2022 (6) TMI 1434 - Tri - Insolvency and Bankruptcy

Personal Guarantor's Application Granted: Interim Moratorium Covers All Debts

The Tribunal allowed the Personal Guarantor's application under section 60(5) of the Insolvency and Bankruptcy Code, staying proceedings, recalling the ... Initiation of legal action or proceedings in respect of any debt against Personal Guarantor during moratorium period - Section 96 of IBC - HELD THAT:- The presence of the term ‘and’ in the section should be read as a conjunctive one, which joins clause 1(a) of the section with clause 1(b) and infers that interim moratorium commences against all the debts (including his personal debt) and the creditors of the debtor are barred from initiating any legal proceedings in respect of any debt. Hence, the interim moratorium restrains any ongoing or fresh legal action or proceeding in respect of any debt pertaining to the Personal Guarantor. The application by IFCI was filed on 29 September, 2021, whereas, the application by SBI was filed on 09 July, 2021, which indicates that the interim moratorium against the personal guarantor commenced from 09 July, 2021. Application allowed. Issues:1. Application under section 60(5) of the Insolvency and Bankruptcy Code by the Personal Guarantor for setting aside an order.2. Interpretation of section 96 of the Insolvency and Bankruptcy Code regarding the interim moratorium period.3. Stay of legal actions or proceedings against the Personal Guarantor during the interim moratorium period.Analysis:Issue 1: Application under section 60(5) of the Insolvency and Bankruptcy CodeThe application was filed by the Personal Guarantor of the Corporate Debtor seeking to set aside an order dated 17 February, 2022. The Court noted the relief sought by the Personal Guarantor and proceeded to analyze the submissions made by the Legal Counsel representing the parties involved in the case.Issue 2: Interpretation of section 96 of the Insolvency and Bankruptcy CodeThe Tribunal delved into a detailed analysis of section 96 of the Insolvency and Bankruptcy Code, which deals with the interim moratorium period. The section outlines that during the interim moratorium period, all legal actions or proceedings pending in respect of any debt shall be stayed, and creditors are prohibited from initiating any legal action or proceeding in respect of any debt. The Tribunal emphasized the conjunctive interpretation of the section, highlighting that the interim moratorium applies to all debts, including personal debts of the debtor.Issue 3: Stay of legal actions against the Personal GuarantorBased on the interpretation of section 96 and the specific timeline of applications filed by the Financial Creditors, the Tribunal concluded that the interim moratorium against the Personal Guarantor commenced from the date of the first application, i.e., 09 July, 2021. Consequently, the Tribunal allowed the application filed by the Personal Guarantor under section 60(5) of the Code, stayed the proceedings in the related case, recalled the previous order, and discharged the Resolution Professional appointed in the matter.In conclusion, the Tribunal's judgment in this case focused on the correct interpretation of the provisions of the Insolvency and Bankruptcy Code, particularly regarding the interim moratorium period and the implications for legal actions against the Personal Guarantor. The detailed analysis provided clarity on the application of the law in the specific context of the case, leading to the issuance of specific orders to address the issues raised by the parties involved.