TaxTMI 
TaxTMI 
2023 (8) TMI 190
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....B) No. 335 / 95 / HDB / 2020. 2. The 'Adjudicating Authority' / 'Tribunal', while passing the 'impugned order', in CP (IB) No. 335 / 95 / HDB / 2020 (Filed by the 1st Respondent / Financial Creditor / Petitioner), at Paragraph Nos. 16 to 22, had observed the following: 16. "A plain reading of Section 179 supra, reveals that Section 179 itself is "subject to Section 60" and DRT is the Adjudicating Authority for insolvency resolution for all other categories of individuals and partnership firms. 17. That apart Hon'ble Supreme Court of India in re: Lalit Kumar Jain vs Union of India & Ors has categorically held as under:- "There is sufficient indication in the Code- by Section 2(e), Section 5(22), Section 60 and Section 179 indicating that personal guarantors, though forming part of the larger grouping of individuals, were to be, in view of their intrinsic connection with corporate debtors, dealt with differently, through the same adjudicatory process and by the same forum (though not insolvency provisions) as such corporate debtors". 18. In so far as the Ld. Counsel for the Personal Guarantor that by virtue of Sub-Section (4) of Section 60 of IBC, 2016, ....
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.... NCLT its Jurisdiction in respect of insolvency resolution and liquidation of Corporate Persons including Corporate Debtors and Personal Guarantors as provided under sub-section (1) of Section 60. Therefore, in the light of the discussion as above, we hereby reject the contention of the Ld. Counsel for the Personal Guarantor that this Tribunal has no jurisdiction to try this Company Petition. The Point is answered accordingly." and admitted the 'Petition', under Section 95 of the I & B Code, 2016, and appointed '2nd Respondent, as a 'Resolution Professional', etc. Appellant 's Submissions: 3. Assailing the correctness, validity, propriety and legality of the 'impugned order', dated 21.07.2022, passed by the 'Adjudicating Authority' ('National Company Law Tribunal', Bench - I, Hyderabad) in CP (IB) No. 335 / 95 / HDB / 2020 (Filed by the 1st Respondent / Financial Creditor / Petitioner, under Section 95 of the I & B Code, 2016, read with Rule 7 (2) of I & B ('Application to Adjudicating Authority for Insolvency Process for Personal Guarantors to Corporate Debtors') Rules, 2019, the Learned Counsel for the Appellant / 1st Respondent / Personal Guarantor, submits that the 'Ap....
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....l be the 'National Company Law Tribunal', subject to a condition, as provided under Section 60 (2) of the 'Code'. 9. The Learned Counsel for the Appellant, takes a stand that Section 60 (1) of the Code locates the 'Tribunal', which has territorial jurisdiction in 'Insolvency Resolution Process', against the 'Corporate Debtor'. Also Section 60 (2) of the Code, mentions that an 'Application', relating to 'Interim Resolution Professional' of a 'Personal Guarantor', shall be filed before the 'National Company Law Tribunal', where the 'Corporate Insolvency Resolution Process' or 'Liquidation Proceeding' of a 'Corporate Debtor', is pending. Thereafter, for the purpose of Section 60(2), Section 60(4) vest the 'National Company Law Tribunal', with the powers of 'Debt Recovery Tribunal'. 10. The Learned Counsel for the Appellant, adverts to the 'Judgment' of the Hon'ble Supreme Court of India, dated 14.08.2018, in State Bank of India v. Mr. V. Ramakrishnan and Anr. (vide Civil Appeal No. 3595 of 2018 with No. 4553 of 2018), wherein at Paragraphs 22 to 24, it is observed as under: 22. "We are afraid that such arguments have to be turned down on a careful reading of the Section....
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....liquidation proceedings of such corporate debtor. An "Adjudicating Authority", defined under Section 5(1) of the Code, means the National Company Law Tribunal constituted under the Companies Act, 2013. 24. 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 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....
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....' / 'Tribunal', is that the 'Corporate Insolvency Resolution Process' or 'Liquidation' proceeding' of a 'Corporate Debtor', must be pending before it, and the phrase 'Pending', may be well appreciated in the teeth of undermentioned provisions, which runs as under: (i) Section 5 (12) defines Insolvency Commencement Date as the date on which an Application U/s 7, 9 & 10 is admitted by an adjudicating authority. (ii) Section 5 (14) states that the insolvency resolution process period means the period of 180 days beginning from the date abovementioned. (iii) Section 7 (6) also states that Corporate Insolvency Resolution Process shall commence from the date of admission of the application. 13. According to the Learned Counsel for the Appellant, Rule 3(a) of the Insolvency and Bankruptcy ('Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors') Rules, 2019, defines an 'Adjudicating Authority', as the 'Debt Recovery Tribunal'. Furthermore, the stand of the Appellant is that, 'Corporate Insolvency Resolution Process', can said to be pending, only when an 'Application', under Section 7, 9 or 10, is admitted, b....
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....of a corporate debtor is National Company Law Tribunal (NCLT) in cases where a corporate insolvency process has been initiated or is pending against the corporate debtor of personal guarantor. In cases where there a corporate insolvency process is not pending against the corporate debtor, the jurisdiction in respect of Insolvency and Bankruptcy of personal guarantor is Debt Recovery Tribunal." 18. The Learned Counsel for the Appellant, points out the 'Working Group Final Report', wherein, while discussing the outline of Part III of the I & B Code, 2016, it is mentioned as under: "Adjudicating Authority: 4.9. "Section 179 of the Code provides that the Adjudicating Authority for individuals and partnership firms is the Debt Recovery Tribunal ("DRT"). However, for personal guarantors, both the National Companies Law Tribunal ("NCLT") and DRT have jurisdiction in different scenarios. 4.10. Section 60(2) lays down that if a corporate insolvency resolution process ("CIRP") or liquidation process is ongoing against a corporate debtor, then an application for IRP or bankruptcy of the personal guarantor to the corporate debtor shall be filed with the N....
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....II of the Code, and the same is pending 'Adjudication'. Appellant's Decisions: 21. The Learned Counsel for the Appellant, cites the 'Order' of the Hon'ble High Court of Bombay, in Surendra B. Jiwrajka v. Omkara Assets Reconstruction Pvt. Ltd., reported in (2021) SCC Online Bom. 9260, wherein, at paragraphs 17 & 18, it is observed as under: 17. " Thus from an analysis of the provisions contained in sections 95 to 100 of IBC, we find that a definite time-line has been provided at each stage of the proceeding. That apart, the interim moratorium in terms of section 96 which commences from the date of the application remains in force till the date of admission of such application under section 100. Though time-lines have been prescribed at each stage of the proceeding leading to acceptance or rejection of the application under section 100, we find that no such time-line has been prescribed for submission of report by the resolution professional though section 100 provides that the adjudicating authority shall take a decision either admitting or rejecting the application within 14 days from the date of submission of the report. That apart on a careful examination of sectio....
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....te Limited, wherein, it is observed as under: "In the meanwhile, the petitioner shall not transfer, alienate, encumber or dispose of any of his assets or his legal rights or beneficial interest therein and the Resolution Professional shall not proceed with filing of the report. Learned senior counsel for the petitioner has given assurance that the petitioner would not seek any adjournment in the proceedings before the Debt Recovery Tribunal." 24. The Learned Counsel for the Appellant, falls back upon the 'Order' of this 'Tribunal', dated 27.01.2022, in State Bank of India, Stressed Asset Management Branch v. Mahendra Kumar Jajodia (vide Comp. App. (AT) (INS.) No. 60 / 2022 and Comp. App. (AT) (INS.) No. 61 of 2022), wherein, at paragraphs 7 to 11, it is observed as under: 7. "Sub-Section 1 of Section 60 provides that Adjudicating Authority for the corporate persons including corporate debtors and personal guarantors shall be the NCLT. The Sub-Section 2 of Section 60 requires that where a CIRP or Liquidation Process of the Corporate Debtor is pending before 'a' National Company Law Tribunal the application relating to CIRP of the Corporate Guarantor or ....
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....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 no CIRP or Liquidation Proceeding of the Corporate Debtor are pending before the NCLT. In result, we set aside the order dated 05th October, 2021 passed by the Adjudicating Authority. The Application filed by the Appellant under Section 95(1) of the Code is revived before the NCLT which may be proceeded in accordance with the law." 25. The Learned Counsel for the Appellant, relies on the decision of the 'Adjudicating Authority' / 'Tribunal', dated 20.01.2022, in State Bank of India, through the Resolution Professional, Mahesh Sureka v. Savita Satish Gowda, wherein, at paragraphs 13 to 18, it is observed as under: 13. "This Bench is of the opinion that be that as it may, the CIRP of the Corporate Debtor was commenced and the Resolution plan was approved by this Tribunal and the jurisdiction to entertain t....
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.... 2019 against Ms. Savita Gowda, the Personal Guarantor of the Corporate Debtor, M/s Sharon Biomedicine Limited in CP No. 1062 of 2021." 26. The Learned Counsel for the Appellant, seeks in aid of the 'Order' dated 06.05.2022 of the Hon'ble Supreme Court of India, in Mahendra Kumar Jajodia, etc. v. State Bank of India, Stressed Asset Management Branch (Respondent), (vide Civil Appeal (s) No. 1871 - 1872 of 2022), wherein, at paragraph 3, it is observed as under: 3. "We have heard learned Solicitor General and learned senior counsel for the parties and perused the record. We do not see any cogent reason to entertain the Appeals. The judgment impugned does not warrant any interference." 27. The Learned Counsel for the Appellant, adverts to the 'Order' dated 05.04.2022 of the Hon'ble High Court of Karnataka in W.P. No.21626 of 2021 (GM-RES), between Sri. Babu A. Dhammanagi & 2 Ors. v. Union of India, wherein, at paragraph 4, it is observed as under: 4. "We have considered the submission made by learned counsel for the petitioner. From perusal of the report of resolution professional, it is evident that the insolvency proceedings initiated against the personal gua....
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....re, the contention of the petitioner that subsequent appointment of the same resolution professional is arbitrary cannot be accepted. The procedure prescribed under the provisions is fair, rational and reasonable and same cannot be termed to be violative of Article 14." 28. The Learned Counsel for the Appellant, falls back upon the 'Judgement of this 'Tribunal', dated 25.08.2022, in Mr. Satyan Kasturi v. State Bank of India, Stressed Assets Management Branch, Egmore, Chennai and 2 Ors. (vide Comp. App (AT) (CH) (INS.) No. 239 of 2022), wherein, at paragraphs 74, 85 to 88 , it is observed as under: 74. "Be it noted, Section 126 of the Indian Contract Act, 1872, deals with "contract of guarantee'', "surety'', "principal debtor'' and "creditor''. Section 128 of the Indian Contract Act, 1872, pertains to "Surety's Liability'', which is co-extensive with that of the "Principal Debtor'', unless it is otherwise provided by the "Contract''. Further, this 'Tribunal' worth recalls and recollects the decision of the Hon'ble Supreme Court of India in Central Bank of India v. C L Vimla, reported in AIR 2015 SC Page ....
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....39; and 'special proceedings', which the 'Financial Creditor' can take recourse, despite availability of any other 'Fora', in 'Law'. 86. It is pointed out that the 'Hon'ble High Court of Karnataka, on 05.04.2022, had dismissed the Writ Petition, assailing the Constitutional validity of Section 95, 99 and 100 of the I & B Code, 2016. In fact, the 'Application' was filed by the 'Financial Creditor' / 'Piramal Capital & Housing Finance Limited', before the 'Adjudicating Authority' ('Tribunal'), through the Resolution Professional, under Section 95 of the Code for initiation of 'Insolvency Resolution Process' against the 'Personal Guarantor'. The Hon'ble Court had considered that I & B Code provides a particular eligibility criterion which a 'Resolution Professional' must possess and a Code of Conduct is to be followed, which governs their activities. 87. Apart from that, the Hon'ble Supreme Court of India in the decision of State Bank of India (Stressed Asset Management Branch) v. Mahendra Kumar Jajodia had held that the 'Financial Creditors' specially Banks may now initiate 'Insolvency Proceedings' ....
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....such powers shall be exercised. xxxx 104. No reconsideration of the matter on its merits is permissible under Section 152 of the CPC. 105. We may also advert to the pronouncement of the Supreme Court reported at (2003) 1 SCC 197, Lakshmi Ram Bhuyan v. Hari Prasad Bhuyan wherein a question was raised as to the relief granted by a judgment and the preparation of the decree thereon. In order to resolve the conundrum which had resulted, the Supreme Court referred to the power of the court under Section 152 to vary its judgment so as to give effect to its meaning and intention, which observations authoritatively explained the scope of the power under Section 152 in the following terms: 14. How to solve this riddle? In our opinion, the successful party has no other option but to have recourse to Section 152 CPC which provides for clerical or arithmetical mistakes in judgments, decrees or orders or errors arising therein from any accidental slip or omission being corrected at any time by the court either on its own motion or on the application of any of the parties. A reading of the judgment of the High Court shows that in its opinion the plaintiffs wer....
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....g fixed by the court on 16.04.2021, this aspect was brought to the notice of this court. This court had suggested that an appropriate application be filed. Hence, the present application. 22. I may only note that defendant No. 1 has filed an application being IA No. 11749/2021 wherein it has specifically been stated that learned counsel for the plaintiff for the first time raised objection regarding the direction for filing the written statement in the order dated 16.04.2021 on 17.08.2021 before the court. 23. There is a reasonable explanation explaining the so called delay/laches on the part of the plaintiff in moving the present application for the rectification of the order dated 16.04.2021. 24. The application is accordingly allowed." 30. The Learned Counsel for the Appellant, refers to the Judgment of this 'Tribunal', in Comp. App (AT) (INS.) No. 305 of 2022 etc., in UCO Bank Flagship Corporate Branch v. Navin Kumar Jain, wherein, at paragraph 22, it is observed as under: 22. "One of the submissions raised before us is that the Application under Section 7 has been filed against the Principal Borrower as is the case in Company Appeal (AT) ....
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....hority, all legal proceedings in respect of any debt that the personal guarantor is facing, would be covered by the interim moratorium and consequently the proceedings in the complaint filed by the respondent herein under Section 138 of the Act also would remain stayed, such proceedings being in respect of a debt alleged to have been incurred by the petitioner qua the respondent, (with such interim moratorium to continue till the application under Section 94 is either rejected or accepted by the Adjudicating Authority. If the application is admitted, proceedings under Section 138 would remain stayed till the proceedings before the Tribunal are taken to their logical conclusion, in terms of Sections 100 and 101 of the Code). 75. The other interpretation that can be given is that the phrases "all legal proceedings" and "any debt", only pertain to debts as are relatable to the corporate debtor in any manner; and any other personal debt incurred by the guarantor to a corporate debtor, as has nothing to do with such corporate debtor or corporate debt, would not be affected in any manner by the application filed under Section 94 by the personal guarantor to a corporate debtor an....
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....t out in Part II is to be applied to such corporate persons, does not lead to incongruity. On the other hand, there appear to be sound reasons why the forum for adjudicating insolvency processes - the provisions of which are disparate - is to be common, i.e. through the NCLT. As was emphasized during the hearing, the NCLT would be able to consider the whole picture, as it were, about the nature of the assets available, either during the corporate debtor's insolvency process, or even later; this would facilitate the CoC in framing realistic plans, keeping in mind the prospect of realizing some part of the creditors' dues from personal guarantors." ( Emphasis applied in this judgment only ) 78. Hence, it is obviously clear from a reading of the aforesaid part of the said judgment as also from the relevant provisions of the Code as have been reproduced hereinabove, that personal guarantors to corporate debtors are to be treated differently from other categories of individuals who would be covered by Part III of the Code, with it to be again observed that personal guarantors have however only been defined in Section 5(22) falling in Part II thereof and not in ....
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....not specifically carve out any exception qua such a debt as is subject matter of an instrument in the context of which a complaint under Section 138 of the Act has been filed, this court would have to interpret the terms "all the debts" and "any legal action or proceedings pending in respect of any debt" as occur in Section 96 of the Code, to mean that it would cover all such debts including any debt not pertaining to a corporate debtor for whom the accused in such a complaint under Section 138 stood as a personal guarantor to, even in his capacity as a Director of such corporate debtor. 83. This would be further so in the opinion of this court, because a "debt" has been defined in the absolutely generic meaning of the word, in Section 3 (11) of the Code (falling in the preliminary Part-I thereof); and further, as admitted by learned counsel for the respondent, a debt as is subject matter of proceedings under Section 138 of the Act, has not been prescribed to be an "excluded debt" in terms of Section 79(e) of the Code. 84. In this regard, it also needs to be observed here that unless the wordings of a statute are "unworkable" or wholly impractical, nothing extra c....
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....INS.) No. 807 of 2021 with Comp. App (AT) (INS.) No.740 of 2022 (Three Member Bench), between Sudip Dutta @ Sudip Bijoy Dutta v. State Bank of India, Mumbai, wherein, at paragraphs 30 & 31, it is observed as under: 30. "We, thus, do not find substance in the submission of Shri Mukherjee that for enforcing the liability under the Guarantee Deed Bank should initiate proceedings for specific performance of the contract or initiate arbitration. The statutory scheme of the code does not contain any indication that the Personal Guarantor of a Corporate Debtor can escape from its liability under the Personal Guarantee Deed merely on the ground that he is now started residing in another country and acquired citizenship of another country and is no more an Indian citizen. It is well settled principle of statutory interpretation that such interpretation of a statute should be adopted which makes the statute functional and does not make a statute non-functional. Accepting the submission of Shri Mukherjee shall lead to interpretation which shall defeat the object and purpose of the Code. 31. The submission of Shri Mukherjee that the Adjudicating Authority has acted beyond the....
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....Counsel for the Respondent is also present. In view of the fact that the issue with respect to the same is pending for adjudication before the Hon'ble Supreme Court in Writ Petition Civil No. 510 / 2022 and the same is listed before the Hon'ble Supreme Court for consideration, on 31.08.2022, we are inclined to adjourn the matter to 30.09.2022." 1st Respondent's Contentions: 35. The Learned Counsel for the 1st Respondent / Financial Creditor / Petitioner submits that the 'Appellant', had incorrectly mentioned that 'neither any CIRP proceedings nor any Liquidation proceedings, under the Code, have been initiated against the Corporate Debtor, either for the said alleged default or in any other matter'. 36. The Learned Counsel for the 1st Respondent, takes a stand that the 'Corporate Insolvency Resolution Process' proceedings, were pending against the 'Corporate Debtor', not only on the date when the 'Application', was filed before the 'Adjudicating Authority' / 'Tribunal', as well as on the date, when the 'impugned order', was filed, and in fact the 'CIRP' proceedings, continued to be 'pending', against the 'Corporate Debtor', as on date. 37. The Learned Counsel f....
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....ing Authority' / 'Tribunal', has jurisdiction, to entertain 'Insolvency Proceedings', against the 'Personal Guarantors', even when the 'CIRP' proceedings, are not pending against the 'Corporate Debtor'. 41. The Learned Counsel for the 1st Respondent contends that the 'Report' of the 'Working Groups', on 'individual Insolvency', is not a precedent, but, instead an 'opinion of the Author', and these 'Reports', have 'no binding / precedential value', in 'Law', and cannot be considered, contrary to the reasoned Judgements, passed by the 'Hon'ble Courts' / 'Tribunals'. 42. The Learned Counsel for the 1st Respondent, points out that in the decision of the Hon'ble Supreme Court of India, in Lalit Kumar Jain v. Union of India, reported in (2021) 9 SCC at Page 321, the provisions of the I & B Code, 2016, in relation to 'Personal Guarantors', were upheld. 43. The Learned Counsel for the 1st Respondent, refers to Section 128 of the Indian Contract Act, 1872, that the 'Guarantor's Liability', is co-extensive with that of the 'Principal Debtor', and that the 'Personal Guarantee', in the instant case, clearly mentions that the 'Guarantee', is an independent obligation of the 'Guarantor'....
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.... 48. In any event, pursuant to the 'impugned order', there is a 'Moratorium', on the Proceedings, before the 'Debt Recovery Tribunal', and there is 'no premature determination' of the 'Quantum of Default', as alleged or otherwise. Furthermore, the 'Quantum of Debt', due to the '1st Respondent / Financial Creditor', is an admitted fact by the 'Appellant' himself and it is a matter of record. 49. The Learned Counsel for the 1st Respondent submits that there is no challenge, to the admitted facts that all requirements, contained in the I & B Code, 2016, for 'initiation of Insolvency Proceedings', against the 'Appellant', admittedly stands satisfied, and therefore, the 'impugned order', was rightly passed by the 'Adjudicating Authority', as per the 'existing / prevailing Law'. 50. The Learned Counsel for the 1st Respondent, while rounding up, prays for a 'Dismissal' of the instant Comp. App (AT) (CH) (INS.) No. 8 of 2023, filed by the 'Appellant'. 1st Respondent's Citations: 51. The Learned Counsel for the 1st Respondent, relies on the 'Judgment' of the Hon'ble Supreme Court of India, in Rajahmundry Electric Supply Corporation Ltd. v. A. Nageshwara Rao & two Ors., report....
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....Ltd. v. Rekha Singh & Ors. (vide Comp. App (AT) (INS.) Nos. 397, 398 and 399 of 2022), wherein, at Paragraphs 31 to 35, it is observed as under: 31. "The objection of the Respondent that application filed by the Financial Creditor under Section 95 is not maintainable since no insolvency proceedings are pending against the Principal Borrower has already been overruled by the Adjudicating Authority. The issue is fully covered by judgment of this Tribunal in "Company Appeal (AT) (Ins.) No. 60 of 2022, State Bank of India vs. Mahendra Kumar Jajodia, decided on 27.01.2022", where interpreting Section 60(2) of the Code following was laid down in Paras 8, 9, 10 and 11: "8. The use of words 'a' and 'such' before National Company Law Tribunal clearly indicates that Section 60(2) was applicable only when a CIRP or Liquidation Proceeding of a Corporate Debtor is pending before NCLT. The object is that when a CIRP or Liquidation Proceeding of a Corporate Debtor is pending before 'a' NCLT the application relating to Insolvency Process of a Corporate Guarantor or Personal Guarantor should be filed before the same NCLT. This was to avoid two different NCL....
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....ve heard learned Solicitor General and learned senior counsel for the parties and perused the record. We do not see any cogent reason to entertain the Appeals. The judgment impugned does not warrant any interference. The Appeals are dismissed." 33. The question is as to whether the Section 95 application which was filed by the Financial Creditor against the Personal Guarantor was maintainable or not. 34. We having held that on the date when application was filed under Section 95 by the Financial Creditor against the Personal Guarantor an application could have filed against the Financial Service Provider on the basis of last Balance Sheet which had asset size of more than Rs.500, the application filed by the Financial Creditor against the Personal Guarantor was fully maintainable. 35. In view of the foregoing discussion, we hold that the Adjudicating Authority has committed error in allowing the applications filed by the Personal Guarantors and dismissing the Company Petitions. All the Appeals are allowed. Order of the Adjudicating Authority dated 22.02.2022 is set aside. The Company Petitions CP No. (IB) - 25/95/JPR/2021, CP No. (IB) - 26/95/JPR....
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....s of individuals and firms shall be the Debt Recovery Tribunal having territorial jurisdiction over the place where the individual debtor actually and voluntarily resides or carries on business or personally works for gain and can entertain an application under this Code regarding such person." 22. The interplay between Section 60 and Section 179 of the IBC came up for consideration before the Supreme Court in Embassy Property Development (supra), wherein the Supreme Court observed that in respect of personal guarantors of corporate persons, the NCLT would be the adjudicating authority. The relevant observations of the Supreme Court are set out below. "33. Sub-section (4) of Section 60 of the IBC, 2016 states that the NCLT will have all the powers of the DRT as contemplated under Part III of the Code for the purposes of sub-section (2). Sub-section (2) deals with a situation where the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor of a corporate debtor is taken up, when CIRP or liquidation proceeding of such a corporate debtor is already pending before NCLT. The object of sub-section (2) is to group together (A) t....
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....judicating an application under Section 95 in respect of a personal guarantor. ... 24. The statutory appeal, being Civil Appeal No(s).1871-1872/2022, filed against the aforesaid order of the NCLAT, was dismissed by the Supreme Court vide order dated 6th May, 2022. 25. In view of the legal position elucidated above, it clear that Section 179(1), which provides the jurisdiction for the DRT with respect to insolvency matters of individuals and firms, is subject to Section 60 of the IBC. Sub-section (1) of Section 60 of the IBC provides that in relation to insolvency resolution for corporate persons, including corporate debtors and personal guarantors, the Adjudicating Authority shall be the NCLT. Sub-section (2) of Section 60 provides that where the CIRP of a corporate debtor is pending before an NCLT, an application relating to the insolvency of a personal guarantor of such corporate debtor shall be filed before the same NCLT. Sub-section (3) of Section 60 further provides that the insolvency resolution process in respect of a personal guarantor pending in any Court or Tribunal, shall stand transferred to the adjudicating authority dealing with the insolvency resolu....
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....stitute an estoppel against the defendant no.2 as it was a legal objection taken by the defendant no.2 and an admission in law cannot be held to be binding against a party. An estoppel can be in respect of admissions made on facts, however, there can be no estoppel on admissions based on law. In any event, the legal position has emerged only after the dismissal of the appeal by the Supreme Court in Mahendra Kumar Jajodia (supra). Therefore, the judgment in Union of India v. N. Murugesan (2022) 2 SCC 25 would not be of any assistance to the plaintiffs in the present case. 29. In view of the discussion above, I am of the view that the NCLT would be the appropriate adjudicating authority in respect of insolvency proceedings initiated against the defendants in their capacity as personal guarantors for the corporate debtor, Bhushan Steel." 54. The Learned Counsel for the 1st Respondent, relies on the decisions; (i) Bank of Bihar Ltd. v. Dr. Damodar Prasad and Anr.: AIR 1969 SCR 620 (ii) State Bank of India v. Index Port Registered: AIR 1992 SC 1740 (iii) Industrial Investment Bank of India v. Biswanath Jhunjhunwala: (2009) 9 SCC 478; and (iv) United Bank of India v. Satyawat....
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.... any 'Plan', because 'no Repayment Plan', was given by the 'Appellant / Personal Guarantor', and therefore, 'No Meeting of Creditors', was required to be 'conducted'. 60. That apart, the 'Appellant / Personal Guarantor', had filed IA/1042/2022 in CP (IB) No. 335 / 95 / HDB / 2020, to set aside the 'Order' dated 16.09.2022, and on 10.10.2022, the said IA/1042/2022, was closed as 'Infructuous' one. Later, the '1st Respondent / Financial Creditor', had filed an 'Appeal', before the 'Adjudicating Authority' ('NCLT', Bench - I, Hyderabad) in CP (IB) No. 389 / 121 / HBD / 2022, for initiation of 'Bankruptcy Process' of the 'Personal Guarantor', and the said 'Bankruptcy Proceedings', are presently in progress, before the 'Adjudicating Authority' / 'Tribunal'. Feature of Insolvency Law Committee Report - Mar'2018: 61. Section 60 of the I & B Code, 2016, requires that the 'Adjudicating Authority', for 'Corporate Debtor' and 'Personal Guarantors', should be the 'National Company Law Tribunal', which has 'Territorial Jurisdiction', over the place, where the 'Registered Office' of the 'Corporate Debtor', is located, which in turn creates a link between the 'Insolvency Resolution' or '....
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.... clear that the provisions, deal with the 'priority' of 'preferences' of the 'Tribunal', over 'Insolvency Proceeding', instituted against the 'Personal Guarantor' / 'Individual' / 'Corporate Debtor'. Moreover, if the 'Insolvency', relates to the 'Corporate Debtor', the 'Adjudicating Authority' / 'Tribunal', has supremacy and for that, the 'Adjudicating Authority' / 'Tribunal', possess all those 'Powers' of 'Debt Recovery Tribunal', as well, whereas, if 'Insolvency', relates to a 'Personal Guarantor / Individual / Partnership Firm', the 'Debt Recovery Tribunal', has supremacy and for that, the 'Debt Recovery Tribunal', possess all those 'Powers' of the 'Adjudicating Authority' / 'Tribunal', as well. 65. According to the Appellant / Personal Guarantor, that the 'period of Limitation', for triggering 'Insolvency and Bankruptcy Proceedings', is 'Three Years', and that, it is to be noted from the 'Date of Default', only, under no circumstances, from the 'Date of Enactment', coming in force'. Furthermore, in the 'Information Utility', the 'Date of Default', is mentioned as 15.05.2017 and that the present 'Application', was filed on 30.07.2020, which is beyond the 'Limitation Period'. ....
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....porate Debtor', even if, 'no Insolvency Proceedings', are pending against the 'Corporate Debtor'. 71. In so far as the challenge to any provision, in a 'separate proceeding', has no bearing whatsoever, to the instant Comp. App (AT) (CH) (INS.) No. 8 of 2023 and it is to be remembered that the provisions of I & B Code, 2016, pertaining to 'Personal Guarantors', were 'upheld', as 'Valid', by the Hon'ble Supreme Court's decision in the matter of Lalitkumar Jain v. Union of India, reported in (2021) 9 SCC 321. In an event, as on today, the ingredients of Section 95 to 120 of the I & B Code, 2016, pertaining to 'Personal Guarantors', are 'Valid', and do have a 'Binding Force', in 'Law', 72. The other vital fact, which cannot be brushed aside in the instant case on hand, before this 'Tribunal', is that, the 'IFCI' Limited, a 'Lead Lender', had issued a 'Recall Notice', to the 'Corporate Debtor', and on 08.03.2019, had invoked the 'Personal Guarantee', on behalf of all the 'Lenders', including the '1st Respondent / Financial Creditor / Petitioner'. 73. Dealing with the aspect of the 'Appellant / Personal Guarantor', as 'Petitioner', has filed a 'Transfer Petition (C) No.1235 of 2....
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....'Registered Office' of the 'Corporate Person', is located, and in the instant case, in the 'State of Telangana', the 'Corporate Debtor's Registered Office', is situated, which comes within the 'ambit of territorial jurisdiction' of the 'Adjudicating Authority' ('National Company Law Tribunal', Bench - I, Hyderabad). 78. One cannot remain in oblivion of a prime fact that the Hon'ble Supreme Court of India, in Lalit Kumar Jain v. Union of India & Ors., reported in (2021) 9 SCC at Page 321, at Spl Pgs: 365, 394-395, 397- 400, wherein at Paragraphs 63, 114, & 121 to 125, it is observed as under: 63. "Section 78(3) of the Code states that the adjudicating authority, for the purpose of Part III (that deals with insolvency resolution and bankruptcy of individuals and partnership firms) would be the Debt Recovery Tribunal ("DRT") that was established under the RDBFI Act. The adjudicating authority for corporate insolvency (companies, LLPs and limited liability entities), on the other hand, is NCLT. The appeal from NCLT lies to the National Company Law Appellate Tribunal ("NCLAT"). The appeal from the DRT lies to the Debt Recovery Appellate Tribunal ("DRAT"). This court hears ap....
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.... being contrary to Section 31(1) of the Code and this Court's judgment in V. Ramakrishnan case [SBI v. V. Ramakrishnan, (2018) 17 SCC 394], is set aside." 122. It is therefore, clear that the sanction of a resolution plan and finality imparted to it by Section 31 does not per se operate as a discharge of the guarantors liability. As to the nature and extent of the liability, much would depend on the terms of the guarantee itself. However, this Court has indicated, time and again, that an involuntary act of the principal debtor leading to loss of security, would not absolve a guarantor of its liability. In Maharashtra State Electricity Board (supra) the liability of the guarantor (in a case where liability of the principal debtor was discharged under the Insolvency law or the Company law), was considered. It was held that in view of the unequivocal guarantee, such liability of the guarantor continues and the creditor can realize the same from the guarantor in view of the language of Section 128 of the Contract Act, 1872 as there is no discharge under Section 134 of that Act. This court observed as follows: (SCC pp. 362-63, para 7) "7. Under the bank guarantee i....
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....o pay the same. 2. Subsequently, Respondent 3 which had taken over the management of Respondent 4 became sick and proceedings were initiated under the Sick Textile Undertakings (Nationalisation) Act, 1974 (for short "the Act"). The appellant filed suit for recovery against the guarantors and the principal debtor of the amount claimed by it. 3. The following preliminary issue was, on the pleadings of the parties, framed: 'Whether the claim of the plaintiff is not maintainable in view of the provisions of Act 57 of 1974 as alleged in para 25 of the written statement of Defendant 2?' 4. The trial court as well as the High Court, both came to the conclusion that in view of the provisions of Section 29 of the Act, the suit of the appellant was not maintainable. 5. We have gone through the provisions of the said Act and in our opinion the decision of the courts below is not correct. Section 5 of the said Act provides for the owner to be liable for certain prior liabilities and Section 29 states that the said Act will have an overriding effect over all other enactments. This Act only deals with the liabilities of a company which is nationalised....