TMI Blog2018 (10) TMI 1838X X X X Extracts X X X X X X X X Extracts X X X X ..... to to these cases to say that these cases shall also be dismissed in limine on the same point. Petition dismissed. - C. P. Nos. 713, 936, 1031 and 1032/IB/CB/2018. - - - Dated:- 30-10-2018 - B. S. V. Prakash Kumar (Judicial Member) And S. Vijayaraghavan (Technical Member) For the Petitioner : Ms. G. Anitha , Ms. V. Gokulam for M/s. India Law LLP For the Respondent in C.P. No. 713 of 2018 : G. R. Ravichandran and S. Raghupathi For the Respondent in C. P. No. 1032 of 2018 : Aashish Jain Lunia ORDER B. S. V. PRAKASH KUMAR (JUDICIAL MEMBER). - 1. These are separate and independent company petitions, the petitioner namely State Bank of India filed under section 60(2) of the Insolvency and Bankruptcy Code, 2016 (in short the Code ) against each of the personal guarantors namely Mr. Vijaraj Surana (C. P. No. 713 of 2018), Mr. Dinesh Chand Surana (C. P. No. 936 of 2018), Mr. Gowthamraj Surana (C. P. No. 1031 of 2018) and Mr. Shantilal Surana (C. P. No. 1032 of 2018), who provided guarantee for the loan availed by the corporate debtor/principal borrower from the petitioner, for initiation of insolvency resolution process against these personal guaran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince this point has already decided holding that the National Company Law Tribunal, as of now, is bereft of jurisdiction to try the cases against the guarantors, to avoid repetition of discussion, we have lifted the entire discussion to this case to say that this Bench is bereft of jurisdiction to decide these cases. The only difference is, in L and T cases, it moved miscellaneous applications in the company petition filed against the corporate debtor, here the SBI moved separate and independent company petitions. Nevertheless this point of filing independent petitions will not make any difference to the legal point of want of jurisdiction to deal with these cases ; therefore we place that discussion to apply it in toto to these cases to say that these cases shall also be dismissed in limine on the same point. The discussion is as follows (page 370 of 220 Comp Cas) : In support of these applications, the applicant counsel has set up an argument that since section 60(2) of the Code has been notified on December 1, 2016 conferring power upon the National Company Law Tribunal to proceed against personal guarantors as well, this Bench shall invoke the jurisdiction under that sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould it be said that this Bench (NCLT), looking at the territorial and the derivative/contingent jurisdiction vested with the National Company Law Tribunal under section 60(4) of the Code to initiate insolvency/ bankruptcy proceedings against personal guarantors (individuals), arrogates subject-matter jurisdiction having regard to proceedings against individuals (in this case personal guarantors) supposed to be conferred upon the Debts Recovery Tribunal and then to be vested in the National Company Law Tribunal on the footing that CIRP against the corporate debtor/principal borrower pending before this National Company Law Tribunal ? To know as to whether the National Company Law Tribunal presently has jurisdiction to deal with proceedings against personal guarantor or not, it is crucial to know what provisions of this Code are in force as on date and whether, with the help of those provisions, this Bench can entertain these applications against the personal guarantors. If we go by order, it is true that territorial as well as derivative juris diction to deal with personal guarantors proceedings has come to the National Company Law Tribunal on December 1, 2016 itself. As to P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 60(4) of the Code is not only derivative but also contingent in nature. Therefore any proceeding against the personal guarantor in furtherance of the CIRP pending against the principal borrower before the National Company Law Tribunal will be void ab initio so long as the jurisdiction in built in Part III is not conferred upon Debts Recovery Tribunal. It is syllogistic because this contingent jurisdiction will travel to the National Company Law Tribunal only upon happening of two events, one, when Part III has been notified and two when CIRP/liquidation proceeding pending against the principal borrower/corporate debtor before the National Company Law Tribunal. It makes no matter as to whether or not section 60(2), (3) and (4) have been notified. As of now since operation of law in respect insolvency/bankruptcy proceeding against individuals and partnership firms has not come into force, and the Debts Recovery Tribunal has not yet been conferred as adjudicating authority to deal with Part III of the Code, the National Company Law Tribunal cannot act as the Debts Recovery Tribunal regarding proceedings against the personal guarantors disregarding the jurisdiction conferred upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate debtor for initiation of the corporate insolvency resolution process against itself, when the National Company Law Tribunal declared a moratorium by admitting the petition, the promoter of the corporate debtor (respondent No. 2 in the case supra) filed an interim application before the National Company Law Tribunal saying that since 14 of the Code would apply to the personal guarantor (respondent No. 2 supra) as well, he sought stay of the SARFAESI proceedings already initiated against the corporate debtor. On such application, the National Company Law Tribunal passed an order stating that if a resolution plan is approved under section 31 of the Code, it would be binding on the personal guarantor as well, section 14 would apply in favour of the personal guarantor as well, on which when an appeal was filed before the hon'ble National Company Law Appellate Tribunal, it held that moratorium would apply to the personal guarantor on the reasoning that since the personal guarantor can also be proceeded against, and forms part of the resolution plan which is binding on him, therefore the personal guarantor is very much part of the CIRP against the corporate debtor. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approach the appropriate authority/court under the existing enactments, instead of approaching the Debts Recovery Tribunal. It is for this reason that sub-section (2) of section 60 speaks of an application relating to the bankruptcy of a personal guarantor of a corporate debtor and states that any such bankruptcy proceedings shall be filed only before the National Company Law Tribunal. The argument of the learned counsel on behalf of the respondents that bankruptcy would include SARFAESI proceedings must be turned down as bankruptcy has reference only to the two Insolvency Acts referred to above. Thus, SARFAESI proceedings against the guarantor can continue under the SARFAESI Act. Similarly, sub-section (3) speaks of a bankruptcy proceeding of a personal guarantor of the corporate debtor pending in any court or Tribunal, which shall stand transferred to the Adjudicating Authority dealing with the insolvency resolution process or 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. The scheme of section 60(2) and (3) is thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn on careful reading of the sections relied upon'. In paragraph 19 of the judgment, it has been sounded that sub-section (1) of section 60 deals with territorial jurisdiction in respect to actions against the corporate debtors, as to personal guarantors are concerned, it has been held that Part III has not been brought into force and the section repealing (section 243) the Presidency-Towns Insolvency Act and the Provincial Insolvency Act have not yet been brought into force, the net result is as to individual personal guarantors are concerned, they continue to be proceeded against the guarantors under the aforesaid two Insolvency Acts and not under the Code. It has also referred that the Government has given a clarification on August 28, 2017 clarifying that section 243 of the Code repealing the aforesaid two Insolvency Acts have not been notified till date. That apart, since Part III itself is not notified till date, the hon'ble Supreme Court reiterated that the Government of India has advised that the stakeholders intending to pursue their Insolvency cases against the personal guarantors may approach the appropriate authority/court under the existing enactments, inste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar the proceedings against individuals under section 179 of the Code as the said section has not yet been brought into force. Likewise, it has also been said that an amendment to Recovery of Debt Act under section 249 of the Code has also not been brought into force. After explaining all these, the honourable Supreme Court clarified that insertion of section 2(e) of the Code was brought into force on November 23, 2017 for the limited purpose contained in section 60(2) and section 60(3) as stated above. The only point this judgment decided is, whether action against the guarantor of the corporate debtor is covered under the prohibition provided under section 14 of the Code or not. It has nowhere held that creditor can initiate CIR process against the guarantors on the ground that CIR process pending against the corporate debtor. As to the insolvency proceeding either under the Presidency-Towns Insolvency Act or under the Provincial Insolvency Act, the jurisdiction is conferred upon a civil court and the same is still in force, in case this Bench initiates insolvency proceedings under any of the insolvency Acts aforementioned, it will become nothing but usurpation into the jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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