Supreme Court Order on Defaulting Tycoons Closes Major Bankruptcy Loophole
Over 70 petitions and challenges regarding the invocation of personal guarantees have been brought together and heard by the Supreme Court, including Anil Ambani of Reliance Group, Kapil Wadhawan of Dewan Housing Finance Ltd, Venugopal Dhoot of Videocon Group and Sanjay Singal of Bhushan Power & Steel.
A two-judge bench led by L Nageswara Rao in a brief statement said: “We maintain the notifications which allowed lenders to initiate insolvency proceedings against personal insurers.”
The written request of the personal guarantors was dismissed without costs.
Lawyers and bankers were still awaiting a copy of the final judgment, but said the order established a priority for future collections in bankruptcy cases.
“We are awaiting the order, but on the face of it, the court allowed creditors to collect residual assessments on a promoter’s personal property even after the sale of the company’s assets. Lenders can also directly judge promoters. for insolvency and invoke their guarantees. These two points are important positives. in the maturity of the law and will also act as a deterrent against defaults in the future “, said Aashit Shah, partner at J Sagar Associates.
Bankers also hope that the Supreme Court’s order clarifies important points such as allowing the seizure of personal assets of promoters even after a business has gone into liquidation.
“You have to go through the order to see what the court said about various arguments, including rights of subrogation, that if personal property is attached in a business case, the person can claim recovery.” of the company in the future. IBC replaced all those rights that were part of the transfer of ownership law and the court had to deal with them as well, ”said a public sector banker.
Bankers hope that with the green light from the highest court, all bridges will be empowered to file for bankruptcy against failed billionaire promoters.