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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-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) |
