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Issues: Whether the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the corporate guarantor alone was maintainable when the creditor had already obtained a decree against the principal borrower and other guarantors and the decree was under review.
Analysis: The liability of a guarantor is ordinarily joint and several, and the creditor may proceed against the borrower or the surety. However, the present case had already been carried to the civil court against the principal borrower, personal guarantors and the corporate debtor, and a decree had been passed which was stated to be pending in review. The Adjudicating Authority treated the present invocation of the insolvency process against only the corporate guarantor, while leaving the principal borrower and other guarantors out of the insolvency action, as giving rise to parallel proceedings. It also noted the long lapse of time, the applicability of limitation to insolvency proceedings, and that the questions concerning the decree and the arbitral clause were already part of the pending review before the High Court.
Conclusion: The petition was held to be not maintainable against the corporate guarantor alone and was dismissed.
Ratio Decidendi: Where a creditor has already obtained a civil decree against the principal borrower and guarantors and the decree remains under challenge in review, a separate insolvency petition against only the corporate guarantor may be rejected as impermissible parallel proceedings and abuse of process.
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