TaxTMI 
TaxTMI 
2025 (1) TMI 1452
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....inafter referred to as the "IBC") against the Appellant(s)/ Personal Guarantors. CP(IB) No.214/(PB)/2024 has been filed by Vistra against Anita Goel and CP (IB) No.213/(PB)/2024 has been filed by Vistra against Ayush Goel. On 29.04.2024, the Adjudicating Authority appointed Resolution Professional ("RP") Shri Vikram Bajaj in Application under Section 95. Company Appeal (AT) (Ins.) No.1284 and 1306 of 2024 was filed (by Ayush Goel and Anita Goyal) challenging the order of appointment of RP, which Appeal(s) were dismissed by this Tribunal on 19.07.2024 relying on the judgment of the Hon'ble Supreme Court in Dilip B Jiwarajka Vs. Union of India & Ors. - WP (Civil) No.1281 of 2021 and holding that all issues had to be agitated at the time when the application come for admission/ rejection under Section 100. The Appeal(s) were dismissed with above observations. Subsequent, to the order dated 19.07.2024, the RP submitted a Report recommending admission of Application under Section 95. Objections were filed by the Personal Guarantors. The Adjudicating Authority after considering the Report of the RP and the objections raised by the Personal Guarantor, by an order dated 04.12.2024 admitted....
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....n of CIRP against the Personal Guarantor of a Corporate Person by virtue of Section 60, sub-section (1). The Appellant ought not be allowed to raise objection regarding jurisdiction of NCLT in the appellate proceedings. It is submitted that no objection having been taken by the Appellant to the jurisdiction of the NCLT and Appellant having willingly participated in the proceedings, without raising any objection, the Appellant is stopped from raising objections now. 5. Learned Counsel for both the parties have placed reliance on various judgments of Hon'ble Supreme Court, this Tribunal as well as Madras High Court, which we shall refer to while considering the submissions in detail. 6. The first submission, which has been raised by learned Counsel for the Appellant is that the appointment of RP was not in accordance with Section 97, sub-section (3). Section 97, sub-section (3) on which reliance has been placed by learned Counsel for the Appellant is as follows: "97(3) Where an application under section 94 or 95 is filed by the debtor or the creditor himself, as the case may be, and not through the resolution professional, the Adjudicating Authority shall direct the Bo....
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....sion of the learned Counsel for the Appellant that NCLT has no jurisdiction to entertain Section 95 Application filed by the Financial Creditor and the Application ought to have been filed before the DRT. Although learned Counsel for the Respondent has contended that the objection regarding jurisdiction having not been raised before the NCLT, we proceed to examine the contention on merit. The issue raised by the Appellant needs consideration and answer in these Appeal(s) to clarify the law on the subject. 11. The submission which has been pressed by the Counsel for the Appellant is that NCLT shall be the Adjudicating Authority for Personal Guarantor only when proceeding of insolvency resolution process is ongoing against the Corporate Debtor have been initiated and are pending before the NCLT. Reliance has been placed by learned Counsel for the Appellant on Section 60, sub-section (2). It is contended that in the present case, no CIRP or liquidation is going on against the Corporate Debtor, hence, the jurisdiction to entertain Application under Section 95 lies with DRT. Learned Counsel for the Appellant has also relied on Section 79 and 179 of the IBC to support his submission. ....
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....sions of learned Counsel for the parties and have perused the record. 14. Before we enter into the rival submissions of the parties, it is necessary to notice certain statutory provisions of the IBC and the rules framed thereunder to find out the legislative Scheme. Section 2, which deals with applicability of provisions of the Code, by an amendment made by Act 8 of 2018 w.e.f. 23.11.2017, sub-clause (e) in Section 2 was inserted, which is as follows: "2. Application. - The provisions of this Code shall apply to- (e) personal guarantors to corporate debtors;" 15. Section 5, sub-section (1), defines the 'Adjudicating Authority', which is as follows: "5.(1) "Adjudicating Authority", for the purposes of this Part, means National Company Law Tribunal constituted under section 408 of the Companies Act, 2013 (18 of 2013);" 16. Section 5, sub-section (22) defines 'Personal Guarantor', is as follows: "5(22) "personal guarantor" means an individual who is the surety in a contract of guarantee to a corporate debtor;" 17. Part-II of the Code, contain Section 60. Section 60, as amended by Act 26 of 2018 on 06.06.2018, provides as follows: ....
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....r this Part, the period during which such moratorium is in place shall be excluded." 18. Part-III of the Code deals with "Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms". Section 78 provides as follows: "78. Application. - This Part shall apply to matters relating to fresh start, insolvency and bankruptcy of individuals and partnership firms where the amount of the default is not less than one thousand rupees: Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one lakh rupees." 19. Section 79, sub-section (1) defines "Adjudicating Authority", which is as follows: "79. Definitions. - In this Part, unless the context otherwise requires, - (1) "Adjudicating Authority" means the Debt Recovery Tribunal constituted under subsection (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institution Act, 1993 (51 of 1993);" 20. Section 179, which is under Chapter-VI of Part-II, which contains heading "Adjudicating Authority for individuals and partnership firms". Section 179 provides as follows: "....
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....notice the ambit and scope of Section 60, which is the basis of the submission. We need to notice the Report of Insolvency Law Committee, March 2018, which noticed that Section 60 create a link between the insolvency resolution or bankruptcy process of the Corporate Debtor and the Personal Guarantor and the matters relating to same debt are dealt in the same Tribunal. The Committee recommended for certain amendments. Paragraph 23 of the Report provides as follows: "23. LINKING PROCEEDINGS OF CORPORATE GUARANTOR WITH CORPORATE DEBTOR 23.1 Section 60 of the Code requires that the Adjudicating Authority for the corporate debtor and personal guarantors should be the NCLT which has territorial jurisdiction over the place where the registered office of the corporate debtor is located. This creates a link between the insolvency resolution or bankruptcy processes of the corporate debtor and the personal guarantor such that the matters relating to the same debt are dealt in the same tribunal. However, no such link is present between the insolvency resolution or liquidation processes of the corporate debtor and the corporate guarantor. It was decided that section 60 may be ....
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....ening sentence of sub-section (2), i.e. "without prejudice to the generality of the provisions of sub-section (1)". It is well settled that when this expression is used anything contained in the provisions following this expression is not intended to cut down the generality of the meaning of the preceding provision. This was so held by the Privy Council in King-Emperor v. Sibnath Banerji [(1945) FCR 195] ." 24. When expression "without prejudice" is used in sub-section (2), the provisions of sub-section (2) in no manner is cutting down the applicability of provisions of sub-section (1) of Section 60. Section 60, sub-section (1) clearly lays down that Adjudicating Authority in addition to insolvency resolution and liquidation for Personal Guarantors, shall be the NCLT having territorial jurisdiction over the place where the registered office of a Corporate Person is located. The issue which has arisen in the present case, came for consideration before this Tribunal in several cases. Two judgments have been relied by learned Counsel for the Respondent, which need to be noticed. The first judgment, which has been relied by learned Counsel for Respondent is State Bank of India vs. M....
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.... 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 Personal Guarantor as the case may be of such Corporate Debtor shall be filed before 'such' National Company Law Tribunal. The purpose and object of the sub-section 2 of Section 60 of the Code is that when proceedings are pending in 'a' National Company Law Tribunal, any proceeding against Corporate Guarantor should also be filed before 'such' National Company Law Tribunal. The idea is that both proceedings be entertained by one and the same NCLT. The sub-section 2 of Section 60 does not in any way prohibit filing of proceedings under Section 95 of the Code even if no proceeding are pending before NCLT. 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 G....
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....a bench. The above judgment clearly covers the issue, which has been raised in the present Appeal and this Tribunal has also answered the said issue holding that even if no CIRP or liquidation is pending against the Corporate Debtor, Application under Section 95 can be filed before the NCLT. 27. Another judgment of this Tribunal relied by the Respondent is Mahendra Kumar Agarwal (supra), which was also a case where Personal Guarantor has challenged the order passed by NCLT Hyderabad, where NCLT, in proceedings under Section 95, has appointed an RP, which order was challenged before the Chennai Bench of this Tribunal. The Personal Guarantor contended before the Appellate Tribunal that Application filed under Section 95 is not maintainable, which ought to have been filed before the DRT. The Appellate Tribunal has noticed elaborately the submissions advanced before it by both the parties and also referred to the various judgments and citations relied by both the parties. The Chennai Bench of this Tribunal has also referred to and relied the judgment of this Tribunal in State Bank of India vs. Mahendra Kumar Jajodia (supra). The Chennai Bench of this Tribunal has laid down that CIRP....
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....as also challenged before the Hon'ble Supreme Court in Civil Appeal No.1871-1872 of 2022. The Hon'ble Supreme Court vide its judgment dated 06.05.2022 dismissed the Appeal. The order passed by Hon'ble Supreme Court on 06.05.2022 is as follows: "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. The Appeals are dismissed." 29. From the above it is clear that with regard to maintainability of Application under Section 95 by a Financial Creditor against a Personal Guarantor, even if no insolvency resolution process or liquidation proceedings of a Corporate Debtor is pending, has been held to be maintainable and the view taken by this Appellate Tribunal in Mahendra Kumar Jajodia has also received the approval of the Hon'ble Supreme Court. 30. Central Government has issued Notification dated 15.11.2019 by which provisions pertaining to various provisions of the IBC were enforced with effect from 01.12.2019. Notification issued by the Government of India, Ministry of Corporate Affairs on 15.11.2019 is as ....
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....ocess provisions in respect of corporate debtors) as it was originally, defined personal guarantor to say that it "means an individual who is the surety in a contract of guarantee to a corporate debtor."..." 32. In paragraph 96 of the judgment, following has been held by the Hon'ble Supreme Court: "96. This court in V. Ramakrishnan (supra), noticed why an application under Section 60(2) could not be allowed. At that stage, neither Part III of the Code nor Section 243 had not been notified. This meant that proceedings against personal guarantors stood outside the NCLT and the Code. The non-obstante provision under Section 238 gives the Code overriding effect over other prevailing enactments. This is perhaps the rationale for not notifying Section 243 as far as personal guarantors to corporate persons are concerned. Section 243(2) saves pending proceedings under the Acts repealed (PIA and PTI Act) to be undertaken in accordance with those enactments. As of now, Section 243 has not been notified. In the event Section 243 is notified and those two Acts repealed, then, the present notification would not have had the effect of covering pending proceedings against individuals,....
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....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. 101. In view of the above discussion, it is held that the impugned notification is not an instance of legislative exercise, or amounting to impermissible and selective application of provisions of the Code. There is no compulsion in the Code that it should, at the same time, be made applicable to all individuals, (including personal guarantors) or not at all. 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. The notifications under Section 1(3), (issued before the impugned notification was issued) disclose that the Code was brought into force in stages, regard be....
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....) Whether in view of the filing of the insolvency resolution process against the corporate debtor, the pending proceedings in I.B.C.No.1 of 2022 before the DRT is to be transferred to the NCLT in view of Section 60(3) of The IBC? 37. The Madras High Court answered the Question No.1 in negative holding that NCLT alone has no jurisdiction in a matter of insolvency resolution. The Madras High Court has relied on the judgment of the Hon'ble Supreme Court in State Bank of India vs. V. Ramakrishnan and Anr., Civil Appeal No. 3595 of 2018 with Civil Appeal No.4553 of 2018. The issue which came for consideration before the Hon'ble Supreme Court of India was as to whether after enforcement of moratorium under Section 14 of the IBC, will the moratorium shall also be applicable to the Personal Guarantors. The Adjudicating Authority in the said case has held that after declaring the moratorium under Section 14, the moratorium shall also apply to Personal Guarantor. Paragraph 22, which has been relied by Madras High Court was in reference to reliance by Respondent to the applicability of moratorium to Personal Guarantors. Observation made in paragraph 22 by the Hon'ble Supreme Court, as extr....
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....nst Personal Guarantor can only be before the NCLT. We need to notice the judgment of Madras High Court dated 28.07.2021, which was in C.R.P. (PD) No.1289 of 2021, where the Personal Guarantor has challenged the proceeding under Section 95(1) initiated before the DRT. The questions which arose for consideration were noted in paragraph D, which we have extracted above. The contention of the petitioner has been noted in paragraph 5(iv) and for interpreting Section 60, sub-section (2) of the IBC, the Madras High Court has extracted paragraph 22 of C.R.P. (PD) No.1289 of 2021. The Division Bench while deciding the proceeding in C.R.P. No.2513 of 2022 felt bound by the earlier judgment, which has become final between the parties. Thus, the reasons, which was relied by the Madras High Court was the finality of its earlier judgment dated 28.07.2021, which was applicable to the facts of earlier proceedings. The observations were made in paragraph 5 (iv) and (v) are as follows: "5.(iv) The specific contention has been raised by the petitioner that even in the absence of the proceedings against the corporate debtor, the proceedings against the personal guarantor can only be before t....
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....179 of the IBC, the Delhi High Court held that NCLT will be the Adjudicating Authority in respect of insolvency proceedings against Personal Guarantors. It is useful to extract paragraph 54 of the judgment of this Tribunal in Mahendra Kumar Agarwal, where Delhi High Court has noticed following: "54. The Learned Counsel for the 1st Respondent, relies on the decision of the Hon'ble High Court of Delhi in Axis Trustee Services Limited v. Brij Bhushan Singal, reported in (2022) SCC OnLine Del. 3634, wherein, at paragraphs 17, 21 to 29, it is observed as under: 17. "To appreciate the aforesaid submissions, a reference may be made to the relevant provisions of the IBC. Part II of the IBC deals with "INSOLVENCY RESOLUTION AND LIQUIDATION FOR COPORATE PERSONS" and Section 60 of the IBC occurs in Chapter VI of Part II of the IBC titled "ADJUDICATING AUTHORITY FOR CORPORATE PERSONS." The relevant portion of Section 60 of the IBC is set out below: 60. (1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors shall be the National Company Law Tribunal having terri....
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....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) the CIRP or liquidation proceeding of a corporate debtor, and (B) the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor of the very same corporate debtor, so that a single forum may deal with both. This is to ensure that the CIRP of a corporate debtor and the insolvency resolution of the individual guarantors of the very same corporate debtor do not proceed on different tracks, before different fora, leading to conflict of interests, situations or decisions. 34. If the object of sub-section (2) of Section 60 is to ensure that the insolvency resolutions of the corporate debtor and its guarantors are dealt with together, then the question that arises is as to why there should be a reference to the powers of the DRT in sub-section (4). The answer to this question is to be found in Section 179 of the IBC, 2016. Under Section 179(1), it 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 name....
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....f a personal guarantor pending in any Court or Tribunal, shall stand transferred to the adjudicating authority dealing with the insolvency resolution process of the corporate debtor. 26. On behalf of the plaintiff, reliance has been placed on sub-section (2) of Section 60 to contend that insolvency proceedings in respect of a personal guarantor of a corporate debtor shall be filed in the NCLT only if the CIRP is pending in respect of corporate debtor before the NCLT. In view of the fact that the CIRP in respect of corporate debtor, Bhushan Steel already stands concluded, insolvency proceedings in respect of its guarantors have to be filed before the DRT and not the NCLT. The aforesaid submission overlooks the fact that sub-section (2) of Section 60, IBC starts with words without prejudice to sub-section (1)'. Clearly, sub-section (2) of Section 60 is supplemental to subsection (1) of Section 60 and has to be read along with sub-section (1) of Section 60. A harmonious reading of the aforesaid provisions would lead to the conclusion that sub-section (1) of Section 60 applies in respect of insolvency proceedings in respect of personal guarantors of corporate debtors irrespect....
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....have a different view from one which has been taken by the Madras High Court. It is well settled that judgment of the High Court has persuasive value as precedent. However, when judgments of this tribunal in State Bank of India vs. Mahendra Kumar Jajodia and Mahendra Kumar Agarwal vs. PTC India Financial Services has answered the same very issue, which has arisen for consideration, we feel ourselves bound by the judgment and we are not persuaded to take any different view to which one was taken by this Tribunal in State Bank of India vs. Mahendra Kumar Jajodia's case. 42. Learned Counsel for the Appellant has relied on judgment of NCLT Kolkata Bench in Aditya Birla Finance Ltd. vs. Sarita Mishra and Tata Capital Financial Services Ltd. vs. Arjun Agarwal. Coming to the judgment of NCLT in Aditya Birla Finance Ltd. vs. Sarita Mishra, the said proceeding was initiated by Financial Creditor against Personal Guarantor under Section 95, sub-section (1). The Application came to be rejected by NCLT Kolkata Bench, holding that NCLT shall have jurisdiction only when the proceedings for insolvency resolution or liquidation is pending against the Corporate Debtor and the Application under S....