Hello friends, Today we are going to talk about a very important decision given by the Supreme Court. This decision is very important for those who are involved in bankruptcy and loan-related matters. Especially, if you have ever given a personal guarantee for a company or taken a big loan from a bank, then this news can be very important for you. The Supreme Court has made it clear that the decision on the validity of the loan will be made not by the High Court, but by the tribunal constituted under the IBC.
Background of the case
This entire dispute is related to a company named Associate Decor Limited, whose promoter and director was the responsible person i.e. the guarantor (Respondent No. 1). This company had taken a loan of Rs 244 crore from several banks. When the company defaulted in repaying the loan, the banks demanded money from that guarantor.
When the banks did not receive the money, they initiated insolvency proceedings against the guarantor under Section 95(1) of the Insolvency and Bankruptcy Code, 2016. The National Company Law Tribunal (NCLT) appointed a Resolution Professional (RP) to look into the matter. However, the guarantor filed a petition in the High Court and argued that his debt had already been settled.
High Court intervention
Strict remarks from the Supreme Court The High Court accepted the guarantor’s plea and stayed the insolvency proceedings. On this, the bank approached the Supreme Court. The Supreme Court took a very tough stand in this matter and made it clear that the High Court should not have intervened in this manner.
The Supreme Court said:
Under Sections 95 to 100 of the IBC, the tribunal (NCLT) will decide whether the debt is valid or not. The resolution professional (RP) only collects information, the final decision is taken by the tribunal.
The High Court had no right to interfere at this stage.
Impact and importance of the decision
This decision will have a direct impact on those cases where the guarantor challenges the bankruptcy process in the High Court. Now it is clear that the High Court cannot interfere in this process and only the tribunal will decide on it. This decision has also brought relief to banks and financial institutions, as now they will not have to face obstacles from the High Court in debt recovery.
Court’s final decision
The Supreme Court overturned the decision of the Karnataka High Court and directed that NCLT, Bengaluru should settle the matter as soon as possible. Friends, this decision is very important for all those who are embroiled in matters related to IBC law. If you give a guarantee for a company or are associated with any loan, then this decision means a lot to you.
Disclaimer: This article is for informational purposes only. The information given in it is not legal advice of any kind. Please consult an experienced lawyer for any legal problems.
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