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2022 (2) TMI 1295 - Tri - Insolvency and BankruptcyMaintainability of petition - personal guarantor under Section 60(5) IBC 2016 - applicability of notification dated 15.11.2019 - auction proceedings initiated against the applicant - Whether this petition filed by the personal guarantor under Section 60(5) IBC 2016 is maintainable? - HELD THAT - The subject matter involved in the present petition has not arisen solely or exclusively from the insolvency proceedings initiated against the corporate debtor but in a proceeding under the SARFAESI Act, 2002 between the 1 st respondent and personal guarantor to corporate debtor. The DRT is only the appropriate forum to determine and decide the validity of the auction proceeding initiated against the applicant by the 1 st respondent financial creditor under the SARFAESI Act 2002. Besides in view of the caution mandated by the Hon ble Apex court in Gujarat Urja Vikas Nigam Limited Vs. Amit Gupta supra 2021 (3) TMI 340 - SUPREME COURT patently this Tribunal has no jurisdiction to entertain this petition - it is determined that the applicant personal guarantor herein who is a stranger to the insolvency and bankruptcy proceedings pending between the financial creditor and corporate debtor before this Tribunal cannot invoke section 60(5) (c) IBC 2016 to file this present petition which therefore is neither maintainable nor sustainable before this Tribunal. Whether the notification dated 15.11.2019 mandates that any / all proceeding /s against the personnel guarantor of corporate debtor must be initiated only under the provisions of the IBC 2016? - HELD THAT - The irresistible conclusion is that after the aforesaid notification S.O.4126(E) dated 15.11.2019 only if any insolvency proceeding is to be initiated against the personal guarantor of corporate debtor it must be only under IBC, 2016 not under the provisions of the PTA and PIA Acts and the said notification does not in any manner whatsoever prohibit the financial creditor to proceed against the person al guarantor of corporate debtor by instituting recovery proceedings permissible under any other existing and applicable law. Whether the auction proceedings initiated against the applicant is liable to be quashed? - HELD THAT - The respondent/financial creditor has initiated auction proceeding against the immoveable property of the applicant under the provisions of the SARFAESI Act 2002. The Apex court in V. Ramakrishnan case supra has categorically held that proceedings under the SARFAESI Act are not proceedings under the IBC 2016. Hence there is no bar to continue the SARFAESI proceeding initiated by the respondent against the applicant and the said proceeding need not to be quashed. Application dismissed.
Issues Involved:
1. Maintainability of the petition filed by the personal guarantor under Section 60(5), IBC, 2016. 2. Applicability of the notification dated 15.11.2019 to proceedings against personal guarantors of corporate debtors. 3. Validity of the auction proceedings initiated against the applicant. Detailed Analysis: Issue 1: Maintainability of the Petition under Section 60(5), IBC, 2016 The applicant contended that the petition is maintainable under Section 60(5)(c) of the IBC, 2016. This section grants the National Company Law Tribunal (NCLT) jurisdiction to entertain or dispose of any application or proceeding by or against the corporate debtor or corporate person, including questions of priorities or any question of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. The respondent financial creditor argued that the petition is not maintainable as Section 60(5) is residuary in nature and applicable only to parties involved in the IBC proceedings. The Supreme Court in Gujarat Urja Vikas Nigam Limited vs. Amit Gupta clarified that NCLT's jurisdiction under Section 60(5)(c) cannot be invoked in matters unrelated to the insolvency of the corporate debtor. The Tribunal concluded that the dispute in the present petition did not arise solely from the insolvency proceedings of the corporate debtor but from a proceeding under the SARFAESI Act, 2002. Therefore, the NCLT has no jurisdiction to entertain the petition, making it neither maintainable nor sustainable. Issue 2: Applicability of the Notification Dated 15.11.2019 The applicant argued that the SARFAESI proceedings initiated by the financial creditor were erroneous due to the moratorium imposed under Section 33, IBC, 2016, and the overriding effect of Section 238, IBC, 2016. The notification dated 15.11.2019 mandated that proceedings against personal guarantors of corporate debtors must be initiated under the IBC. The Tribunal noted that Section 33(5) of the IBC, 2016, restricts legal proceedings against the corporate debtor without prior approval but does not extend to personal guarantors. The Supreme Court in Lalit Kumar Jain vs. Union of India held that the notification does not imply that all proceedings against personal guarantors must be under the IBC. The Tribunal emphasized that Section 243 of the IBC, which repeals the Presidency-Town Insolvency Act, 1909, and the Provincial Insolvency Act, 1920, is yet to be notified. Thus, insolvency proceedings under these Acts are still valid. The Tribunal concluded that the notification does not prohibit financial creditors from proceeding against personal guarantors under other laws like the SARFAESI Act, 2002, or the RDB Act, 1993. Therefore, the financial creditor's actions were not barred by the IBC. Issue 3: Validity of the Auction Proceedings The respondent initiated auction proceedings under the SARFAESI Act, 2002, to recover dues from the applicant's immovable property. The Supreme Court in V. Ramakrishnan held that proceedings under the SARFAESI Act are independent of the IBC. Consequently, the Tribunal found no bar to continuing the SARFAESI proceedings initiated by the respondent and determined that the auction proceedings need not be quashed. Conclusion The Tribunal dismissed the application, determining that: 1. The petition under Section 60(5), IBC, 2016, is not maintainable. 2. The notification dated 15.11.2019 does not mandate that all proceedings against personal guarantors must be under the IBC. 3. The auction proceedings under the SARFAESI Act, 2002, are valid and need not be quashed.
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