Territorial jurisdiction and guarantor recovery: part cause of action supported interim stay of enforcement proceedings.

Part cause of action within Haryana was held sufficient to support territorial jurisdiction under Article 226 where the petitioners' properties were located there and enforcement could lead to sale of those assets. On the insolvency issue, the Court took a prima facie view that a resolution plan contemplating assignment of the remaining debt, read with the RBI prudential framework and the requirement of compliance with law under Section 30(2)(e) of the Insolvency and Bankruptcy Code, cast doubt on continuation of recovery against the personal guarantors. Interim protection was granted, and proceedings before the NCLT and DRT were stayed pending further consideration.

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Issues: (i) Whether the High Court had territorial jurisdiction because part of the cause of action arose within Haryana. (ii) Whether, on a prima facie view of the resolution plan and the RBI prudential framework, the respondents could continue proceedings to enforce the petitioners' personal guarantees.

Issue (i): Whether the High Court had territorial jurisdiction because part of the cause of action arose within Haryana.

Analysis: The petitioners' properties were situated in Haryana and the recovery proceedings against them could result in sale of those properties. On that basis, and applying the principle that even a fraction of the cause of action can confer jurisdiction under Article 226, the Court found that part of the cause of action arose within its territorial jurisdiction.

Conclusion: The writ petitions were held maintainable before the High Court.

Issue (ii): Whether, on a prima facie view of the resolution plan and the RBI prudential framework, the respondents could continue proceedings to enforce the petitioners' personal guarantees.

Analysis: The Court noticed that the resolution plan contemplated assignment of the remaining debt to the purchaser, that the RBI framework stated a resolution plan involving assignment is implemented only when the exposure is fully extinguished, and that Section 30(2)(e) of the Insolvency and Bankruptcy Code requires compliance with the law in force. On that basis, the Court formed a prima facie view that the debt stood extinguished in the lenders' books and that continuation of recovery proceedings against the guarantors was doubtful, though the observations were expressly tentative.

Conclusion: A prima facie case was made out for staying the proceedings against the petitioners, and the proceedings before the NCLT and DRT were stayed until further orders.

Final Conclusion: The order granted interim protection to the petitioners and kept the issues open for deeper consideration after replies were filed.

Ratio Decidendi: Where the petitioners' properties and the proposed enforcement action are situated within the territorial jurisdiction of the High Court, part cause of action may confer jurisdiction under Article 226, and a resolution plan that contemplates assignment of the debt may justify interim restraint on guarantor recovery proceedings where compliance with the governing insolvency framework is in serious doubt.

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