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of <h1>Tribunal affirms jurisdiction over insolvency of Personal Guarantors under IBC, clarifies Section 179 and Section 60</h1> <h3>Mahendra Kumar Agarwal Versus PTC India Financial Services Ltd., Devvart Rana</h3> The Tribunal upheld the NCLT's jurisdiction over insolvency proceedings against Personal Guarantors, clarifying that Section 179 of the IBC is subject to ... Jurisdiction of Tribunal to entertain/initiate, the Insolvency Proceedings of the Personal Guarantors, even when no Corporate Insolvency Resolution Process proceedings, is pending, against the Corporate Debtor. HELD THAT:- In the present case, it is brought to the notice of this ‘Tribunal’, on ‘Record’ that the ‘Corporate Insolvency Resolution Process’ proceedings, against the ‘Corporate Debtor’, were pending, on the ‘Date’, when the ‘Petition’, was filed before the ‘Adjudicating Authority’ / ‘Tribunal’, by the ‘1st Respondent / Financial Creditor’, and on the ‘Date’, when the ‘impugned order’, came to be passed, as on date, they continued to be pending - It is well settled by now, that the ‘Insolvency Proceedings’, can be initiated against the ‘Personal Guarantor’, even when ‘no proceedings’, are pending against the ‘Corporate Debtor’. Going by the ingredients of Section 60 (1) of the I & B Code, 2016, it is quite clear, that for ‘Insolvency Resolution’ and ‘Liquidation’, for ‘Corporate Persons’, including ‘Corporate Debtors’ and ‘Personal Guarantors’, the ‘National Company Law Tribunal’ (‘Adjudicating Authority’), having ‘territorial jurisdiction’, over the place, where the ‘Registered Office’ of the ‘Corporate Person’, is located, and in the instant case, in the ‘State of Telangana’, the ‘Corporate Debtor’s Registered Office’, is situated, which comes within the ‘ambit of territorial jurisdiction’ of the ‘Adjudicating Authority’ (‘National Company Law Tribunal’, Bench – I, Hyderabad). This ‘Tribunal’, keeping in mind the respective contentions advanced on either side, and considering the facts and circumstances of the instant case, in a conspectus manner, comes to a resultant conclusion that the ‘Adjudicating Authority’ / ‘Tribunal’, has ‘jurisdiction’, to ‘entertain’/’initiate’, the ‘Insolvency Proceedings’ of the ‘Personal Guarantors’, even when ‘no Corporate Insolvency Resolution Process’ proceedings, is ‘pending’, against the ‘Corporate Debtor’, and in any event, the ‘Corporate Insolvency Resolution Process’ proceedings, is pending, and continued to be pending, against the ‘Corporate Debtor’. Appeal dismissed. Issues Involved:1. Jurisdiction of NCLT over Personal Guarantors.2. Applicability of Section 60 and 179 of the IBC.3. Limitation period for initiating insolvency proceedings.4. Requirement of pending CIRP against Corporate Debtor for initiating proceedings against Personal Guarantor.Summary:Jurisdiction of NCLT over Personal Guarantors:The Appellant argued that the NCLT did not have jurisdiction over insolvency proceedings against Personal Guarantors, citing Section 179 of the IBC. However, the Tribunal held that Section 179 is subject to Section 60, which provides that the NCLT has jurisdiction over insolvency resolution for both Corporate Debtors and Personal Guarantors. The Tribunal referenced the Supreme Court's decision in Lalit Kumar Jain vs. Union of India, which clarified that personal guarantors are to be dealt with through the same adjudicatory process as corporate debtors due to their intrinsic connection.Applicability of Section 60 and 179 of the IBC:The Appellant contended that the Adjudicating Authority failed to correctly interpret Sections 60 and 179 of the IBC. The Tribunal, however, emphasized that Section 60(2) specifies that applications relating to the insolvency resolution of a Personal Guarantor should be filed before the NCLT where the CIRP or liquidation proceeding of the Corporate Debtor is pending. The Tribunal also noted that Section 60(4) vests the NCLT with all the powers of the DRT for the purposes of sub-section (2).Limitation period for initiating insolvency proceedings:The Appellant argued that the limitation period for triggering insolvency proceedings is three years from the date of default. The Tribunal noted that the period of limitation was extended by the Supreme Court's order dated 23.03.2020, making the petition filed by the Financial Creditor within the limitation period.Requirement of pending CIRP against Corporate Debtor for initiating proceedings against Personal Guarantor:The Appellant argued that there was no pending CIRP or liquidation proceedings against the Corporate Debtor, making the proceedings against the Personal Guarantor invalid. The Tribunal held that the pendency of CIRP against the Corporate Debtor is not a condition precedent for initiating insolvency proceedings against the Personal Guarantor. It was clarified that insolvency proceedings could be initiated against the Personal Guarantor even if no proceedings are pending against the Corporate Debtor.Conclusion:The Tribunal concluded that the NCLT has jurisdiction to entertain insolvency proceedings against Personal Guarantors, even when no CIRP is pending against the Corporate Debtor. The impugned order dated 21.07.2022, admitting the petition under Section 95 of the IBC and appointing a Resolution Professional, was upheld. The appeal was dismissed with no costs.
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