Personal guarantor insolvency jurisdiction: SARFAESI recovery can continue despite IBC proceedings against the corporate debtor.

Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 confers residuary jurisdiction only where the dispute arises out of or relates to the corporate debtor's insolvency or liquidation; a challenge by a personal guarantor to SARFAESI measures against his mortgaged property was therefore not maintainable before the Tribunal. The 15.11.2019 notification applying Part III to personal guarantors did not require all proceedings against them to be brought only under the Code, and it did not displace recovery under other laws. SARFAESI auction and possession proceedings against the guarantor's secured assets were held to be legally distinct from insolvency proceedings and were not liable to be quashed.

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Issues: (i) Whether a petition by a personal guarantor invoking section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 was maintainable before the Tribunal; (ii) Whether the notification dated 15.11.2019 required all proceedings against a personal guarantor of a corporate debtor to be initiated only under the Insolvency and Bankruptcy Code, 2016; (iii) Whether the auction and possession proceedings under the SARFAESI Act, 2002 against the personal guarantor's mortgaged property were liable to be quashed.

Issue (i): Whether a petition by a personal guarantor invoking section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 was maintainable before the Tribunal.

Analysis: Section 60(5)(c) confers residuary jurisdiction only where the dispute arises out of or in relation to the insolvency or liquidation proceedings of the corporate debtor. The dispute here arose from SARFAESI action taken against the personal guarantor in respect of his secured property and was independent of the corporate debtor's liquidation proceedings. The Tribunal therefore could not assume jurisdiction merely because the corporate debtor was undergoing insolvency/liquidation.

Conclusion: The petition was not maintainable.

Issue (ii): Whether the notification dated 15.11.2019 required all proceedings against a personal guarantor of a corporate debtor to be initiated only under the Insolvency and Bankruptcy Code, 2016.

Analysis: The notification made Part III applicable to personal guarantors for insolvency proceedings, but it did not bar recovery proceedings under other applicable laws. The insolvency framework and recovery mechanisms operate in different fields, and the notification did not render SARFAESI or other recovery statutes inapplicable against personal guarantors. The Tribunal also read the later Supreme Court pronouncements as preserving the creditor's right to proceed against the guarantor outside insolvency proceedings.

Conclusion: The notification did not compel all action against a personal guarantor to be brought only under the Insolvency and Bankruptcy Code, 2016.

Issue (iii): Whether the auction and possession proceedings under the SARFAESI Act, 2002 against the personal guarantor's mortgaged property were liable to be quashed.

Analysis: Proceedings under the SARFAESI Act are not insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. The liquidation moratorium applicable to the corporate debtor did not automatically extend to the personal guarantor's mortgaged assets, and there was no legal bar shown against continuation of SARFAESI measures by the secured creditor.

Conclusion: The auction and possession proceedings were not liable to be quashed.

Final Conclusion: The application failed on jurisdiction and merits, and the SARFAESI action against the personal guarantor was permitted to continue.

Ratio Decidendi: Section 60(5)(c) can be invoked only for disputes arising out of or in relation to the insolvency or liquidation of the corporate debtor, and recovery proceedings against a personal guarantor under SARFAESI remain legally distinct from insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.

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