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TMI Blog2025 (5) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... ief facts necessary to be noticed for deciding the Appeal are: i. The Principal Borrower - Mica Industries Limited has obtained loan of Rs.10 lakhs from the Appellant on 01.02.2023. The Respondent - Gursev Singh, provided a personal guarantee for repayment of the loan as taken by the Principal Borrower on 08.02.202. ii. The Financial Creditor invoked the personal guarantee on 15.10.2023 and filed an Application CP IB No.422/2024 under Section 95, sub-section (1) of the IBC, which Application has been rejected by the Adjudicating Authority holding that it did not meet the threshold of Rs.1 crore. Aggrieved by which order, this Appeal has been filed. 3. We have heard Shri Mrinal Harshwardhan and Shri Iswar Mohapatra, learned Counsel appearing for the Appellant and Shri Rahul Gupta, learned Counsel appearing for the Respondent. 4. Learned Counsel for the Appellant in support of the Appeal submits that threshold limit for individuals prescribed under Section 78 of the IBC is Rs.1000/-. Section 95 Application is under Part-III of the IBC for which threshold is of Rs.1000/- only. Thus, for initiating personal insolvency against a Personal Guarantor, the debt requirement is of only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Counsel for the parties and have perused the records. 7. A short but very interesting question has arisen for consideration in this Appeal, i.e., what is the threshold for filing an Application under Section 95, sub-section (1) by the Financial Creditor against the Personal Guarantor. Whether the threshold is Rs.1 crore as provided in Section 4 or it is Rs.1000/- as provided in Section 78 of the IBC, is the question to be answered. Section 4, which provides for threshold for filing an Application for insolvency against the CD is Rs.1 crore with effect from 24.03.2020. Section 60 of the IBC provides for 'Adjudicating Authority for corporate person'. Section 60, sub-section (1), (2), (3) and (4) are as follows: "60. Adjudicating Authority for corporate persons. - (1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of a corporate person is located. (2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto Sections 78 and 79 of the IBC, which find place in Part-III of the IBC. Section 78 provides as follows: "78. Application. - This Part shall apply to matters relating to fresh start, insolvency and bankruptcy of individuals and partnership firms where the amount of the default is not less than one thousand rupees: Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one lakh rupees." 10. Section 79 defines the Adjudicating Authority, i.e., Debt Recovery Tribunal in Part-III. Section 79 is as follows: "79. Definitions. - In this Part, unless the context otherwise requires, - (1) "Adjudicating Authority" means the Debt Recovery Tribunal constituted under subsection (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institution Act, 1993 (51 of 1993); ......" 11. Section 179, which deals with territorial jurisdiction, sub-section (1) of which is as follows: "179. Adjudicating Authority for individuals and partnership firms. - (1) Subject to the provisions of section 60, the Adjudicating Authority, in relation to insolvency matters of individuals and firms s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e registered office of the corporate debtor is located. This creates a link between the insolvency resolution or bankruptcy processes of the corporate debtor and the personal guarantor such that the matters relating to the same debt are dealt in the same tribunal. However, no such link is present between the insolvency resolution or liquidation processes of the corporate debtor and the corporate guarantor. It was decided that section 60 may be suitably amended to provide for the same NCLT to deal with the insolvency resolution or liquidation processes of the corporate debtor and its corporate guarantor. For this purpose, the term "corporate guarantor" will also be defined."" 13. This Tribunal noticed the judgment of the Hon'ble Supreme Court in Lalit Kumar Jain, where Hon'ble Supreme Court has taken the view that Parliamentary intent was to treat Personal Guarantors differently from other categories of individuals, which is referred in Part-III, i.e. Section 78 of the IBC. The relevant paragraph of the Hon'ble Supreme Court in Lalit Kumar Jain has been noticed by this tribunal in Anita Goyal's judgment. It is useful to notice paragraphs 31, 32, 33 and 34 of Anita Goyal's judgment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enactments. As of now, Section 243 has not been notified. In the event Section 243 is notified and those two Acts repealed, then, the present notification would not have had the effect of covering pending proceedings against individuals, such as personal guarantors in other forums, and would bring them under the provisions of the Code pertaining to insolvency and bankruptcy of personal guarantors. The impugned notification, as a consequence of the non obstante clause in Section 238, has the result that if any proceeding were to be initiated against personal guarantors it would be under the Code. 33. The observation by the Hon'ble Supreme Court in the last line is relevant which reads "The impugned notification, as a consequence of the non obstante clause in Section 238, has the result that if any proceeding were to be initiated against personal guarantors it would be under the Code". The Hon'ble Supreme Court further held that Parliamentary intent was to treat personal guarantors differently from other categories of individuals. The intimate connection between such individuals and corporate entities to whom they stood guarantee, as well as the possibility of the two separate pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orum (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." 34. The above judgment of the Hon'ble Supreme Court also clearly emphasized that Personal Guarantor of the Corporate Debtor has been treated as a separate species of individuals. Hence, provision regarding Personal Guarantor of the Corporate Debtor have been enforced and when we read Section 60, sub-sections (1) and (2), the conclusion is inescapable that for insolvency resolution process of personal guarantor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without doing violence to the rules of construction. If both the words "introduced" or "moved" are held to refer to the Bill, it must necessarily be held that both those words will also refer to the word "amendment". On the face of it, there can be no question of introducing an amendment. Amendments are moved and then, if accepted by the House, incorporated in the Bill before it is passed. There is further an indication in the Constitution itself that wherever a reference is made to a Bill, the only step envisaged is introduction of the Bill. There is no reference to such a step as a Bill being moved. The articles, of which notice may be taken in this connection, are Articles 109, 114, 117, 198 and 207. In all these articles, whatever prohibition is laid down relates to the introduction of a Bill in the legislature. There is no reference at any stage to a Bill being moved in a House. The language thus used in the Constitution clearly points to the interpretation that, even in the proviso to Article 304, the word "introduced" refers to the Bill, while the word "moved" refers to the amendment." (emphasis in original)" 15. The fact that process of insolvency in Part-III is to appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2023) SCC OnLine NCLAT 321 where also this Tribunal had occasion to consider Section 60, Section 179 and Section 95, sub-section (1). This Tribunal in Mahendra Kumar Agarwal referred to the judgment of Hon'ble Supreme Court in Lalit Kumar Jain and has laid down following in paragraph 74: "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'." 19. This Tribunal in the above case noticed that for Personal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication dated 18.11.2019 has to be treated as last audited Balance Sheet from the date the application can be filed. In event, the Balance Sheet as on 31.03.2021 was audited after filing of the application and let us assume that the asset size is reduced to less than Rs.500 Crores, what will be the consequence, whether the Adjudicating Authority who has jurisdiction to proceed with the application, shall not be having any more jurisdiction to proceed with the application is the question which needs to be answered. It is submission of learned counsel for both the parties that jurisdiction to proceed against the Personal Guarantors under Section 95 shall be dependent on entitlement to proceed against the Financial Service Provider i.e. JFIL and in event there is no jurisdiction to proceed against the Financial Service Provider, there is no jurisdiction to proceed against the Personal Guarantors. We, thus, have to proceed to examine the issue as per above submission of learned counsel for the parties." 22. This Tribunal held ultimately that Application under Section 7 was maintainable, hence, the Application under Section 95 was also maintainable. In paragraphs 33 and 34, following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he IBC, hence, the Appeal under Section 61 is maintainable and the objection that Personal Guarantors are covered by Part-III, no Appeal lies under Section 61 is rejected. In paragraphs 22 and 23, following was held: "22. Learned counsel for the appellant has also relied on the judgment of this Tribunal in 'Anita Goyal' Vs. 'Vistara ITCL (India) Ltd. & Anr.' reported in 2025 SCC OnLine NCLAT 37, where the question was raised regarding the forum of initiating insolvency resolution process against the personal guarantor of the corporate debtor and this Tribunal after considering all relevant provisions of the IBC held that NCLT has jurisdiction to entertain Section 95 application filed by the financial creditor. Conclusions were recorded in paragraph 43, which are as follows : "43. In view of the foregoing discussions, we are not proceeded to accept the submissions of the Appellant that NCLT Delhi has no jurisdiction to entertain Section 95 Application filed by the Financial Creditor against the Personal Guarantor for initiating insolvency resolution process. We do not find any substance in any of the submissions raised by the Appellant. There is no merit in the any of the Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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