Personal guarantor liability remains enforceable despite borrower insolvency; SARFAESI recovery can continue independently.

Proceedings under SARFAESI may be initiated or continued against a personal guarantor even while insolvency proceedings are pending against the principal borrower. The guarantor's liability remains co-extensive with that of the principal debtor under Section 128 of the Contract Act, and the moratorium under Section 14 of the Insolvency and Bankruptcy Code applies to the corporate debtor, not the surety. An approved resolution plan under Section 31 does not bar independent recovery action against the guarantor. The Delhi High Court therefore held that the bank could proceed against the guarantor despite the borrower's insolvency proceedings.

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Issues: Whether proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 can be initiated or continued against a guarantor during the pendency of insolvency proceedings against the principal borrower under the Insolvency and Bankruptcy Code, 2016.

Analysis: The liability of a guarantor is co-extensive with that of the principal debtor under Section 128 of the Indian Contract Act, 1872, and is not in the alternative. Sections 14 and 31 of the Insolvency and Bankruptcy Code, 2016 do not create any bar against action against a personal guarantor; the moratorium applies to the corporate debtor and not to the surety, and the binding effect of an approved resolution plan does not suspend recovery against the guarantor. The legal position is settled that a bank or financial institution may proceed against the guarantor independently of the insolvency proceedings against the principal borrower.

Conclusion: The challenge to continuation of proceedings under the SARFAESI regime against the guarantor failed, and the bank was entitled to proceed against the petitioner.

Ratio Decidendi: Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 does not extend to a personal guarantor, and Section 31 does not bar independent recovery proceedings against the guarantor whose liability remains co-extensive with that of the principal debtor.

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