TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 1838
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....d by the corporate debtor/principal borrower from the petitioner, for initiation of insolvency resolution process against these personal guarantors/individuals under the assumption that section 60(2) is application section for creditors to proceed against the personal guarantors before this National Company Law Tribunal where CIRP pending against the corporate debtor/principal borrower. 2. Though none of the facts of the case are denied by any of the respondents, for the sake of completeness, I must introduce this case saying that the corporate debtor-company, namely M/s. Surana Power Ltd., owned by these respondents availed of loan from the petitioner-bank by themselves standing as guarantors for the loan availed of by the company stating that they would discharge the liability owed by their company, in the event the company failed to repay the loan, like in any other case, here also the company defaulted repaying loan to the bank, in the meanwhile, when section 9 proceeding was initiated against the company, this Bench appointed IRP by admitting C. P. No. 646 of 2017-(L and T Infrastructure Finance Co. Ltd. v. Dineshchand Surana [2020] 220 Comp Cas 366 (NCLT)) (filed under secti....
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....National Company Law Tribunal to proceed against personal guarantors as well, this Bench shall invoke the jurisdiction under that sub-section to initiate CIRP against these guarantors for this Bench has already initiated CIR pro cess against the corporate debtor. To pep up this argument, the applicant counsel relied upon paragraph 21 of the judgment of the hon'ble Supreme Court in between State Bank of India v. V. Ramakrishnan [2018] 210 Comp Cas 364 (SC), dated August 14, 2018 to say that the moment CIRP pending against the corporate debtor/principal borrower before the National Company Law Tribunal, proceedings against personal guarantors shall lie before the respective National Company Law Tribunal only, not anywhere else. As against this stand of the applicant counsel, the guarantors counsel refuted it as not maintainable because the jurisdiction conferred upon the National Company Law Tribunal under section 60(2) of the Code to initiate insolvency/bankruptcy proceedings against the guarantors alongside the CIRP pending against the corporate debtor/ principal borrower is not exercisable for the reason that till now Part III of the Code to initiate insolvency/bankruptcy ....
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....ion to deal with personal guarantors proceedings has come to the National Company Law Tribunal on December 1, 2016 itself. As to Part III (sections 78-187) of the Code, the subject matter jurisdiction that has to be percolated to National Company Law Tribunal (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 pro visions of Part III ? In fact under sub-section (4) of section 60 of the Code, unless powers are conferred upon the Debts Recovery Tribunal under Part III, the National Company Law Tribunal vesting with such powers of the Debts Recovery Tribunal would not arise. Sub-section (4) is indeed carved out in such a way that whenever proceedings against personal guarantors to be invoked under sub-section (2), the National Company Law Tribunal will take the avatar (incarnation) as the Debts Recovery Tribunal by virtue of sub-section (4) of section 60 of the Code. So to get that jurisdiction to the National Company Law Tribunal, that avatar to the De....
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....e Debts Recovery Tribunal regarding proceedings against the personal guarantors disregarding the jurisdiction conferred upon the National Company Law Tribunal under section 60(2), (3) and (4). This applicant moved these applications under section 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. A....
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....hich is binding on him, therefore the personal guarantor is very much part of the CIRP against the corporate debtor. In this background, when the financial creditor appealed before the hon'ble Supreme Court, it has set aside that impugned judgment of the Tribunal holding that moratorium granted under section 14 against the corporate debtor is not extendable in respect to actions against the personal guarantors. To say what mandate the honourable Supreme Court given, it is essential to read not only paragraph 21 cited by the applicant counsel, but also paragraphs 18, 19, 20 and 21 of the judgment supra which are as below (page 379 of 210 Comp Cas) : 'However, sections 2(e) and 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 section 60, proceedings against such personal guarantors will show that such moratorium extends to the guarantor as well. 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 c....
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....ational Company Law Tribunal constituted under the Companies Act, 2013. The scheme of section 60(2) and (3) is thus clear-the moment there is a proceeding against the corporate debtor pending under the 2016 Code, 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 Debts Recovery Tribunal, as contemplated under Part III of this Code, for the purposes of sub-section (2), would not take effect, as the Debts 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 ....
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.... against the personal guarantors may approach the appropriate authority/court under the existing enactments, instead of approaching the Debts Recovery Tribunal. In paragraph 20, the hon'ble apex court only speaks of bankruptcy proceedings that are different from the 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 the CIR process of the principal borrower/corporate debtor. In this paragraph, 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 the CIRP of the corporate debtor. That is the relief precisely asked by the respondent in the MA filed before the hon'ble National Company Law Tribunal, but the hon'ble Supreme Court reversed the order of National Company Law Tribunal staying the independent proceedings against guarantor pending under the SARFAESI. Therefore, the only inference that could be drawn from paragraph 20 is that though section 60(3) has been notified o....