liability.

IMPORTANT APEX COURT UPDATES

1. COVID Is Not Panacea For All Cases Of Arrest To Get Bail, Regardless Of Nature Of Accusation: Supreme Court

The Supreme Court this week observed that apprehension of COVID cannot be cited as a ground for bail in all cases, regardless of the nature and gravity of the offence.

The vacation bench of Justices Dinesh Maheshwari and Aniruddha Bose was considering an SLP against the April order of the Punjab and Haryana High Court denying anticipatory bail to the petitioner, a hotel owner, in connection with an FIR under Sections 3 (Punishment for keeping a brothel or allowing premises to be used as a brothel), 4 (Punishment for living on the earnings of prostitution) and 5 (Procuring, inducing or taking person for the sake of prostitution) of the Immoral Traffic (Prevention) Act. 

"COVID comes in here also?! In a 3, 4, 5 case (sections 3, 4, 5 of the PITA, 1956)?! Where 15 customers were found in your premises? Corona is the panacea for everything?! And you are seeking anticipatory bail!", expressed Justice Maheshwari.

"Either you surrender immediately or we will direct the SSP to arrest you!", the judge told the advocate.

2. Supreme Court Grants Bail To YSRCP MP Raghu Rama Krishna Raju In Sedition Case

The Supreme Court this week grated bail to YSR Congress MP K. Raghu Rama Krishnam Raju from Andhra Pradesh, who was arrested by Guntur CID on May 14 for alleged sedition and promotion of communal hatred over his speeches.

A Bench of Justices Vineet Saran and BR Gavai observed that custodial interrogation would not be required as all statements of Petitioner are on record. The bench also took note of the medical condition of the petitioner, having regard to the heart surgery underwent by him last year. The bench also opined on the basis of the medical report from Army Hospital, Secundarabad, that possibilities of the petitioner's ill-treatment in custody cannot be ruled out.

However, the bench had imposed a condition that Raju should not give media interviews and make press statements during the period of investigation. He has to cooperate with the investigation and should not influence the witnesses. He should respond whenever he is called upon by the Investigating Officer. He shall be given at least 24 hrs notice by IO.

The Apex Court allowed Raju's appeal against an order of the Andhra Pradesh High Court which had refused to entertain his bail application and had asked him to approach the Sessions Court.

3. 'We Cannot Demoralize High Courts':SC Rejects SG Tushar Mehta's Request To Direct All HCs To List Covid Cases Before Chief Justice-led Benches

Supreme Court this week declined the request of Solicitor-General Tushar Mehta seeking directions to all High Courts to only let Benches headed Chief Justices of the High Courts hear matters related to COVID-19.

The Supreme Court was hearing an appeal filed by the State of Uttar Pradesh against an order passed by the Allahabad High Court wherein the Court had noted that entire medical system in smaller cities and villages in the State was in the hands of God (Ram Bharose).

"The constitution of Benches is the prerogative of the Chief Justice of the concerned High Court. We will not pass an order for every High Court. This is only for your High Court. You are not appearing for Union of India", remarked the Apex Court.

4. 'High Court Should Avoid Passing Orders Which Are Difficult To Implement' : Supreme Court Stays Allahabad HC Directions For Improving Health Care System Of Uttar Pradesh

The Supreme Court this week stayed the directions issued by the Allahabad High Court on May 17 for upgrading the medical facilities in the state of Uttar Pradesh on a war-scale footing.

A vacation bench comprising Justices Vineet Saran and BR Gavai stayed the order after hearing the submissions made by Solicitor General of India Tushar Mehta on behalf of the State of Uttar Pradesh.

The Allahabad High Court, while considering a suo moto case taken to deal with COVID issues, had passed a slew of directions on May 17 in relation to providing ambulances with ICU facilities in all villages, making oxygen beds available in all nursing homes, upgradation of medical college hospitals in the state etc., on an urgent basis in a time-bound manner considering the COVID second wave.

5. Alleging Threats To Withdraw Complaint Against Anil Deshmukh, Param Bir Singh Moves SC Against Maharashtra Govt Inquiries

Expelled Mumbai police commissioner Param Bir Singh has approached the Supreme Court against the departmental inquiries initiated against him by the Maharashtra Government alleging that they are an attempt to frame him in false cases.

In his petition, Singh alleges that the inquiry officer of the state government is threatening him with false cases unless the complaint made by him against former Home Minister Anil Deshmukh - which is being investigated by the CBI as per orders of the Bombay High Court- is withdrawn. The former Mumbai top cop says that he has submitted before the CBI the transcripts showing alleged phone call conversations from the inquiry officer threatening him.

In the writ petition filed before the Supreme Court, Singh has prayed for a direction to the CBI to act on his representation made against the alleged threats made by the Maharashtra Government's inquiry officer.

6. West Bengal Post-Poll Violence : Supreme Court To Hear Next Week Plea For Compensation & Rehabilitation Of Victims, SIT Probe

The Supreme Court will hear next week a plea seeking directions to stop/prevent the alleged State-sponsored violence in West Bengal in wake of the State Assembly elections results , as well as the constitution of an SIT to investigate the same and take appropriate action against the culprits in reported incidents.

It further prays for the formation of a Commission for rehabilitation of displaced persons, compensation for loss of family members, property, livelihood, and mental and emotional agony.

The petitioners are Arun Mukherjee, Debjani Halder, Prosanta Das, Paramita Dey and Bhupen Halder. As per the petition, Mukherjee and Halder are social activists, Das is a victim of post-poll violence on Kooch Behar district, Dey and Halder are advocates practicing in West Bengal whose homes and offices were destroyed by TMC workers.