TMI Blog2023 (8) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtors and Personal Guarantors , the National Company Law Tribunal ( Adjudicating Authority ), having territorial jurisdiction , over the place, where the 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). This Tribunal , keeping in mind the respective contentions advanced on either side, and considering the facts and circumstances of the instant case, in a conspectus manner, comes to a resultant conclusion that the Adjudicating Authority / Tribunal , has jurisdiction , to entertain / initiate , the Insolvency Proceedings of the Personal Guarantors , even when no Corporate Insolvency Resolution Process proceedings, is pending , against the Corporate Debtor , and in any event, the Corporate Insolvency Resolution Process proceedings, is pending, and continued to be pending, against the Corporate Debtor . Appeal dismissed. - Company Appeal ( AT ) ( CH ) ( INS. ) No. 8 of 2023 - - - Dated:- 1- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Guarantors as provided under sub-section (1) of Section 60. What sub-section (4) of Section 60 of IBC states is that the NCLT shall be vested with all the powers of DRT as contemplated in part-III of the Code for the purpose of sub-section (2). 19. Ld. Counsel for Personal Guarantor relied on Ebix Singapore Pvt Ltd Vs CoC of Educomp Solutions Ltd Anr. While fully agreeing with the dictum laid down in the above ruling by the Hon ble Supreme Court of India, approving the ruling in Laxmi Pat Surana Vs Union Bank of India 2020 SCC Online SC 1187, Hon ble Supreme Court, held that That importing principles of any other law or statue like the Contract Act into IBC regime would introduce necessary complexity into the working of the IBC and may lead to protracted litigation on considerations that are alien to IBC . Remedies that are specific to the Contract Act cannot be applied, dehors the overriding principles of the IBC . 20. We may state herein that for the purpose of deciding the jurisdiction of this Tribunal in the case on hand, it is not required for us to place any reliance on the provisions of Indian Contract Act nor the parties have placed any reliance on this. We th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cating Authority / Tribunal , dated 21.07.2022 in CP (IB) No. 335 / 95 / HDB / 2020, had failed to take into consideration of the fact that there was no pending Corporate Insolvency Resolution Process or Liquidation Proceedings , against the Principal Borrower . 5. According to the Learned Counsel for the Appellant, the Adjudicating Authority / Tribunal , had failed to correctly interpret Section 60 and 179 of the I B Code, 2016, in the light of the Legislative Intent , behind introducing the said provisions, pertaining to the Personal Guarantors , to Corporate Debtor . 6. According to the Appellant, the Adjudicating Authority / Tribunal , had failed to consider 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, wherein it was held that the Adjudicating Authority , in respect of Personal Guarantors to Corporate Debtor , shall be both the National Company Law Tribunal , and the Debt Recovery Tribunal , in different scenarios, as mentioned therein. 7. The Learned Counsel for the Appellant, comes out with a plea that in case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is only important in that it locates the Tribunal which has territorial jurisdiction in insolvency resolution processes against corporate debtors. So far as personal guarantors are concerned, we have seen that Part III has not been brought into force, and neither has Section 243, which repeals the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920. The net result of this is that so far as individual personal guarantors are concerned, they will continue to be proceeded against under the aforesaid two Insolvency Acts and not under the Code. Indeed, by a Press Release dated 28.08.2017, the Government of India, through the Ministry of Finance, cautioned that Section 243 of the Code, which provides for the repeal of said enactments, has not been notified till date, and further, that the provisions relating to insolvency resolution and bankruptcy for individuals and partnerships as contained in Part III of the Code are yet to be notified. Hence, it was advised that stakeholders who intend to pursue their insolvency cases may approach the appropriate authority/court under the existing enactments, instead of approaching the Debt Recovery Tribunals. 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 23.11.2017 would, when it refers to the application of the Code to a personal guarantor of a corporate debtor, apply only for the limited purpose contained in Section 60(2) and (3), as stated hereinabove. This is what is meant by strengthening the Corporate Insolvency Resolution Process in the Statement of Objects of the Amendment Act, 2018. 11. The Learned Counsel for the Appellant, refers to Rule 10 of the Personal Guarantors Rules, which provides for the manner in which, an Application , under Section 95 of the Code, is required to be filed, which reads as under: 10. Filing of application and documents.― (1) Till such time, rules of procedure for conduct of proceedings under the Code are notified, the applications under rules 6 and 7 shall be filed and dealt with by the Adjudicating Authority in accordance with ― (a) rules 20, 21, 22, 23, 24 and 26 of Part III of the National Company Law Tribunal Rules, 2016 made under section 469 of the Companies Act, 2013 (18 of 2013); or (b) rule 3 of the Debt Recovery Tribunal (Procedure) Rules, 1993 made under section 36 of the Recovery of Debts and Bankruptcy Act, 1993 (51 of 1993) and regulations 3, 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 5 (14) of the Code , enjoins that an Insolvency Resolution Process , begins from the Commencement Date , and ends on 180th day , unless extended, in terms of Section 12 of the I B Code, 2016. 14. The Learned Counsel for the Appellant, contends that in the Order dated 10.08.2021 (vide CP(IB) No.1365/MB-IV/2020) in Insta Capital Pvt. Ltd. v. Ketan Vinod Kumar Shah, it is observed that an Application , for Insolvency of the Personal Guarantors , is not maintainable , unless Insolvency / Liquidation , is ongoing , against the Corporate Debtor . 15. According to the Appellant, in Altico Capital India Limited v Rajesh Patel in IA No. 1062 of 2021 in CP (IB) No. 293 of 2020) , the Adjudicating Authority / Tribunal , had opined that preferring of Applications , seeking Insolvency of Personal Guarantors , without the Corporate Debtor , undergoing Insolvency / Liquidation , would be tantamount to vesting the Adjudicating Authority / Tribunal , with the jurisdiction of Debt Recovery Tribunal , and the same view, was taken by the Hon ble Madras High Court (vide C.R.P. (PD) No.1289 of 2021), paragraph 22. 16. The Learned Counsel for the Appellant, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate debtor. For example, if X is an individual going through an IRP in a DRT and X has given a personal guarantee for a debt owed by company Y , then if CIRP is initiated against Y in an NCLT it would have the effect of transferring the proceedings going on against X in the DRT to the NCLT. 19. The Learned Counsel for the Appellant, refers to the Order of the Hon ble Madras High Court, dated 28.07.2021, (vide C.R.P.(PD) No.1289 of 2021), in Rohit Nath v. KEB Hana Bank Ltd., reported in (2021) SCC Online Mad 2734, wherein, at paragraph 23, it is observed as under : 23. The text of Section 60(2) discloses that Section 60 of the Code would apply to an individual only if there is a corporate insolvency resolution process pertaining to the corporate entity which is the principal debtor, that has been filed or commenced. In other words, in case of company A being the principal debtor and an individual P the guarantor promising repayment of the credit facilities obtained by A , if a corporate insolvency resolution process is initiated under the provisions of the Code pertaining to company A , the insolvency resolution process pertaining to guarantor P would per fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requirement of the principles of natural justice, it would be in the fitness of things and in furtherance of the principles of natural justice that the parties are also heard before the decision is taken by the adjudicating authority one way or the other under section (1) of section 100. 18. In such circumstances, we do not find any good ground to interfere with the impugned orders save and except that the resolution professional should submit the report within a definite time period. This is because under sub-section (1) of section 96 the interim moratorium automatically commences from the date of the application and continues till the date of admission of such application (or rejection as the case may be). The legislative intent which is discernible is that such interim moratorium should be for a limited duration. Therefore, the resolution professional should expedite preparation and submission of report but at the same time complying with the requirements of section 99 of IBC. We may note that in this case the resolution professional has already been appointed. 22. The Learned Counsel for the Appellant, refers to the Order , dated 28.10.2021 of the Hon ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 Guarantor should be filed before the same NCLT. This was to avoid two different NCLT to take up CIRP of Corporate Guarantor. Section 60(2) is applicable only when CIRP or Liquidation Proceeding of a Corporate Debtor is pending, when CIRP or Liquidation Proceeding are not pending with regard to the Corporate Debtor there is no applicability of Section 60(2). 9. Section 60(2) begins with expression Without prejudice to sub-section (1) thus provision of Section 60(2) are without prejudice to Section 60(1) and are supplemental to sub-section (1) of Section 60. 10. Sub-Section 1 of Section 60 provides that Adjudicating Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IRP has culminated by way of approval of Resolution Process, by approval of Resolution Plan, is untenable. Once the Corporate Debtor was admitted into CIRP and Resolution Plan is approved, yet the Tribunal has the territorial jurisdiction to hear any applications filed by the Monitoring Committee and in the instant case, Interim Applications with regard to implementation of Resolution Plan are pending before the Tribunal and therefore this Tribunal is vested with the jurisdiction to entertain the Petition related to Personal guarantees of Corporate Debtor. 15. The Counsel for the Financial Creditor has relied upon the Master Restructuring Agreement dated 30.03.2015 and the Deed of Guarantee dated 30.03.2015, at clause 23 which expressly captures that the Guarantee is in the nature of continuing guarantee and that the Guarantee shall be continuing and shall be valid and in full force and effect till the final settlement deed. 16. The Petitioner has annexed the Balance confirmed, signed by the personal guarantor as on 31.03.2016. The petitioner invoked the guarantees and issued demand notice dated 17.03.2018. Further the notice under Form B was issued on 11.08.2021 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution professional is required to give reasons in support of its recommendation. The Adjudicating Authority is the body, which takes the final decision on the recommendation submitted by the resolution professional. The Adjudicating Authority is not bound by the recommendation made by the resolution professional. There is no element of adjudication on the part of the resolution professional. Therefore, the contention raised by the petitioner that the impugned provisions are arbitrary as no person can be allowed to be a judge in his own case is misconceived. The Supreme Court in GUJURAT URJA VIKAS NIGAM LTD. VS AMIT GUPTA (2021) 7 SCC 209 has negative the contention of the petitioner and has held that the role of Adjudicating Authority is that of a rubber stamp in the context of Section 95, 97, 99 and 100 of the Code. It has further been held by the Supreme Court that Section 95, 97, 99 and 100 of the Code do not suffer from any illegality or any unconstitutionality. As per the procedure prescribed under Section 95 to 100 of the Code, the role of resolution professional is limited to make the appropriate recommendation to the Adjudicating Authority and the final decision of the admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of U.P. and Ors., (2012) 11 SCC 511, this Court has held that in view of the provisions of Section 128 of the Contract Act, the liability of the guarantor/surety is co-extensive with that of the debtor. The only exception to the nature of the liability of the guarantor is provided in the Section itself, which is only if it stated explicitly to be otherwise in the Contract. In the case of Ram Kishun and Ors. v. State of U.P. and Ors., (2012) 11 SCC 511, this Court has also stated that it is the prerogative of the Creditor alone whether he would move against the principal debtor first or the surety, to realize the loan amount. This Court observed: Therefore, the creditor has a right to obtain a decree against the surety and the principal debtor. The surety has no right to restrain execution of the decree against him until the creditor has exhausted his remedy against the principal debtor for the reason that it is the business of the surety/guarantor to see whether the principal debtor has paid or not. The surety does not have a right to dictate terms to the creditor as to how he should make the recovery and pursue his remedies against the principal debtor at his instance. Thus, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth in no particular Order'. 29. The Learned Counsel for the Appellant, relies on the decision of the Hon ble High Court of Delhi in Axis Trustee Services Limited v. Brij Bhushan Singal Anr., reported in (2021) SCC OnLine Del. 4501, wherein, at paragraphs 16 to 24, it is observed as under: 16. This court instead of passing directions in terms of the above provision of Order 37 CPC erroneously and inadvertently by error granted time to the defendant to file written statement. Clearly, the last sentence in the order, namely, Defendant No. 1 may file written statement within 30 days from today. Reapplication be filed within 30 days thereafter. has been added inadvertently by omission. 17. The question is: Can the court correct the said inadvertent error? In this context reference may be had to Section 152 CPC which reads as follows:- 152. Amendment of judgments, decrees or orders.- Clerical or arithmetical mistakes in judgments, decrees or orders or errors arising therein from any accidental slip or omission may at any time be corrected by the court either of its own motion or on the application of any of the parties. 18. In this context reference m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the only limitation that the amendment can be made without injustice or on terms which preclude injustice. Lindley, L.J. observed that if the order of the court, though drawn up, did not express the order as intended to be made then there is no such magic in passing and entering an order as to deprive the court of jurisdiction to make its own records true, and if an order as passed and entered does not express the real order of the court, it would, as it appears to me, be shocking to say that the party aggrieved cannot come here to have the record set right, but must go to the House of Lords by way of appeal . 19. Hence, Section 152 CPC covers errors arising out of accidental slip or omission which may be corrected by the court on its own motion or on an application by any of the parties. In my opinion, this is a fit case for this court to exercise powers under Section 152 CPC to correct the inadvertent error noted above. 20. I may now deal with one of the pleas raised by the learned counsel for the defendant, namely, the delay on the part of the plaintiff in filing the present application. It has been pointed out that this court had passed the said order on 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Pritpal Singh Babbar, reported in (2022) SCC OnLine P H 1672, wherein, at paragraphs 72 to 87, it is observed as under: 72. Consequently, the two questions now before this court are:- (1) Whether in such circumstances the complaint under Section 138 of the Act of 1881 would also fall within the ambit of the phrases all the debts and any legal actions or proceedings pending in respect of any debt as occur in clauses (a) and (b)(i) of sub-section (1) respectively of Section 96, or would the aforesaid expressions be limited to any debt as is concerned or linked in any manner to the corporate debtor for whom the petitioner stands as a personal guarantor, with the respondent herein not being in any manner concerned with the debt of either the corporate debtor or the personal guarantee furnished by the petitioner in respect of the corporate debtor; (2) If the answer to the aforesaid question is in the affirmative, whether proceedings under Section 138 of the Act would be deemed to have been stayed in terms of Section 96 of the Code in view of the fact that the complaint against the petitioner was filed 8 to 9 years prior to the petitioners' application under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such guarantors to escape from an independent and co-extensive liability to pay off the 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. 77. Further, the judgment in Lalit Kumar Jains' case (supra) may also be again referred to wherein, while upholding the distinction created between other individuals and personal guarantors to corporate debtors vide sub-section (2) of Section 60 of the Code (as regards the forum before which a personal guarantor would be required to apply under Section 94), it was thereafter held in paragraph 100 (Law Finder edition = para 113 SCC edition) as follows:- 100. It is clear from the above analysis that Parliamentary intent was to treat personal guarantors differently from other categories of individua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Part II of the Code and not in Part III thereof, is to be made under Section 94(1) falling within Part III and with the said application to be made before the NCLT, in terms of Section 60(1) which falls under Part II of the Code. 81. Now in the aforesaid background, if one is to consider Mr. Jaggas' argument that the petitioner having sought his own insolvency under Section 94, all his debts would necessarily have to be considered by the Tribunal, that would seem to be in consonance with what has been observed in paragraph 100 of Lalit Kumar Jains' case (reproduced earlier also, supra), to the effect that:- 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 ) 82. Hence, though in the opinion of this court otherwise a proceeding under Section 138 of the Act, qua a debt as is wholly inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; case (as have been pointed to by Mr. Mehta, learned counsel for the respondent), the dismissal would seem to be on account of the fact that the proceedings under Section 138 against the Directors of the companies as were corporate debtors in those cases, were firstly held to be independent of the proceedings under the Code against the corporate debtor itself and further, there is no interim moratorium referred to in Section 14, with the moratorium mentioned in that provision, being one as has to be declared by the Adjudicating Authority; and consequently the Supreme Court held that such declaration having come at a stage far after the proceedings were initiated under Section 138 of the Act, the moratorium would not apply (obviously also because the Directors were treated different to the corporate debtor itself); which is a wholly different situation to that as is postulated in Section 96, wherein it is an interim moratorium that comes into effect, by which all proceedings qua any debt of the individual/partnership firm etc. would be deemed to have been stayed. 87. Consequently, even though the respondent herein may suffer longer delays due to the stay that would be deemed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 95(1). We, thus, are of the view that no grounds have been made out by the Appellant to hold that Adjudicating Authority by the impugned order acted beyond the jurisdiction or committed error in admitting application under Section 95(1) of the Code. There is no merit in this Appeal. 33. The Learned Counsel for the Appellant, adverts to the Order , dated 11.07.2022 of the Hon ble Supreme Court of India, in Writ Petition (Civil) No. 385 of 2022, etc. Batch, in Vikas Bhawanishankar Sharma, through its Authorized Representative Satish Kumar Tiwari v. Union of India, through its Secretary Ors., wherein, it is observed as under: It is submitted that the issues involved in these writ petitions are similar and akin to those involved in other petitions pending in this Court questioning the validity of Sections 95(1), 96(1), 97(5), 99(1), 99(2), 99(4), 99(5), 99(6) and 100 of the Insolvency and Bankruptcy Code, 2016, wherein notices have been issued with interim orders. Issue notice, returnable in six weeks. Tag with W.P (C) No. 307 of 2022. In the meanwhile, petitioner(s) shall not transfer, alienate, encumber or dispose of any of their assets or leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CP(IB) No.108/9/HDB/2020: Raghavender Yadagirkar vs. Gati Infrastructure Bhamsey Power Pvt. Ltd. (under Section 9 of the IBC) 03.02.2020 Dismissed on 09.07.2021 for non-prosecution with liberty to revive. 3 NCLT Application in the present case: CP (IB) No.335/95/HDB/2020 06.08.2020 Admitted on 21.07.2022. 4 CP (IB) No.203/7/HDB/2022 State Bank of India vs. Gati Infrastructure Bhamsey Power Pvt. Ltd. (under Section 7 of the IBC) 21.06.2022 Pending as on date. 38. The Learned Counsel for the 1st Respondent, projects an argument that what is required is only initiation of Insolvency Proceedings , by filing an Application , under Section 7 or 9 of the I B Code, 2016, and not an admission of such Proceedings . Also, it is pointed out on behalf of the 1st Respondent a Proceeding is pending, from the date, it is instituted, till the date, it is Disposed of . 39. The Learned Counsel for the 1st Respondent, forcefully comes out with a stance, that the Validity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Proceedings , before the Adjudicating Authority , in the present case, to the Debt Recovery Tribunal . As a matter of fact, the Transfer Petition was Dismissed as Withdrawn , by an Order , dated 21.01.2022, passed by the Hon ble Supreme Court of India, and in reality, the filing of the Transfer Petition , was not disclosed by the Appellant . 45. The Learned Counsel for the 1st Respondent, comes out with a plea that the 1st Respondent / Financial Creditor s remedies, against the Appellant , are independent and absolute remedies in Law , and are not and cannot be dependent on whether, any remedy is exhausted against the Corporate Debtor . 46. The Learned Counsel for the 1st Respondent points out that in the decision of the Hon ble Madras High Court in Rohit Nath v. KEB Hana Bank Limited (2021) SCC OnLine Mad. 2734, the issue was whether Insolvency Proceedings , against a Personal Guarantor , as initiated by the Creditor , before the Debt Recovery Tribunal , can be dismissed, and in this regard, it was held that the Liability of the Personal Guarantor and Corporate Debtor , are co-extensive and the Guarantor , cannot be permitted to escape its liability s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon. We do not find any substance in this contention. Though the objection was raised in the written statement, the respondents did not press the same at the trial, and the question was never argued before the trial Judge. The learned Judges before whom this contention was raised on appeal declined to entertain it, as it was not pressed in the trial court, and there are no grounds for permitting the appellant to raise it in this appeal. Even otherwise, we are of opinion that this contention must, on the allegations in the statement, assuming them to be true, fail on the merits. Excluding the names of the 13 persons who are stated to be not members and the two who are stated to have signed twice, the number of members who had given consent to the institution of the application was 65. The number of members of the Company is stated to be 603. If, therefore, 65 members consented to the application in writing, that would be sufficient to satisfy the condition laid down in section 153-C, subclause (3)(a)(i). But it is argued that as 13 of the members who had consented to the filing of the application bad, subsequent to its presentation, withdrawn their consent, it thereafter ceased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0(2) are without prejudice to Section 60(1) and are supplemental to sub-section (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 subsection (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 main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciate 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 territorial jurisdiction over the place where the registered office of the corporate person is located. (2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or bankruptcy of a personal guarantor of such corporate debtor shall be filed before such National Company Law Tribunal. (3) An insolvency resolution process or bankruptcy proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rests, 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 sub-section (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 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. 27. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the 2nd Respondent / Resolution Professional , among other things, it is mentioned that the Personal Guarantor , had failed to Repay the Debt Amount of the Financial Creditor , and because of the said Default , the Financial Creditor , had filed a Petition , before the Adjudicating Authority / Tribunal , under Section 95 (1) of the I B Code, 2016, demanding a Sum of Rs.1,76,75,60,935/- as on 15.01.2020. 56. It comes to be known that a Resolution Professional , was appointed by the Adjudicating Authority , on 08.07.2021, and a Report , was directed to be filed within a month. The Resolution Professional , had submitted his Report , recommending the Admission of an Application . Also that the Insolvency Petition , was admitted on 21.07.2022, wherein a Resolution Professional , was appointed and a direction was issued, to conduct the Process , as per the Code . 57. The last date for submission of Claims, as per Section 102 of the I B Code, 2016, was 21.08.2022, and that the Resolution Professional was required, to receive the Repayment Plan , from the Debtor , and submit the same along with his Report , to the Adjudicating Authority / T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al , the 1st Respondent / Financial Creditor / Petitioner , had filed CP (IB) No. 335 / 95 / HDB / 2020 (under Section 95 (1) of the I B Code, 2016 read with Rule 7 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, wherein, among other things, it is mentioned as under: PFS sanctioned financial assistance of Rs.125,00,00,000 of which Rs.116,07,13,161 was disbursed for the project. However, due to failure of the Corporate Debtor in achieving financial closure of cost overrun and failure in equity infusion, the project got stalled. Moreover, the Corporate Debtor was classified as Non Performing Asset (NPA) on 31.03.2018 by PFS. Thereafter a recall notice dated 11.02.2019 was issued by IFCI (Lead Lender of the Consortium), on behalf of the Lenders to GIBPPL, wherein a sum of Rs.150,08,42,949/-, due as on 15.01.2019 was demanded on behalf of PFS. Further, on behalf of the Lenders IFCI issued two Letters dated 08.03.2019 invoking Personal Guarantee against Mr. Mahendra Kumar Agarwal and Corporate Guarantee against TCI Finance Ltd. respectively, demanding a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Adjudicating Authority , the 1st Respondent / Financial Creditor , inter alia, had averred that the Period of Limitation , was extended by the Hon ble Supreme Court, through its Order dated 23.03.2020, and hence the main Company Petition , filed by the 1st Respondent / Financial Creditor , is well within the Three Years Limitation Period , from 15.05.2017. 68. Also, according to the 1st Respondent / Financial Creditor, no Dispute , exists on the Debt due, and the Personal Guarantor s Liability , to repay the said Debt , was admitted and absolute and the Liability of the Personal Guarantor , has no relation to the Liability of GATI Infra , and hence the Personal Guarantor , had failed to put forth any valid defence / objection , to the main Petition. 69. Be it noted, that on the Date , when the Application , was filed before the Adjudicating Authority / Tribunal , since Corporate Insolvency Resolution Process proceedings, were pending in the Tribunal , against the Corporate Debtor , as per Section 60 (2) of the I B Code, 2016, as well, the 1st Respondent / Financial Creditor / Petitioner , was bound to initiate Insolvency Proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Company Law Tribunal , Hyderabad, Telangana, to the Debt Recovery Tribunal , Delhi, the said Transfer Petition , was Dismissed by the Hon ble Supreme Court as Withdrawn , through an Order , dated 21.01.2022. 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 sight off. In reality, Section 60 of the Code, provides for only a Single Fora , in respect of an adjudication of Insolvency Proceedings , against both the Corporate Debtor and the Personal Guarantor of the Corporate Debtor , Viz. Adjudicating Authority / Tribunal . 75. In the present case, it is brought to the notice of this Tribunal , on Record that the Corporate Insolvency Resolution Process proceedings, against the Corporate Debtor , were pending, on the Date , when the Petition , was filed before the Adjudicating Authority / Tribunal , by the 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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. 121. In Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta15 (the Essar Steel case ) this court refused to interfere with proceedings initiated to enforce personal guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d owing to any default on the part of the supplier of goods i.e. the Company in liquidation. The liability is absolute and unconditional. The fact that the Company in liquidation i.e. the principal debtor has gone into liquidation also would not have any effect on the liability of the Bank i.e. the guarantor. Under Section 128 of the Contract Act, 1872, the liability of the surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract. A surety is no doubt discharged under Section 134 of the Indian Contract Act, 1872 by any contract between the creditor and the principal debtor by which the principal debtor is released or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. But a discharge which the principal debtor may secure by operation of law in bankruptcy (or in liquidation proceedings in the case of a company) does not absolve the surety of his liability (see Jagannath Ganeshram Agarwale v. Shivnarayan Bhagirath [AIR 1940 Bom 247; see also Fitzgeorge In re [(1905) 1 KB 462] ). 123. This legal position was noticed and approved later in Industrial Finance Corpn. of India L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 6. In our opinion, the principle of the aforesaid decision of this Court is equally applicable in the present case. The right of the appellant to recover money from Respondents 1, 2 and 3 who stood guarantors arises out of the terms of the deeds of guarantee which are not in any way superseded or brought to a naught merely because the appellant may not have been able to recover money from the principal borrower. It may here be added that even as a result of the Nationalisation Act the liability of the principal borrower does not come to an end. It is only the mode of recovery which is referred to in the said Act. 124. In Kaupthing Singer and Friedlander Ltd.34 the UK Supreme Court reviewed a large number of previous authorities on the concept of double proof, i.e. recovery from guarantors in the context of insolvency proceedings. The court held that: (AC p. 814, para 11) 11. The function of the rule is not to prevent a double proof of the same debt against two separate estates (that is what insolvency practitioners call d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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