TaxTMI 
TaxTMI 
2018 (12) TMI 652
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of action seeking common relief for initiation of Corporate Insolvency Resolution Process against these personal guarantors in this Company Petition, which this Bench admitted on 07.03.2018 and initiated Corporate Insolvency Resolution Process (CIRP) by appointing an Interim Resolution Professional and the CIRP is now in progress. 3. The ground for filing these Applications is that since the Respondents stood as personal guarantors to the loan the Corporate Debtor availed from this Financial Creditor and having the Debtor defaulted in repaying the loan despite being notified to repay it, then this financial creditor, notifying the fact of the debtor failing to discharge its obligation, demanded these Respondents/persona guarantors to discharge the liability of the Corporate Debtor/Principal Borrower as they are bound to clear the obligation as per the Guarantee Agreements these Respondents executed against Rupee Term Loan the debtor availed from the financial creditor. When these Respondents also failed to discharge the obligation despite the creditor notifying the fact of debtor failing to repay the dues outstanding against the loan availed by the Corporate debtor, this Appli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....18. Since this Applicant is supposed to file its claim before the IRP, it has filed its Claim Form stating that the Corporate Debtors and the Guarantors thereto are liable to pay Rs. 127,13,53,657 to this Applicant, the same has been accepted by the IRP and there is no objection over the said claim till date. 7. Now this Applicant has filed separate and independent Miscellaneous Applications against each of these Respondents/Guarantors u/s. 60(2)(5) of the Code stating that since the liability against the Corporate Debtor and these individual guarantors being co-extensive, this applicant has derived right to initiate Corporate Insolvency Resolution Process against each of these guarantors as evinced u/s. 60(2) of the Code, accordingly, it has filed these applications u/s. 60(5) of the Code seeking relief as mentioned in these applications. 8. In support of these applications, the Applicant Counsel has set up an argument that since Section 60 (2) of the Code has been notified on 01.12,2016 conferring power upon NCLT to proceed against personal guarantors as well, this Bench shall invoke the jurisdiction under that subsection to initiate CIRP against these guarantors for this B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(individuals), arrogates subject matter jurisdiction having regard to proceedings against individuals (in this case personal guarantors) supposed to be conferred upon DRT and then to be vested in NCLT on the footing that CIRP against the corporate debtor/principal borrower pending before this NCLT? 13. To know as to whether NCLT presently has jurisdiction to deal with proceedings against personal guarantor or not, it is crucial to know what provisions of this Code are in force as on date and whether, with the help of those provisions, this Bench can entertain these Applications against the Personal Guarantors. 14. If we go by order, it is true that territorial as well as derivative jurisdiction to deal with personal guarantors proceedings has come to NCLT on 01.12.2016 itself. As to Part-III (Sections78-187) of the Code, the subject matter jurisdiction that has to be percolated to NCLT (section 60 (4)) in respect to personal guarantors to the loans availed by the Corporate Debtor is not being notified, unless Part-III of the Code is notified, how can it be taken for granted that despite sub-section 4 of section 60 was notified, this Bench could straight away invoke provisions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cannot act as DRT regarding proceedings against the personal guarantors disregarding the jurisdiction conferred upon NCLT under sections 60 (2), (3) and (4). 18. This Applicant moved these applications u/s. 60 (5) of the Code, like any other miscellaneous applications in the CP already admitted, instead of filing original application as prescribed under section 95 of the Code. The Creditor could not have filed MAs under section 60 (5) of the Code as a step enabling the progress of main petition. Had jurisdiction arrived under Part-III of the Code, an occasion would have arisen to the applicant to file such independent applications. On the top of it, the applicant could not have sought for relief of initiation of CIRP against a personal guarantor, who is an individual amenable to a separate set of process set out under Part-III, of course since that separate power has not come into force, this creditor cannot initiate that insolvency resolution process meant for individuals. It is not that this creditor is remediless; other remedies are available under other dispensations to initiate insolvency proceedings against the personal guarantors. 19. Another anomaly in these applicati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t aside that impugned judgement of the Tribunal holding that moratorium granted u/s.14 against the Corporate Debtor is not extendable in respect to actions against the personal guarantors. 22. To say what mandate the Honourable Supreme Court given, it is essential to read not only Para-21 cited by the applicant counsel, but also Paras 18, 19, 20 and 21 of the judgment supra which are as below: "18, However, Sections 2(e) and Section 60 are strongly relied upon by learned counsel for the Respondents as, according to them, the Code will apply to personal guarantors of corporate debtors, and by Sections 19 & 60, proceedings against such personal guarantors will show that such moratorium extends to the guarantor as well. 19. We are afraid that such arguments have to be turned down on a careful reading of the Sections relied upon. Section 60 of the Code, in sub-section (1) thereof, refers to insolvency resolution and liquidation for both corporate debtors and personal guarantors, the Adjudicating Authority for which shall be the National Company Law Tribunal, having territorial jurisdiction over the place where the registered office of the corporate person is locate....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., any bankruptcy proceeding against the individual personal guarantor will, if already initiated before the proceeding against the corporate debtor, be transferred to the National Company Law Tribunal or, if initiated after such proceedings had been commenced against the corporate debtor, be filed only in the National Company Law Tribunal. However, the Tribunal is to decide such proceedings only in accordance with the Presidency-Towns Insolvency Act, 1909 or the Provincial Insolvency Act, 1920, as the case may be. It is clear that sub-section (4), which states that the Tribunal shall be vested with all the powers of the Debt Recovery Tribunal, as contemplated under Part-III of this Code, for the purposes of sub-section (2), would not take effect, as the Debt Recovery Tribunal has not yet been empowered to hear bankruptcy proceedings against individuals under Section 179 of the Code, as the said Section has not yet been brought into force. Also, we have seen that Section 249, dealing with the consequential amendment of the Recovery of Debts Act to empower Debt Recovery Tribunals to try such proceedings, has also not been brought into force, It is thus clear that Section 2(e), which ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from SARFAESI proceedings, and sub-section (3) of Section 60 has been meant for transfer of the proceedings pending against the guarantors of the Corporate Debtor to the Adjudicating Authority dealing with CIR Process of the Principal Borrower/Corporate Debtor. In this para, it has not been held anywhere that since sub-section 3 speaks about transfer of proceedings pending against the guarantor, such proceedings shall be transferred to the Adjudicating Authority dealing with CIRP of the Corporate Debtor. That is the relief precisely asked by the respondent in the MA filed before the Hon'ble NCLT, but Hon'ble Supreme Court reversed the order of NCLT staying the independent proceedings against guarantor pending under SARFAESI. Therefore, the only inference that could be drawn from para 20 is that though section 60(3) has been notified on 1.12. 2016, the Hon'ble Supreme Court virtually turned down the plea of transfer from DRT to the Adjudicating Authority on the ground Part - III of the Code has not been notified. 27. When it has been categorically clarified that such transfer is not possible, how could it be possible to assume that the Hon'ble Supreme Court held ....