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2023 (3) TMI 898 - HC - Companies LawRecovery of electricity dues of the Company - personal liability of the Directors of the Defaulter Company/Corporate debtor which went into insolvency - Company under moratorium period (undergoing CIRP) - It was urged that once the Company went into insolvency, the outstanding electricity dues towards the defaulter company being Corporate debtor could not have been recovered from its Directors. Whether the Director of the Company who is claimed to be the personal guarantor in the matter of payment of electricity dues of the Company would be able to sustain the challenge to the demand of dues of electricity from the personal assets of the Directors, in view of the Insolvency Proceedings concluded in relation to the defaulter company namely the Corporate debtor? HELD THAT:- In STATE BANK OF INDIA VERSUS V. RAMAKRISHNAN AND ANR. [2018 (8) TMI 837 - SUPREME COURT], the controversy revolved around Section 14 of the Insolvency and Bankruptcy Code, 2016 which provides for moratorium for the limited period mentioned in the Code. The issue before the Apex Court was as to whether on admission of insolvency petition, the moratorium under Section 14 of the Code would apply to a personal guarantor of a Corporate debtor. While answering the said question, the Apex Court had considered different provisions of the Code and the effect of enforcement of Section 2(e) w.e.f 23.11.2017 by the Amendment Act, 2018. It was noted that under Part II of the Code which deals with insolvency resolution and liquidation for Corporate persons, a financial creditor or a Corporate debtor may make an application to initiate the insolvency resolution process. Once initiated, the adjudicating authority, after admission of such application, shall by order declare a moratorium for the purposes referred to in Section 14 (as per Section 13 of the Code). It was, thus, held therein that the object of the Code is not to allow personal guarantors such as Directors who are in management of the companies to escape from an independent and co-existent liability to pay off the entire outstanding debt. The decision in Sanjeev Shriya vs S.B.I [[2017 (9) TMI 1638 - ALLAHABAD HIGH COURT]] wherein moratorium was applied to enforcement of guarantee against personal guarantor to the debt, has been overruled. Thus, it is clear that approval of a resolution plan does not ipso facto absolve the surety/guarantor of his or her liability, which arises out of an independent contract of guarantee. To what extent, the liability of a guarantor can be pressed into service would depend on the terms of the guarantee/contract, itself - the main contention of the learned counsel for the petitioner to challenge the recovery on the ground that approval of the resolution plan in the insolvency proceeding in relation to the defaulter company namely M/s Trimurti Concast Pvt ltd (Corporate debtor) would ipso facto discharge both the Directors of the defaulter Company, one of whom is the petitioner, is liable to be turned down. As to the issue of applicability of Clause 4.3(f)(v) of the Electricity Supply Code, 2005, the arguments with regard to validity of the same or the said provision being ultra vires to the Electricity Act, 2003, made in rejoinder half-heartedly, cannot be entertained, in as much as, no foundation has been laid in that regard in the writ petition. Thus, it is clarified that the legal issue with regard to the liability of the personal guarantor of the Corporate debtor whose liability is co-extensive with the principal debtor, i.e the Corporate debtor has been answered by us taking into consideration the law laid down by the Apex Court - the challenge to the demand notice for dues of electricity, issued jointly in the name of the Directors of the Corporate debtor, the defaulter company which went into insolvency cannot be sustained on the ground that in view of the acceptance of the resolution plan under Section 31 of the Code, all liabilities of the Directors, who may be the guarantor, stood automatically discharged/extinguished. Petition dismissed.
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