AI Drafter 
TaxTMI 
TaxTMI 
2022 (11) TMI 297
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....the defendant no.1 u/S 151 CPC), I.A. 5776/2021 (O-XXXVII R-3(4) of CPC), I.A. 11335/2021(of the defendants O-XXXVII R-3 of CPC), I.A. 15155/2021 (of the defendants u/S 151 of CPC), I.A. 4996/2021(of the defendant no.2 u/O-VII R-11(d) of CPC), I.A. 5013/2021(of the defendant no.2 u/S 151 CPC seeking sine die adjournment of proceedings), I.A. 5663/2021(of the defendant no.1 u/S 151 CPC seeking sine die adjournment of proceedings), I.A. 11335/2021(of the defendants u/O-XXXVII R-3 of CPC for leave to defend) Plaintiff Through: Mr. Dayan Krishnan, Senior Advocate with Ms. Misha, Mr. Vijayant Paliwal, Ms. Moulshree Shukla, Mr. Sukrit Seth, Mr. Parth Gokhale, Ms. Megha Khandelwal and Mr. Daksh Kadian, Advocates. Defendants Through: Mr. Sandeep Sethi, Senior Advocate with Ms. Ranajana Roy Gawai, Ms. Vasudha Sen, Ms. Aayushi Singh, Mr. Parminder Singh and Mr. Pranjit K. Bhattacharya, Advocates. JUDGMENT AMIT BANSAL, J. 1. Detailed submissions on various applications, including applications seeking leave to defend filed on behalf of the defendants, were heard on 10th February, 2022, 25th February, 2022, 17th May, 2022, 7th July, 2022, 18th July, 2022, 23rd August, 2022 and 5t....
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....tional Company Law Tribunal (NCLT) vide order dated 26th July, 2017. In the said proceedings, the Financial Creditors filed a claim for the outstanding amounts in terms of the Facility Agreement. An amount of EUR 156,929,177.43 was admitted by the Resolution Professional of Bhushan Steel as the financial debt owed to the Financial Creditor. As a part of the Resolution Plan dated 3rd February, 2018, approved by the NCLT on 15th May, 2018, a total amount of EUR 92,178,068.70 was received by the Financial Creditor on 29th and 30th May, 2018. In terms of Clause 8.7.3(vi) of the approved Resolution Plan, Financial Creditors of Bhushan Steel were given right to recover any unresolved financial debt, owed by the borrower, from the guarantors in terms of the personal guarantee issued by them. Pursuant thereto, vide a Demand Notice dated 20th October, 2020, the financial creditors demanded payment of EUR 64,751,108.73/- from the defendants (guarantors). No reply to the said notice was received, nor was the due amount paid to the financial creditors. Accordingly, the present suit has been filed seeking recovery of EUR 64,751,108.73. 4.5. Summons in CS(COMM) 8/2021 were issued on 16th A....
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....nd the present suits would not be maintainable against the defendant no.2. ii. The NCLT is the appropriate forum for adjudicating the personal insolvency of the defendants. Reliance is placed on Section 179 read with Section 60 of the IBC to submit that insolvency proceedings in respect of personal guarantors of a corporate debtor would lie before the NCLT and not a Debt Recovery Tribunal (DRT). Reliance is also placed on the judgment of the Supreme Court in Embassy Property Development Pvt. Ltd. v. State of Karnataka &Ors., (2020) 13 SCC 308. iii. The moratorium under Section 96 of the IBC is 'debt centric'. Therefore, it would be applicable to both the defendants no.1 and 2, who are co-guarantors, as the debt is common to both of them and is not separable. Reliance in this regard is placed on the judgment of the Supreme Court in State Bank of India v. V. Ramakrishnan and Anr., (2018) 17 SCC 394. iv. In any event, in view of the insolvency proceedings being initiated against the defendant no.1 on 28th May, 2022, the present suits cannot proceed against the defendant no.1. The relevant date for the interim moratorium under Section 96 is the date of filing....
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....the other guarantor. vi. Though the application under Section 95 in respect of the defendant no.1 was filed on 28th May, 2022, it was registered only on 3rd October, 2022, when the judgment had been reserved in the present cases. Once the judgment has been reserved in a matter, the subsequent developments in the matter cannot come in the way of the court pronouncing the judgment. Therefore, the interim moratorium under Section 96 of the IBC in respect of the defendant no.1 cannot come in the way of the Court pronouncing its judgment in the present suits. vii. The effect of a moratorium has to be assessed by the court and the court cannot take a blinkered approach. The pronouncement of judgment in the present proceedings would not have an effect of diminishing the assets of the defendants. Reliance in this regard is placed on the judgment in SSMP Industries Ltd. v. Perkan Food Processors Pvt. Ltd.,(2019) SCC OnLine Delhi 9339. ANALYSIS & FINDINGS 9. I shall now proceed to deal with the rival contentions raised by the counsels appearing on behalf of the parties. 10. To appreciate the aforesaid submissions, a reference may be made to the relevant provisions ....
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....79. In this Part, unless the context otherwise requires,- (1) "Adjudicating Authority" means the Debt Recovery Tribunal constituted under sub-section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993;" 13. Next, a reference may be made to relevant portions of Sections 95 and 96 of the IBC, which occur in Chapter III of Part III of the IBC: "95. (1) A creditor may apply either by himself, or jointly with other creditors, or through a resolution professional to the Adjudicating Authority for initiating an insolvency resolution process under this section by submitting an application. 96. (1) When an application is filed under section 94 or section 95- (a) an interim-moratorium shall commence on the date of the application in relation to all the debts and shall cease to have effect on the date of admission of such application; and (b) during the interim-moratorium period- (i) any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed; and (ii) the creditors of the debtor shall not initiate any legal action or proceedings in respect of any de....
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....is the DRT which is the adjudicating authority in relation to insolvency matters of individuals and firms. This is in contrast to Section 60(1) which names the NCLT as the adjudicating authority in relation to insolvency resolution and liquidation of corporate persons including corporate debtors and personal guarantors. The expression "personal guarantor" is defined in Section 5(22) to mean an individual who is the surety in a contract of guarantee to a corporate debtor. Therefore the object of subsection (2) of Section 60 is to avoid any confusion that may arise on account of Section 179(1) and to ensure that whenever a CIRP is initiated against a corporate debtor, NCLT will be the adjudicating authority not only in respect of such corporate debtor but also in respect of the individual who stood as surety to such corporate debtor, notwithstanding the naming of the DRT under Section 179(1) as the adjudicating authority for the insolvency resolution of individuals. This is also why subsection (2) of Section 60 uses the phrase "notwithstanding anything to the contrary contained in this Code." 16. The NCLAT in its judgement dated 27^th January, 2022 in Company Appeal (AT) Insolvenc....
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....ction (1) of Section 60. 10. Sub-Section 1 of Section 60 provides that Adjudicating Authority in relation to Insolvency or Liquidation for Corporate Debtor including Corporate Guarantor or Personal Guarantor shall be the NCLT having territorial jurisdiction over the place where the Registered Office of the Corporate Person is located. The substantive provision for an Adjudicating Authority is Section 60, sub-Section (1), when a particular case is not covered under Section 60(2) the Application as referred to in sub-section (1) of Section 60 can be very well filed in the NCLT having territorial jurisdiction over the place where the Registered Office of corporate Person is located. 11. The Adjudicating Authority erred in holding that since no CIRP or Liquidation Proceeding of the Corporate Debtor are pending the application under Section 95(1) filed by the Appellant is not maintainable. The Application having been filed under Section 95(1) and the Adjudicating Authority for application under Section 95(1) as referred in Section 60(1) being the NCLT, the Application filed by the Appellant was fully maintainable and could not have been rejected only on the ground that....
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....t of insolvency proceedings in respect of personal guarantors of corporate debtors irrespective of the fact whether CIRP is pending against the corporate debtor. The objective of sub-sections (2) and (3) is that where proceedings in respect of a corporate debtor have been initiated in one NCLT and those against a guarantor before another NCLT or another court or tribunal while the CIRP is pending in respect of the corporate debtor before a particular NCLT, the proceedings against the personal guarantor should also be before the same NCLT. 20. It may also be relevant to mention here that in term of Rule 3(1)(a) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors), Rules, 2019, it has specifically been provided that the adjudicating authority for the purposes of Section 60 would be the NCLT. No distinction has been made under different sub-sections of Section 60 of the IBC in this Rule with regard to the competent adjudicating authority. 21. On behalf of the plaintiffs, it was further contended that the defendant no.2 himself had objected to the maintainability of the aforesaid ap....
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....vant date for purposes of interim moratorium under Section 96 should be the date when the application is registered and not the date of filing, came up for consideration before the NCLAT. The NCLAT in the judgment dated 6th June, 2022 in Company Appeal (AT) (Insolvency) No.724/2022 titled Dinesh Kumar Basia v. State Bank of India held that an application under Section 95 is treated to be filed when it is filed in the office of the Registry at the filing counter. The submission of the appellant therein that the application cannot be held to be filed unless it is numbered by the Registry was rejected. The relevant observations of the NCLAT are set out below: "13. Section 96 of the Code uses the expression - "when an application is filed under Section 94 and 95". What is the meaning of filing an Application under Section 94 and 95 is the question to be answered in these Appeal(s). Rule 2, subrule (14) of the NCLT Rules itself defines the word 'filed', which is to the following effect: "(14) "filed" means filed in the office of the Registry of the Tribunal;" 14. When we read Rule 2 (14) along with Rule 23 of NCLT Rules, it is clear that Application is treated....
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.... to be certainty regarding such consequences. We cannot accept any interpretation, which may lead to uncertainty regarding the date of filing, resulting in uncertainty, regarding enforcement of the Interim Moratorium. Interim Moratorium has serious consequences, which consequences flow immediately after filing of the Application. If we accept the submission of the Appellant that filing is postponed till it is numbered, it will lead to uncertainty and allow the Guarantors and other Respondents to delay the moratorium by pleading that filing is not complete, since the Application has not yet numbered. The statutory scheme, thus, does not in any manner support the submission of learned Counsel for the Appellant. Numbering of Application is essential for different purpose and cannot be equated with the filing as contemplated by the Rules." 26. In the present case, the application against the defendant no.1 has been filed under Section 95 of the IBC by State Bank of India on 28th May, 2022, as a creditor of the corporate debtor/borrower for whom the defendant no.1 stood as a guarantor. Therefore, in my view, the relevant date on which the interim moratorium under Section 96 would kic....
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....aforesaid developments, the submissions of the parties were heard. 30. The mandate of Section 96 of the IBC is clear. The interim moratorium under Section 96 of the IBC kicks in as soon as an application is filed under Section 94/95 of the IBC and the effect of such interim moratorium is that all pending legal proceedings are deemed to have been stayed. This is in contrast to the moratorium under Section 14 of the IBC, whereby the moratorium comes into effect only upon an order being passed by the NCLT declaring a moratorium. 31. A Division Bench of this Court in Stichting Doen-postcode Loterij v. Vin Poly Recyclers Pvt. Ltd. & Ors., 2010 (115) DRJ 708 (DB) was seized of a similar issue in a case where judgment was reserved on the leave to defend application filed on behalf of the defendant herein. After the judgment was reserved, the defendant/respondent therein made a reference to BIFR that was registered under Section 22 of the erstwhile Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The issue before the Division Bench was whether the judgment could be pronounced in view of the bar contained in Section 22 of SICA. The Division Bench held that the judgment....
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....aim was filed by the defendant against the plaintiff/corporate debtor. It was in that situation that the court noted that it would create a piquant situation if there is a moratorium in respect of the counter claim and the suit continues to proceed in respect of the claims of the plaintiff against the defendant. There would be a possibility of conflicting views in respect of the same transaction as the suit in respect of the original claim of the plaintiff would be adjudicated by this Court and the counter claim against the plaintiff would be adjudicated by the NCLT. Faced with such a situation, the court did not apply the moratorium in respect of the counter claim. This is not the situation here and therefore, the observations of the court in the aforesaid case would not be of assistance to the plaintiffs in the present case. 34. Before the insolvency applications were filed against the defendant no.1, counsel for the defendants had also contended that the interim moratorium in respect of one of the co-guarantors would also apply to the other co-guarantor for the same debt as the liability of both the coguarantors arise from the same debt. Reliance is placed on the words 'any d....
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....he entire outstanding debt, which is why Section 14 is not applied to them. However, insofar as firms and individuals are concerned, guarantees are given in respect of individual debts by persons who have unlimited liability to pay them. And such guarantors may be complete strangers to the debtor - often it could be a personal friend. It is for this reason that the moratorium mentioned in Section 101 would cover such persons, as such moratorium is in relation to the debt and not the debtor. 26.2. We may hasten to add that it is open to us to mark the difference in language between Sections 14 and 96 and 101, even though Sections 96 and 101 have not yet been brought into force. This is for the reason, as has been held in State of Kerala v. Mar Appraem Kuri Co. Ltd. [State of Kerala v. Mar Appraem Kuri Co. Ltd., (2012) 7 SCC 106 : (2012) 4 SCC (Civ) 69] , that a law "made" by the legislature is a law on the statute book even though it may not have been brought into force." 37. In the aforesaid judgment, the observations made by the Supreme Court were in the context of moratorium under Section 101 applying to guarantors of debts of individuals and firms. In the present cas....