TaxTMI 
TaxTMI 
2025 (5) TMI 579
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....ication has come up in this Appeal. 2. Brief facts necessary to be noticed for deciding the Appeal are: i. The Principal Borrower - Mica Industries Limited has obtained loan of Rs.10 lakhs from the Appellant on 01.02.2023. The Respondent - Gursev Singh, provided a personal guarantee for repayment of the loan as taken by the Principal Borrower on 08.02.202. ii. The Financial Creditor invoked the personal guarantee on 15.10.2023 and filed an Application CP IB No.422/2024 under Section 95, sub-section (1) of the IBC, which Application has been rejected by the Adjudicating Authority holding that it did not meet the threshold of Rs.1 crore. Aggrieved by which order, this Appeal has been filed. 3. We have heard Shri Mrinal Harshwardhan and Shri Iswar Mohapatra, learned Counsel appearing for the Appellant and Shri Rahul Gupta, learned Counsel appearing for the Respondent. 4. Learned Counsel for the Appellant in support of the Appeal submits that threshold limit for individuals prescribed under Section 78 of the IBC is Rs.1000/-. Section 95 Application is under Part-III of the IBC for which threshold is of Rs.1000/- only. Thus, for initiating personal insolvency ....
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....al Guarantor of the CD. 6. We have heard the submissions of learned Counsel for the parties and have perused the records. 7. A short but very interesting question has arisen for consideration in this Appeal, i.e., what is the threshold for filing an Application under Section 95, sub-section (1) by the Financial Creditor against the Personal Guarantor. Whether the threshold is Rs.1 crore as provided in Section 4 or it is Rs.1000/- as provided in Section 78 of the IBC, is the question to be answered. Section 4, which provides for threshold for filing an Application for insolvency against the CD is Rs.1 crore with effect from 24.03.2020. Section 60 of the IBC provides for 'Adjudicating Authority for corporate person'. Section 60, sub-section (1), (2), (3) and (4) are as follows: "60. Adjudicating Authority for corporate persons. - (1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of a corporate person is located. (2) With....
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....Corporate Debtors) Rules, 2019. Section 3, sub-section (e) was also inserted defining personal guarantor to a CD by the said Notification. Now we need to look into Sections 78 and 79 of the IBC, which find place in Part-III of the IBC. 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." 10. Section 79 defines the Adjudicating Authority, i.e., Debt Recovery Tribunal in Part-III. Section 79 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); ......" 11. Section 179, which deals with territorial jurisdiction, sub-section (1) of which is as fol....
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.... 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 suitably amended to provide for the same NCLT to deal with the insolvency resolution or liquidation processes of the corporate debtor and its corporate guarantor. For this purpose, the term "corporate guarantor" will also be defined."" 13. This Tribunal noticed the judgment of the Hon'ble Supreme Court in Lalit Kumar Jain, where Hon'ble Supreme Court has taken the view that Parliamentary intent was to treat Personal Guarantors differently from other categories of individuals, which is referred ....
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....r 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, such as personal guarantors in other forums, and would bring them under the provisions of the Code pertaining to insolvency and bankruptcy of personal guarantors. The impugned notification, as a consequence of the non obstante clause in Section 238, has the result that if any proceeding were to be initiated against personal guarantors it would be under the Code. 33. The observation by the Hon'ble Supreme Court in the last line is relevant which reads "The impugned notification, as a consequence of the non obstante clause in Section 238, has the result that if any proceeding were to be initiated against personal guarantors it would be under the Code". The Hon'ble ....
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....ion 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 being had to the categories of persons to whom its provisions were to be applied. The impugned notification, similarly inter alia makes the provisions of the Code applicable in respect of personal guarantors to corporate debtors, as another such category of persons to whom the Code has been extended. It is held that the impugned notification was issued within the power granted by Parliament, and in valid exercise of it. The exercise of power in issuing the impugned notification under Section 1(3) is therefore, not ultra vires; the notification is valid." 34. The above judgment of the Hon'ble Supreme Court also clearly emphasized that Personal Guarantor of the ....
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.... (1969) 1 SCC 255], SCC pp. 263-64, para 14) "14. ... In our opinion, the High Court inKoteswar Vittal Kamath v. Rangappa Baliga & Co. [Koteswar Vittal Kamath v. Rangappa Baliga & Co., 1963 SCC OnLine Ker 132] did not correctly appreciate the position. The language of the proviso cannot be interpreted in the manner accepted by the High Court without doing violence to the rules of construction. If both the words "introduced" or "moved" are held to refer to the Bill, it must necessarily be held that both those words will also refer to the word "amendment". On the face of it, there can be no question of introducing an amendment. Amendments are moved and then, if accepted by the House, incorporated in the Bill before it is passed. There is further an indication in the Constitution itself that wherever a reference is made to a Bill, the only step envisaged is introduction of the Bill. There is no reference to such a step as a Bill being moved. The articles, of which notice may be taken in this connection, are Articles 109, 114, 117, 198 and 207. In all these articles, whatever prohibition is laid down relates to the introduction of a Bill in the legislature. There is no referen....
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....ery of Debts and Bankruptcy Act, 1993 (51 of 1993); 17. The Rules clearly contemplate that Adjudicating Authority for the purposes of Section 60 is National Company Law Tribunal and for other cases, it is Debt Recovery Tribunal. 18. Learned Counsel for the Appellant has referred to judgment of NCLAT, Chennai Bench in Mahendra Kumar Agarwal vs. PTC India Financial Services Ltd. & Anr. - (2023) SCC OnLine NCLAT 321 where also this Tribunal had occasion to consider Section 60, Section 179 and Section 95, sub-section (1). This Tribunal in Mahendra Kumar Agarwal referred to the judgment of Hon'ble Supreme Court in Lalit Kumar Jain and has laid down following in paragraph 74: "74. In ' Law', 'Guarantee', is an ' independent obligation' of the 'Guarantor', which is evident from the 'Personal Guarantee', and that there is 'no requirement', enabling a 'Person', to 'exhaust', any 'remedy', against a 'Corporate Debtor', prior to the issuance of 'Demand', in terms of 'Personal Guarantee' and in the present case, Clauses 3, 4 and 6 of the 'Personal Guarantee', cannot be lost si....
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.... of both the parties were noticed in paragraph 14 of the judgment, which is as follows: "14. For argument sake, we proceed on the premise that on 31.03.2021 the asset size of the JFIL became Rs.407 Crores. The application under Section 95 was filed by Financial Creditor on 03.06.2021 on which date last audited Balance Sheet was only the Balance Sheet as on 31.03.2020. Last Balance Sheet referred to in the Notification dated 18.11.2019 has to be treated as last audited Balance Sheet from the date the application can be filed. In event, the Balance Sheet as on 31.03.2021 was audited after filing of the application and let us assume that the asset size is reduced to less than Rs.500 Crores, what will be the consequence, whether the Adjudicating Authority who has jurisdiction to proceed with the application, shall not be having any more jurisdiction to proceed with the application is the question which needs to be answered. It is submission of learned counsel for both the parties that jurisdiction to proceed against the Personal Guarantors under Section 95 shall be dependent on entitlement to proceed against the Financial Service Provider i.e. JFIL and in event there is no jur....
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....arantor having been passed under Part-III of the IBC, no Appeal is maintainable under Section 61 of the IBC. It was contended that the Appeal under Section 61 before this Tribunal is maintainable against an order passed under Part-II of the IBC. The said objection was noticed and parties were heard and the objection was rejected and it was held that proceedings against Personal Guarantor are initiated before the NCLT under Section 60 of the IBC, hence, the Appeal under Section 61 is maintainable and the objection that Personal Guarantors are covered by Part-III, no Appeal lies under Section 61 is rejected. In paragraphs 22 and 23, following was held: "22. Learned counsel for the appellant has also relied on the judgment of this Tribunal in 'Anita Goyal' Vs. 'Vistara ITCL (India) Ltd. & Anr.' reported in 2025 SCC OnLine NCLAT 37, where the question was raised regarding the forum of initiating insolvency resolution process against the personal guarantor of the corporate debtor and this Tribunal after considering all relevant provisions of the IBC held that NCLT has jurisdiction to entertain Section 95 application filed by the financial creditor. Conclusions were recorded in ....