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2021 (7) TMI 1429 - HC - Insolvency and BankruptcyInsolvency proceedings against Guarantor - Whether an individual, in his capacity as a guarantor in connection with credit facilities granted by a bank or financial institution to a corporate entity, may be proceeded against by way of insolvency proceedings under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 before an appropriate Debts Recovery Tribunal? HELD THAT:- The statutory source of authority for carrying such application to the Debts Recovery Tribunal is found in Section 95 of the Code of 2016. Section 95 is included in Chapter III of Part III of the Code. Part III of the Code is intituled "Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms". A creditor may apply to the jurisdictional Debts Recovery Tribunal for initiating an insolvency resolution process against appropriate persons under Section 95 of the Code. Section 60 of the Code, which is included in Part II thereof, identifies the adjudicatory authority in relation to insolvency resolution and liquidation for corporate persons. Section 60(1) of the Code mandates that insolvency resolution and liquidation for corporate persons, including corporate debtors and personal guarantors, may be brought before the National Company Law Tribunal having territorial jurisdiction over the places where the registered office of the corporate person is located - However, a “corporate debtor” is defined in Section 3(8) of the Code to mean a corporate person who owes a debt to any person and a "corporate person", in turn, is defined in Section 3(7) of the Code to mean a company, a limited liability partnership firm or any person incorporated with limited liability under any law for the time being in force but not including any financial service provider. Thus, by no stretch of imagination, may a human individual, whether as a guarantor or otherwise, be seen to be a corporate debtor or a corporate person within the definitions ascribed to such expressions in the Code. The petitioner seeks to send the Court on a wild goose chase by seeking to take advantage of the perceived anomaly upon the Code, like the Companies Act, 2013, being notified and implemented in stages. That Section 95(1) of the Code applies to any debtor, other than debtors against whom an insolvency resolution process may be initiated under other specific provisions, is apparent - the construction as suggested by the petitioner would also be impermissible, inter alia, in the light of Section 94 which permits an individual debtor to initiate an insolvency resolution process and the use of the general word ‘debtor’ therein, without it being confined to certain classes of persons or partners of partnership firms. In view of Section 128 of the Contract Act, 1872 the liability of a guarantor is co-extensive with that of the principal-debtor, unless it is otherwise provided by the contract. The petitioner does not claim that there is any agreement or clause present in any agreement that obliges the creditor-bank to exhaust its remedies against the concerned corporate entity before proceeding against the guarantor. The rule as embodied in Section 128 of the Act of 1872 will apply in equal measure to a guarantor who has furnished a guarantee in connection with any credit facilities obtained by a corporate entity. The petition is found to be completely devoid of merit and nothing but a kite-flying exercise to waste time and dodge the inevitable. For all of the petitioner’s efforts, the petitioner will pay costs assessed at Rs.50,000/- (Rupees Fifty Thousand only) to the respondent bank which the respondent bank will be entitled to recover in course of the insolvency resolution process initiated before the appropriate Debts Recovery Tribunal. Petition dismissed.
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