IBC moratorium protects only the corporate debtor, not guarantors, while pledged shares do not defeat a summary suit.

Jurisdiction under the Recovery of Debts Due to Banks and Financial Institutions Act is confined to claims by banks and financial institutions, so a civil suit by a non-bank claimant was not barred. Collateral security in the form of pledged shares did not, by itself, defeat maintainability of a summary suit under Order XXXVII CPC for recovery on written contracts and guarantees. The guarantee deeds were not shown to be insufficiently stamped, and the objection was also belated. Section 14 of the Insolvency and Bankruptcy Code moratorium applies only to the corporate debtor and does not automatically extend to guarantors, who may seek protection only through insolvency proceedings against them. The defendants' objections failed, subject to a conditional leave to defend.

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Issues: (i) Whether the Debts Recovery Tribunal had exclusive jurisdiction to entertain the claim because the plaintiff was a subsidiary of a financial institution; (ii) whether the suit was not maintainable as a summary suit merely because the plaintiff held security in the form of pledged shares; (iii) whether the deeds of guarantee were insufficiently stamped; and (iv) whether the moratorium ordered under Section 14 of the Insolvency and Bankruptcy Code, 2016 in favour of the corporate debtor extended to the guarantors.

Issue (i): Whether the Debts Recovery Tribunal had exclusive jurisdiction to entertain the claim because the plaintiff was a subsidiary of a financial institution.

Analysis: The jurisdiction of the Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is confined to applications by banks and financial institutions for recovery of debts due to them. The plaintiff did not answer that description. The statutory bar under Section 18 operates only in relation to matters within Section 17, and therefore does not oust the jurisdiction of the civil court in a suit by a non-bank, non-financial institution claimant.

Conclusion: The objection to jurisdiction failed and was rejected.

Issue (ii): Whether the suit was not maintainable as a summary suit merely because the plaintiff held security in the form of pledged shares.

Analysis: Order XXXVII of the Code of Civil Procedure, 1908 applies to suits on written contracts and guarantees for recovery of a debt or liquidated demand. The existence of collateral security does not take a suit outside the summary procedure, and the security alleged here was not even furnished by the defendants. The presence of pledged shares therefore did not defeat maintainability under the summary procedure.

Conclusion: The challenge to maintainability of the summary suit failed and was rejected.

Issue (iii): Whether the deeds of guarantee were insufficiently stamped.

Analysis: The plea was not taken in the affidavits and was raised only at the hearing. Even otherwise, the deeds were franked with stamp duty and no material was shown to establish insufficiency of stamp duty. No basis existed to exclude the guarantees from consideration.

Conclusion: The stamping objection failed and was rejected.

Issue (iv): Whether the moratorium ordered under Section 14 of the Insolvency and Bankruptcy Code, 2016 in favour of the corporate debtor extended to the guarantors.

Analysis: The language of Section 14 is confined to proceedings against the corporate debtor. The Code separately defines a corporate debtor and a personal guarantor, and Part III provides an independent insolvency regime for individuals and partnership firms. Sections 94, 95, 96, 100 and 101 show that a guarantor obtains moratorium only when insolvency proceedings are initiated by or against that guarantor. Section 31, which makes an approved resolution plan binding on guarantors, does not enlarge the scope of Section 14. Section 60 only fixes the forum for insolvency proceedings concerning personal guarantors and does not create an automatic moratorium in their favour. Accordingly, the moratorium granted to the corporate debtor could not be extended to the guarantors.

Conclusion: The moratorium plea was rejected and the suit was held maintainable against the guarantors.

Final Conclusion: The defendants' defences were found to be devoid of merit, but leave to defend was granted only on a deposit condition, so the plaintiff obtained the effective advantage in the summons for judgment.

Ratio Decidendi: A moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 operates only in favour of the corporate debtor and does not automatically protect its guarantors, who can seek moratorium only through insolvency proceedings initiated against them under the applicable part of the Code.

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