In a major relief for Anil Ambani, the Delhi High Court, on Thursday ( August 27,2020), stayed the Insolvency and Bankruptcy proceedings initiated against the debt-laden industrialist by the State Bank of India (SBI) in connection to a personal guarantee given by him against the loan taken by Reliance Communications Ltd (RCom) and Reliance Infratel Ltd (RITL).
A Division Bench of Justice Vipin Sanghi and Justice Rajneesh Bhatnagar has, however, restricted Anil Ambani from disposing or transferring his personal assets. The court has further said that the insolvency proceedings against Ambani shall continue as before. The order has come in a plea moved by Anil Ambani against the appointment of a Resolution Professional (RP) by Mumbai bench of NCLT against non-repayment of loans to the State Bank of India, which had provided credit facilities of Rs 565 crore and Rs 635 crore to now insolvent RCom and RITL, respectively, in 2016.
In addition to this, Ambani has also challenged the ‘constitutional validity’ of the provision regarding the personal guarantee and bankruptcy by arguing that the Act does not provide an enabling provision for such an order. Ambani is aggrieved by the August 20 order passed by the NCLT, Mumbai Bench wherein the court held that “There is no doubt that Ambani furnished his personal guarantee for the credit facility availed by RCom and RITL… The authority accordingly has no other option than to issue the direction.” In September 2016, Anil Ambani offered about Rs 1,200 crore of personal guarantees for availing the credit facility. Later in 2017, accounts of RCom and RITL were held to be in default, retrospectively, since August 2016. In March 2020, SBI had filed a petition before the Mumbai bench of the NCLT seeking initiation of personal insolvency against Ambani under section 95 of IBC for personal bankruptcy based on the guarantees issued by him. Whenever a petition is moved under sections 94 or 95 of the IBC, within seven days of the application the NCLT has to direct the Insolvency and Bankruptcy Board of India to nominate an RP. The court has posted the matter for the next hearing on October 06. [READ ORDER]