2022 (2) TMI 1289

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....ven personal guarantees for the term loan and working capital facilities granted in 2010 -2015 to M/s. Asian Colour Coated Ispat Limited ( for short "ACCIL") by a consortium of lenders including the respondent nos. 3 &4, Karnataka Bank , Andhra Bank and respondent nos. 7 to 11. Respondent nos. 5 and 6 are assignees of the debt from Karnataka Bank and Andhra Bank respectively. The account of ACCIL became a Non Performing Asset in 2016. A Corporate Insolvency Resolution Process under the provisions of the Insolvency and Bankruptcy Code, 2016 (for short "IBC") was initiated by Respondent No.4 by filing an application under Sec.7 of the IBC before the National Company Law Tribunal, Principal Bench, New Delhi. The said application was admitted on 20.7.2018. Prior thereto respondent No.3 had filed OA 367 of 2017 before the DRT-II, New Delhi. Respondent No.4 along with the erstwhile lenders filed OA 743 of 2018 before the said DRT. Allahabad Bank, the predecessor of Respondent No.11 filed OA No.1095 of 2019 before the said DRT. Petitioners in both these Writ Petitions were arrayed as respondents in these OAs along with M/s ACCIL and other guarantors. Attachment and sa....

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....Resolution Plan approved under law; there remains no debt in the books of respondents No.3 to 11; and without such valid debts in their books, respondents No.3 to 11 cannot pursue/continue recovery against the petitioners/personal guarantors of M/s ACCIL, the principal borrower. According to them even under Section 5 (2) & (3) of the SARFAESI Act, 2002, there would be assignment of all rights to the assignee and the respondents No.3 to 11/Assignors cannot enforce their personal guarantees in OA.No.367 of 2017, OA No.743 of 2018, OA No.1095 of 2019 and in IP(IB) No.478 of 2021. Petitioners have questioned before the NCLT, the portion of the order of the NCLT passed on 19.10.2020 insofar as the NCLT had held that the right to proceed against guarantors will remain in force even though the loan has been assigned to a purchaser and the appeal, being Company Appeal (AT)(INSOL) 1107 of 2020 is said to be pending before the NCLAT. A specific issue had been framed on this aspect by the NCLAT on 23.12.2020 to the following effect: " The issue raise in these appeals assailing approval of the Resolution Plan submitted by JSW Steel Coated Products Ltd in respect of the Corporate De....

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....ia and Another' (2004) 6 SCC 254. In the said decision, the Supreme Court held, by placing reliance on Clause (2) of Article 226 of the Constitution of India and also Section 20 (c) of the CPC that even if a small fraction of cause of action accrues within the jurisdiction of the High Court, it would have jurisdiction in the matter. The counsel for the Respondents did not deny that petitioners properties are located in the State of Haryana and there is likelihood of the same being sold in the proceedings initiated by the Respondents in the DRTII, New Delhi and in the NCLT, New Delhi while enforcing the personal guarantees given by the petitioners to the loans granted to M/s ACCIL. Prima facie, having regard to the undisputed fact that the properties of the petitioners are located in the State of Haryana within the jurisdiction of this Court, and since the proceedings referred to above initiated by the respondents No.3 to 11 to enforce the personal guarantees given by the petitioners to the principal borrower might result in the sale of such properties of the petitioners, we hold that prima facie part cause of action arises within the jurisdiction of this Court, and these Writ....

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....T with the provision for exclusion of rights to enforce personal guarantees, and so the respondents are entitled to enforce them. He further contended that a Corporate Insolvency Resolution Process will only deal with the resolution of the debt of the corporate debtor i.e. M/s ACCIL, and the Resolution Applicant would not be given rights to enforce the personal guarantees and only the Financial Creditors would have to enforce them. On the other hand, counsel for the petitioners referred to the Reserve Bank of India circular RBI/2018-19/203 dt. 7.6.2019 which contained 'the Reserve Bank of India (Prudential Frame Work for Resolution of Stressed Assets), 2019 issued by the Reserve Bank of India in exercise of its powers conferred by the Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934. Clause 22 thereof stated that the Prudential norms applicable to any restructuring/change of ownership whether under the IBC frame work or outside the IBC, are contained in Annexure-1 thereto. Clause 17 to 20 provide for making of additional provisions if there is delayed implementation of a Resolution Plan; and Clause 21(c) states that where resolution is pursued under IBC....

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.... (introducing Section 4 dealing with 'Excluded Rights') apparently permitted Financial Creditors to enforce personal guarantees, as contended by the counsel for the respondents, if such exclusion is contrary to the circular of the Reserve Bank of India referred to above, then it may not prevail prima facie. Indeed this is what is also being examined by the NCLAT in Company Appeal (AT) (Insolvency) No.1107 of 2020. We may refer to para 249 of the order dt. 19.10.2020 of the NCLT approving the Resolution Plan of the principal borrower M/s ACCIL, wherein it is stated as under: "249. ....... For this plan is spread in various schedules running into several pages, since all these aspects hae not been brought to the notice of this Bench at the time of making submissions, we hereby hold that whichever provision that is inconsistent with Section 30(2)(e) of the Code, it shall be treated as not approved by this Bench." (emphasis supplied) Section 30 of the IBC deals with submission of Resolution Plan by a resolution applicant and its examination by the Resolution Professional, and Clause (e) of Sub Section (2) of Section 30 requires the Resolution Professional to examine each....