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TMI Blog2024 (6) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... ling Motor Company of Noida, Uttar Pradesh under various documents. One Mr. Tarun Kapoor is the Proprietor of Sterling Motor Company (SMC for short hereinafter), who had executed the aforesaid documents as a Proprietor and had also stood as guarantor for repayment of the finance. Mrs. Pavan Kapoor, Mr. B.L. Passi and Rameshwar Sweets and Namkeens Pvt. Ltd. stood as guarantors. As there was default on part of SMC its account was categorized as NPA on 04.09.2019 and by a notice dated 15.10.2019 the loan was recalled by the petitioner. ii) The Petitioner thereafter initiated arbitration proceedings before Gulnar A. Mistry, Advocate who was appointed as Arbitrator. iii) During the pendency of the arbitration proceedings an application namely C.P. (IB) - 1097(ND)/2020 came to be filed by Volkswagen Finance Pvt. Ltd against SMC Mr. Tarun Kapoor, as a result of which an application came to be filed by Mr. Tarun Kapoor and Mrs. Pavan Kapoor before the Arbitral Tribunal, contending that in view of Sec. 96 of the IB Code, a moratorium had come into effect due to the above proceedings on account of which the Arbitral proceedings were required to be kept in abeyance. The learned Arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of this Application and during the interim moratorium period the following is prohibited. a. Any pending legal action or proceeding in respect of any debt of the personal guarantor shall be deemed to have been stayed; and b. The Creditors of the personal guarantor shall not initiate any legal action or proceedings in respect of any debt. c. The provisions of sub-section (1) shall not apply to such transaction as may be notified by the Central Government in consultation with financial sector regulator." vii) The original respondent No. 4 Shri. B.L. Passi passed away on 12.05.2021 and his legal heirs the present respondents were impleaded in his place as respondents 4A to 4B in pursuance to the order dated 19.07.2021 passed by the arbitrator. viii) Mr. Tarun Kapoor, the original respondent No. 2 filed an application in arbitration proceedings seeking adjournment of the arbitration proceedings, sine die on account of the proceedings against S MC being kept in abeyance by the order dated 11.01.2021, which came to be dismissed by the order dated 16.12.2021 (pg. 69) as a result of which the proceedings continued. ix) On 06.05.2022 the arbitrator passed an order and di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings therefore would be liable to be continued against the guarantors in whose favour there is no moratorium, on account of which the impugned orders passed by the learned Arbitrator cannot be sustained and are liable to be quashed and set aside. 3.3. It is only on a discharge order being passed under Section 138 of IB Code by virtue of the provisions of Section 139 of the same, there is a discharge and not otherwise on account of which the arbitration proceedings are liable to be continued against the present respondents who are the legal heirs of the original respondent No. 4 Shri. B. L. Passi in the arbitration proceedings. 3.4. By relying upon Jagannath Ganeshram Agarwale Vs. Shivnarayan Bhagirath 1940 ILR 387 it is contended that the liability of the surety is co-extensive and not in alternative with the principal debtor. 3.5. Relying upon Mukesh Gupta Vs. SICOM Ltd. 2004 (1) MhL.J. 159 it is also contended that the proceedings can also be instituted against the guarantor treating him as a principal debtor and it is not necessary to sue the principal debtor as the liability of the principal debtor and that of the guarantor is coextensive. 3.6. Reliance is also place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings have rightly been kept in abeyance by the learned Arbitrator. 5. Dr. Saraf, learned Senior Counsel for the petitioner, in rebuttal, by relying upon Deep Industries Ltd./ ONGC (supra) and Bhaven Construction / Sardar Sarovar Narmada Nigam Ltd. (supra), contend that the jurisdiction of this Court to interfere in orders of the Arbitrator, in exercise of its writ jurisdiction is not fully ousted and interference is permissible when the orders in arbitration proceedings indicate that the orders patently lack jurisdiction and considering that the impugned orders stall the arbitral proceedings, which go against the settled position that this should not be so done, a writ would certainly be maintainable. 6. S B P & Co. / Patel Engineering (supra), was a case under Sec. 11 (6) of the A & C Act, in which the hon'ble Apex Court by a majority had held as under : 45. It is seen that some High Courts have proceeded on the basis that any order passed by an Arbitral Tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution. We see no warrant for such an approach. Section 37 makes certain orders of the Arbitral Tribunal appealable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 5 of the Act. In these circumstances, what is important to note is that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us hereinabove so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction. 22. ------. Even otherwise, entering into the general thicket of disputes between the parties does not behave a court exercising jurisdiction under Article 227, where only jurisdictional errors can be corrected.-----. Bhaven Construction / Sardar Sarovar (supra); Suncity Dhoot Colonizers Pvt. Ltd. / Ram Chandra Patidar (supra) and all the other judgments cited by the learned Counsel for the respondents, all reiterate the same principles, that the writ jurisdiction of this Court can only be invoked when there is perversity or patent illegality, which is apparent on the face of it. The hon'ble Apex Court in State Power Corpn. Ltd. v. Emta Coal Ltd., (2020) 17 SCC 93 (supra) itself has clarified what the paten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be made the subject matter of an application under sec. 34 or an appeal under sec. 37 of the A & C Act, 1996, the intention being to get the arbitration proceedings decided as expeditiously as possible with minimum judicial intervention. 7. The basic issue which requires to be considered is whether the impugned orders could be categorised as one, which are so perverse that the only possible conclusion would be that there is patent lack of inherent jurisdiction, in the Arbitrator in passing them, on the face of it, so that the writ jurisdiction of this Court can be invoked. 8. Dr. Saraf learned Senior Counsel for the petitioner is correct in the proposition, that considering a debt, which is unpaid, the creditor, could move the Court, against the principal borrower and the surety/guarantor for recovery of the debt, as the liability of a surety/guarantor, is co-extensive with that of the principal borrower. It is equally a settled position of law, that a creditor could also choose to proceed against the surety/guarantor, alone for recovery of the debt, without suing the principal borrower and in such a case, if a decree/award is passed against the surety/guarantor, then such sure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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. SBI / V. Ramakrishnan (supra), thus categorically distinguished between the moratorium under Sec. 14 vis-a-vis Sec. 96 of the IB Code to hold that the protection of the moratorium under sec. 96 is far greater than that of Section 14, in that pending legal proceedings in respect of the 'debt' and not the debtor are stayed, as such moratorium is in relation to the debt and not the debtor. 9.2. In Dilip B. Jiwrajka v. Union of India, 2023 SCC OnLine SC 1530, while considering the impact of a moratorium under Sec. 14 of Part II vis-a-vis interim moratorium under Sec. 96 of Chapter III of Part II, this is what the hon'ble Apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the 'debt', and not the debtor. Axis Trustee Services Ltd. / Brij Bhushan Singhal (supra), will therefore have to be read in the context of what has been said about Sec. 96 of the IB Code in Dilip B. Jiwrajka v. U OI (supra). 10. Once this is so, then when the NCLT granted a moratorium under Sec. 96 of the IB Code in favour of Mr. Tarun Kapoor who was the principal borrower being the proprietor of SMC and Mrs. Pavan Kapoor, being the guarantor, the same will have to be construed as a moratorium in respect of the entire 'debt'. It is the 'debt', and its entitlement which has been claimed to be put before the learned Arbitrator, for decision, in the arbitration proceedings. The Claim does not make any distinction between a 'debt', vis-a-vis Mr. Tarun Kapoor as a principal debtor, or the other parties thereto as the guarantors or even considering their co-extensive liability. The 'debt', is the debt of SMC/ Tarun Kapoor as principal borrowers as well as of the guarantors. The 'debt', for the purpose of the moratorium, cannot be severed into the 'debt' of the principal borrower or for that matter of one of the guarantors on the one hand, and the debt of the other guaranto ..... 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