TMI Blog2018 (12) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... gment, every sentence of the judgment has to be read in the context of the remaining portion of the judgment, reader shall not fork out a sentence, and spin another story disregarding the ratio decided and the context of that sentence, which is not the spirit of understanding the ratio of a judgment. Moreover as to jurisdiction is concerned, no court will confer jurisdiction upon somebody to whom legislature has not given such jurisdiction, moreover judges declare law, they do not make law. Therefore if the sentence referred by the Applicant Counsel from the judgement of Honourable Supreme Court is read along with the remaining portion of the judgment, it would be clear to understand that the Honourable Supreme Court has not held that the parties can initiate insolvency proceedings against personal guarantors before NCLT under either Presidency Towns Insolvency Act or Provincial Insolvency Act. As I said earlier, in the judgment supra, the Hon'ble Supreme Court has only held that actions against the personal guarantors are not covered by moratorium granted under Section 14 of the Code. In view of the reasons, we have not found any merit in the applications, henceforth these Appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed the only point left to be decided in all these applications regarding maintainability, for the sake of brevity, this Bench is passing this common order covering all the applications moved by the Applicant. 5. Facts in Brief: The Corporate Debtor namely M/s. Surana Power Limited (Principal Borrower) availed loan facility of ₹ 1800 crores from consortium of lenders including the applicant by entering into an agreement dated 24.09.2010, to get that loan, since this Corporate Debtor/Principal Borrower was required to procure an irrevocable and unconditional personal guarantee in favour of the Security Trustee guaranteeing the obligations, these respondents stood as personal guarantors by executing a deed of guarantee on 24.09.2010 on the corporate debtor behalf stating that they would unconditionally and irrevocably pay to the security trustee without demur or protest in the event the principal borrower failed to repay the loan as mentioned in the Common Rupee Term Loan Agreement. Thereafter, the principal borrower from time to time entered into Facility Agreement and other agreements with the Applicant for sanction of other loans agreements. When the corporate de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say that the moment CIRP pending against the Corporate Debtor/Principal Borrower before NCLT, proceedings against personal guarantors shall lie before the respective NCLT only, not anywhere else. 10. As against this stand of the Applicant counsel, the Guarantors Counsel refuted it as not maintainable because the jurisdiction conferred upon NCLT u/s. 60 (2) of the Code to initiate insolvency/bankruptcy proceedings against the guarantors alongside the CIRP pending against the Corporate Debtor/Principal Borrower is not exercisable for the reason that till now Part-Ill of the Code to initiate insolvency/bankruptcy proceeding against individuals/ partnership firms has not been notified. 11. As to the Judgment supra, the counsel has categorically stated that the judgment has nowhere held that NCLT could exercise jurisdiction to initiate Part-III proceedings against personal guarantors despite Part-III of the Code has not been notified, and he says, the Honourable Supreme Court laid bare only as to how various provisions of the Code play when they come into force, nothing more nothing less, besides this, he says, the ratio the Supreme Court held is that Moratorium u/s. 14 will not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uarantors to be invoked under Sub-Section 2, NCLT will take the avatar (incarnation) as DRT by virtue of Sub-Section 4 of Section 60 of the Code. 15. So to get that jurisdiction to NCLT, that avatar to DRT shall be in existence. Today DRT is in existence as before, but DRT in the avatar of Adjudicating Authority as defined in section 79 (1) of Part-III of the Code is not in existence. 16. For this reason only, the jurisdiction to deal with proceedings against personal guarantors has been coined as derivative jurisdiction, because the powers to deal with personal guarantors is to be percolated to NCLT from that of DRT powers, which yet to come to it. 17. Let us contemplate a converse situation, if no CIRP is initiated against principal borrower, in such situation, can NCLT as Adjudicating Authority will have jurisdiction to proceed independently against personal guarantor in the absence of CIRP against the principal borrower, certainly not because personal guarantor being an individual, proceedings lie against him before DRT as Adjudicating Authority. This jurisdiction to proceed against personal guarantors before NCLT is contingent upon CIRP proceeding pending before NCLT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceeding under Part-III of the Code which has not yet come into force. 20. As the judgment supra is concerned, the point decided by the Hon'ble Supreme Court is as to whether moratorium u/s.14 on admission of insolvency proceedings would apply to personal guarantor/corporate debtor. While deciding the said point, the Hon'ble Supreme Court has scouted various provisions of the Code, notifications of various provisions and their applicability to find out as to whether moratorium is applicable to personal guarantors or not. While discussing various aspects of this Code, it has also been held that merely by notification of Section 2 (e) of the Code - application of the provisions of the Code to personal guarantors to corporate debtors and Section 60 (2) cannot be construed as Moratorium u/s. 14 is extendable against the proceedings initiated against personal guarantors pending before other forums. 21. The facts of the judgment supra are that on Section 10 petition filed by the Corporate Debtor for initiation of Corporate Insolvency Resolution Process against itself, when NCLT declared moratorium by admitting the petition, the Promoter of the Corporate Debtor (R2 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither 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. 20. 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 Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solvency Resolution Process in the Statement of Objects of the Amendment Act, 2018. 23. On reading Para-18, it is ascertainable that the argument of the appellant Bank is prohibition under moratorium will not cover actions against personal guarantors, whereas the respondent counsel argument is by virtue of notifying Section 2(e) and Section 60 of the Code, actions against the personal guarantors of the Corporate Debtor are covered under Section 14 of the Code therefore the creditors shall not proceed against the personal guarantors of the Corporate Debtor, once CIRP is initiated against the Principal Borrower/ Corporate Debtor. 24. When it comes to Para-20, in opening line itself, Hon'ble Apex Court says, we are afraid that such arguments have to be turned down on careful reading of the Sections relied upon. 25. In Para-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 P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Applicant is entitled to initiate CIR Process against the guarantors of the Corporate Debtor, In this para, the Hon'ble Supreme Court has explained as to how sub-section 60(2) functions, how sub-section 60(3) functions and how sub-section 60(4) functions. The Applicant Counsel has heavily relied upon a sentence amidst this para i.e., However, the Tribunal is to decide such proceedings only in accordance with Presidency Towns Insolvency Act, 1909 or the Provincial Insolvency Act, 1920 as the case may be , In the following lines to the line aforesaid, again held that DRT has not been empowered to hear the proceedings against individual's u/s 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 23.11.2017 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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