As an interim relief, the Supreme Court of India, in 

Gurmeet Sodhi v. Union of India, recently restrained a

resolution professional from submitting a statutory report before the National Company Law Tribunal (NCLT).
It was granted after a petition was filed questioning the constitutionality of specific provisions of the Insolvency
and Bankruptcy Code 2016. (IBC). 

The petitioner (a personal guarantor to a company) contends that the impugned provisions violate the right of
the personal guarantor to be heard before acting upon the insolvency petition filed by the creditor and the
appointment of a resolution professional. In the capacity of a personal guarantor, one should be entitled to notice
and hearing by the Adjudicating Authority, and non-adherence to the same being a violation of principles of
natural justice is the conflict that arises.

Given that this case could be of landmark precedence for personal guarantors and their rights, it is significant to
look into the constitutionality of certain provisions of the IBC. To understand the relevance of the issues that
have been contended, a bare perusal of the factual background of this case adds a lot contextually.

Factual Background

The petitioner, in this case, Mrs. Gurmeet Sodhi, is the former Director of Kudos Chemie Limited (Corporate
Debtor), a company that recently underwent corporate insolvency resolution process. As a director, she had
undertaken personal guarantees to secure credit for her company. The aforementioned issues are in
consideration now, as the financial creditors have initiated an insolvency resolution process in order to invoke
the guarantees.

At the time of hearing of this case, the court also noted the pendency of a similar issue in Surendra Jiwrajkar v.
Omkara Assets Reconstruction Private Ltd. (2021) ibclaw.in 26 HC. It has decided to club the proceedings of
both the cases, thereby making the facts of the latter relevant. Surendra Jiwrajkar, the personal guarantor,
challenged the insolvency resolution process initiated against him by Omkara Assets Reconstruction Private
Limited (Omkara) because the outstanding debt had already been assigned to JM Financial Asset Reconstruction
(JM) Limited. The issue of maintainability arose as Omkara sought to recover this debt, already sold for
consideration to JM Ltd. 

Thus, the constitutional vires of Sections 95, 96, 97, 99 and 100 have been challenged on the grounds of lack of
notice & hearing by the Adjudicating Authority and the subsequent denudation of the right of personal
guarantors to raise objections on the maintainability issue. Since the above-mentioned provisions have been
challenged, the scope and the interpretation of the said provisions need to be examined to understand their
statutory connotations.

Scope of the Impugned Provisions

Section 95 of IBC deals with the application by a creditor to initiate the insolvency resolution process. The
provision bestows upon the creditor the right to initiate the process either by himself, jointly with other
creditors, or through a resolution professional by applying to the Adjudicating Authority. It also mandates the
requirements of certain details, documents and the notification of the application to the debtor. 
Whereas Section 96 provides for the initiation of the interim moratorium. The moratorium period commences on
the exact date that the application is filed. Thus, as per the current law provided in IBC, the Adjudicating
Authority, by order, declares a moratorium on the assets of the debtor by prohibiting any action from
foreclosing, recovering or enforcing any security interest created by the corporate debtor in respect of its
property, including any action under the act.