TaxTMI 
TaxTMI 
2020 (11) TMI 54
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....cipal borrower and the same are pending adjudication. 2. In the instant case, respondent No.4/M/s Metenere Ltd. is the principal borrower. Respondent No.4 (for short 'the Principal Borrower') had obtained loans from the respondent/State Bank of India (for short, 'the Bank'). The petitioner, who is the wife of the promoter of the principal borrower, stood as a guarantor for repayment of the loans. The Bank filed an insolvency petition against the principal borrower under the provisions of the IB Code before the NCLT, Delhi. 3. During the pendency of the insolvency proceedings against the principal borrower, the Bank issued a Notice dated 06.09.2018 under Section 13(2) of the SARFAESI Act to the petitioner, who had stood as a guarantor for the principal borrower. The Notice issued under Section 13(2) of the SARFAESI Act was replied to by the petitioner. This was followed by issuance of a Possession Notice dated 16.07.2019, under Section 13(4) of the SARFAESI Act. Both the Notices i.e. one under Section 13(2) and the other under Section 13(4) of the SARFAESI Act were challenged by the petitioner by filing S.A.No.118/2019 before the Debts Recovery Tribunal-II, Delhi (for ....
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....ion to fetch a good value of the property and therefore, it will not be prudent to go ahead with the sale of the property. 8. Mr. Sandeep Sethi, learned Senior Advocate appearing for the petitioner contended that from the date of admission of an application for initiating Corporate Insolvency Process by the Adjudicating Authority, the Adjudicating Authority by order declares a moratorium prohibiting institution or continuation of suits, arbitrations and other proceedings against the entity against which the insolvency proceedings have commenced. He submitted that Section 12 of the IB Code stipulates that the Insolvency Resolution Process has to be completed within a period of 180 days from the date of admission of the application and this period can be extended only by a maximum period of 90 days. Under Section 31 of the IB Code, once a Resolution Plan is submitted by the Resolution Professional and is approved by the Adjudicating Authority, then the same is binding on the guarantor and the guarantor is discharged from all his liabilities. It was therefore, the submission of Mr. Sethi that proceedings against the guarantor under SARFAESI Act should await the final decision under....
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....um period. 1[(3) The provisions of sub-section (1) shall not apply to- (a) such transaction as may be notified by the Central Government in consultation with any financial regulator; (b) a surety in a contract of guarantee to a corporate debtor.] (4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be." ... ... Section 31 of IB Code. Approval of resolution plan.-(1) If the Adjudicating Authority is satisfied that the Resolution Plan as approved by the committee of creditors under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by order approve the resolution plan which shall be binding on t....
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....a, in support of his submission, placed reliance on a judgment of this Court in Bank of Bihar Ltd. v. Dr. Damodar Prasad [AIR 1969 SC 297 : (1969) 1 SCR 620], AIR p. 298, para 5. In that case, the Court referred to a judgment in Lachhman Joharmal v. Bapu Khandu [(1869) 6 Bom HCR 241] in which the Division Bench of the Bombay High Court held as under: (Lachhman case [(1869) 6 Bom HCR 241], Bom HCR p. 242) "The court is of opinion that a creditor is not bound to exhaust his remedy against the principal debtor before suing the surety and that when a decree is obtained against a surety, it may be enforced in the same manner as a decree for any other debt." 15. This Court, while approving the said judgment, observed that: (Damodar Prasad case [AIR 1969 SC 297: (1969) 1 SCR 620], AIR p. 299, para 6) "6. ... The very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety. In the present case the creditor is a banking company. A guarantee is a collateral security usually taken by a banker. The security will become useless if his rights against the surety can be so easily cut down." 16. In SBI v. Indexport....
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....land, 4th Edn., Vol. 20, para 159 at p. 87 it has been observed that: "159. ... It is not necessary for the creditor, before proceeding against the surety, to request the principal debtor to pay, or to sue him, although solvent, unless this is expressly stipulated for." 21. A Division Bench of the Bombay High Court in Jagannath Ganeshram Agarwala v. Shivnarayan Bhagirath [AIR 1940 Bom 247] held that the liability of the surety is coextensive, but is not in the alternative. Both the principal debtor and the surety are liable at the same time to the creditors. A Division Bench of the High Court of Karnataka, in Hukumchand Insurance Co. Ltd. v. Bank of Baroda [AIR 1977 Kant 204] had an occasion to consider the question of liability of the surety vis-à-vis the principal debtor. The Court held as under: (AIR p. 208, para 12) "12. ... The question as to the liability of the surety, its extent and the manner of its enforcement have to be decided on first principles as to the nature and incidents of suretyship. The liability of a principal debtor and the liability of a surety which is coextensive with that of the former are really separate liabili....
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.... of application to personal guarantors of a corporate debtor. XXX XXX XXX 25. Section 31 of the Act was also strongly relied upon by the respondents. This section only states that once a resolution plan, as approved by the Committee of Creditors, takes effect, it shall be binding on the corporate debtor as well as the guarantor. This is for the reason that otherwise, under Section 133 of the Contract Act, 1872, any change made to the debt owed by the corporate debtor, without the surety's consent, would relieve the guarantor from payment. Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the resolution plan, which has been approved, may well include provisions as to payments to be made by such guarantor. This is perhaps the reason that Annexure VI(e) to Form 6 contained in the Rules and Regulation 36(2) referred to above, require information as to personal guarantees that have been given in relation to the debts of the corporate debtor. Far from supporting the stand of the respondents, it is clear that in point of fact, Section 31 is one more factor in favour of a personal guarantor having to pay for debts due witho....