Personal guarantor insolvency proceedings must go before the NCLT when CIRP is pending against the borrower.

Where a corporate insolvency resolution process is already pending against the principal borrower, proceedings for insolvency resolution or bankruptcy of the personal guarantor fall within the National Company Law Tribunal's jurisdiction under the Insolvency and Bankruptcy Code. Pending proceedings before the Debt Recovery Tribunal are excluded and must be transferred to the NCLT, which also exercises the relevant powers for that purpose. On that basis, the Debt Recovery Tribunal order entered in the guarantor proceedings was held unsustainable for want of jurisdiction and was set aside, and the matter was directed to proceed before the NCLT in accordance with law.

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Issues: Whether proceedings initiated against a personal guarantor under the Insolvency and Bankruptcy Code, 2016 were required to be entertained by the National Company Law Tribunal and not the Debt Recovery Tribunal once a corporate insolvency resolution process had commenced against the principal borrower; and whether the order of the Debt Recovery Tribunal declaring an interim moratorium was without jurisdiction and liable to be set aside.

Analysis: The governing scheme of Section 60 of the Insolvency and Bankruptcy Code, 2016 gives the National Company Law Tribunal jurisdiction over insolvency resolution and liquidation concerning corporate persons, including personal guarantors. Where a corporate insolvency resolution process or liquidation is pending against the corporate debtor, an application relating to the insolvency resolution, liquidation, or bankruptcy of the personal guarantor must be filed before the same Tribunal. The statutory framework also provides for transfer of pending proceedings against the personal guarantor to that Tribunal and vests in it the powers of the Debt Recovery Tribunal for that purpose. In the present case, since proceedings against the principal borrower were already pending before the National Company Law Tribunal, the application against the personal guarantor could not validly continue before the Debt Recovery Tribunal. The order passed by the Debt Recovery Tribunal on the basis of such an application was therefore unsustainable.

Conclusion: The proceedings before the Debt Recovery Tribunal were held to be not maintainable, and the order dated 2 May 2022 was set aside for want of jurisdiction.

Final Conclusion: The petitions succeeded to the extent that the impugned Debt Recovery Tribunal order was annulled and the pending proceedings were directed to be transferred to the National Company Law Tribunal for further action in accordance with law.

Ratio Decidendi: Once a corporate insolvency resolution process is pending against the principal borrower, insolvency proceedings against its personal guarantor fall within the jurisdiction of the National Company Law Tribunal under Section 60 of the Insolvency and Bankruptcy Code, 2016, and any pending proceeding before the Debt Recovery Tribunal stands excluded or transferable accordingly.

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