The Supreme Court rejected a petition by the country’s largest lender State Bank of India to allow the personal bankruptcy case against tycoon Anil Ambani to resume.
Justice L. A three-judge panel headed by Nageswara Rao ruled that the bankruptcy case against the former billionaire would remain suspended and directed the Delhi High Court to decide on Mr. Ambani’s challenge to the provisions of the law.
The case is one of the first high-profile ones since the rules were set for personal bankruptcy last year. Bankers and investors in stressed assets are keenly watching the case as its end result could determine the power of lenders to take action against founders who guaranteed repayment of loans by companies that later went bankrupt.
“There are serious consequences for declaring a man bankrupt,” said lawyer Harish Salve, who represented Mr. Ambani in court. Mr Salve said the lenders cited tens of billions of rupees of loans as “pleasant rhetoric”.
A Bankruptcy Tribunal agreed in August to hear a petition by the State Bank to initiate proceedings against Mr. Ambani, who had guaranteed loans of about $ 160 million to his two telecom companies. The Tribunal appointed a Bankruptcy Administrator to assess SBI’s claims. Mr. Ambani challenged the case in the Delhi High Court, which suspended the bankruptcy proceedings against him for deciding his broad challenge to parts of the country’s insolvency law.
The state-controlled lender appealed to the apex court, stating that such suspension of the bankruptcy case was not legal and would fail the provisions of law.