Surendra B. Jiwrajka vs Omkara Assets Reconstruction Private Limited
Background
A large batch of over 200 writ petitions (led by Dilip B Jiwrajka) was filed directly in the Supreme Court by personal guarantors to corporate debtors, challenging the constitutional validity of Sections 95 to 100 of the Insolvency and Bankruptcy Code, 2016: the provisions that let a creditor (here, an asset reconstruction company such as Omkara Assets Reconstruction) trigger insolvency proceedings against an individual who has personally guaranteed a company's debt. The petitioners argued that a Resolution Professional gets appointed and an interim moratorium is imposed against the guarantor, and a report is sent to the National Company Law Tribunal (NCLT) recommending admission or rejection of the insolvency application, all without the guarantor first getting a hearing, which they said breached natural justice and Articles 14 and 21 of the Constitution. Surendra B. Jiwrajka's own case against Omkara Assets Reconstruction, raising the identical constitutional challenge, was one of the connected matters decided together by this common judgment.
Decision Breakdown
The Supreme Court upheld the constitutional validity of Sections 95 to 100 of the IBC. It held that the Resolution Professional's role at the report stage is purely "facilitative" (collecting and collating information) and not adjudicatory, so no hearing is constitutionally required at that stage; however, the debtor must be given a fair opportunity to participate and furnish information during this process. The Court clarified that real judicial adjudication happens only later, when the NCLT (the "adjudicating authority") decides under Section 100 whether to admit or reject the insolvency application, and at that stage, the adjudicating authority must comply with principles of natural justice and hear the guarantor before deciding. The interim moratorium under Section 96, which freezes other legal proceedings against the guarantor once the process starts, was held to be a protective measure, not a punitive one. All the connected writ petitions, including this one, were accordingly dismissed, with the Court reading procedural safeguards into the law rather than striking the provisions down.
Lesson Learnt
A person who has personally guaranteed someone else's business loan can be pulled into insolvency proceedings by the lender without a hearing at the initial fact-gathering stage, but the law guarantees that person a hearing before the Tribunal actually decides to admit the case against them, so the real opportunity to contest arises at the NCLT stage, not before.