Interpretation of Section 29A(h) of IBC – Bank of Baroda & Anr. Vs. MBL Infrastructures Ltd. & Ors. – Supreme Court

Hon’ble Supreme Court holds that once an application for insolvency resolution is admitted on behalf of ‘a creditor’ then the process would be one of rem, and therefore, all creditors of the same class would have their respective rights at par with each other. The word “such creditor” in Section 29A(h) has to be interpreted to mean similarly placed creditors after the application for insolvency application is admitted by the adjudicating authority. As a result, what is required to earn a disqualification under the said provision is a mere existence of a personal guarantee that stands invoked by a single creditor, notwithstanding the application being filed by any other creditor seeking initiation of insolvency resolution process. This is subject to further compliance of invocation of the said personal guarantee by any other creditor. We have already said that the concern of the Court is only from the point of view of two entities viz., corporate creditors and the corporate debtors. Any other interpretation would lead to an absurdity striking at the very objective of Section 29A, and hence, the Code. Ineligibility has to be seen from the point of view of the resolution process. It can never be said that there can be ineligibility qua one creditor as against others. Rather, the ineligibility is to the participation in the resolution process of the corporate debtor. Exclusion is meant to facilitate a fair and transparent process.

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