2026 (2) TMI 291 - AT - IBC

Moratorium under Section 14 and SARFAESI action against personal guarantor - contempt appeal under Section 19 held not maintainable.

Moratorium under Section 14 does not extend to the property of a personal guarantor, permitting initiation of SARFAESI proceedings against the guarantor; ... Moratorium u/s 14 - SARFAESI Act proceedings against personal guarantor - Corporate Insolvency Resolution Process (CIRP) - Maintainability of appeal u/s 19 of the Contempt of Courts Act - Appeal not maintainable against order dismissing contempt application in limine - HELD THAT:- The Contempt Application was filed by the Appellant- Suspended Director alleging violation of Moratorium dated 30.01.2025. From the facts on the record, it does appear that notice under Section 13(2) was issued both to borrower i.e. Corporate Debtor as well as the personal guarantor. Appellant was one of the personal guarantor and mortgagor which is reflected from the materials under Section 13(4) brought on the record. The Appellant was also referred in the notice as mortgagor. Adjudicating Authority in the impugned order held that the Moratorium under Section 14 does not protect the property of the personal guarantor, hence, the declaration of Moratorium under Section 14 does not bar initiation of proceeding under the SARFAESI Act. The above view of the Adjudicating Authority is clearly in accordance with law and fully supported by judgment of the Hon’ble Supreme Court in “State Bank of India vs. V. Ramakrishnan [2018 (8) TMI 837 - SUPREME COURT]”. The Hon’ble Supreme Court in “Midnapore Peoples’ Co- operative Bank Ltd. & Ors. vs. Chunilal Nanda & Ors. [2006 (5) TMI 537 - SUPREME COURT] framed one of the questions for consideration is as to whether the Appeal was maintainable and in the above context, law was clarified in paragraph 11. The above judgment clearly lays down that the Appeal under Section 19 is maintainable only against an order or decision of the High Court passed in exercise of its jurisdiction to punish for contempt, that is, an order imposing punishment for contempt. When Contempt Application has been rejected in limine, Appeal under Section 19 was held not maintainable. In the present case, Contempt Application has been dismissed in limine, hence, the said order cannot be said to have been issued in exercise of jurisdiction to punish for contempt and we are of the view that the Appeal filed by the Appellant is not maintainable and objection raised by the Respondent deserves to be accepted. We hold the Appeal not maintainable and consequently, the Appeal is dismissed. Issues: Whether an appeal under Section 19 of the Contempt of Courts Act is maintainable against an order dismissing a contempt application in limine and whether the moratorium under Section 14 of the IBC bars initiation of proceedings under the SARFAESI Act in respect of a personal guarantor's property.Analysis: Section 19 permits appeal only from an order or decision of a court made in exercise of its jurisdiction to punish for contempt; orders declining to initiate or dismissing contempt proceedings in limine are not orders imposing punishment and are generally not appealable under Section 19. Relevant authorities establish that only orders deciding some substantive question against the alleged contemnor or imposing punishment are appealable as of right. Separately, the moratorium under Section 14 of the IBC does not protect the property of a personal guarantor and does not bar proceedings under the SARFAESI Act against such guarantor; notices and possession under Sections 13(2) and 13(4) of the SARFAESI Act issued to a personal guarantor/mortgagor are not restrained by the corporate moratorium.Conclusion: The appeal is not maintainable and is dismissed; the Adjudicating Authority's view that the moratorium under Section 14 does not protect a personal guarantor's property and does not bar SARFAESI proceedings is affirmed (result against the appellant).