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2020 (12) TMI 644 - HC - Insolvency and Bankruptcy


Issues:
Challenge to proceedings of the 2nd respondent under Article 226 of the Constitution of India regarding sale of properties offered as guarantee by personal guarantors. Interpretation of Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) regarding applicability to personal guarantors. Validity of e-Auction sale notice under Rule 8(6) of Security Interest (Enforcement) Rules, 2002. Alternative remedy available under Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

The Writ Petition challenged the 2nd respondent's actions under Article 226 of the Constitution of India concerning the sale of properties offered as guarantee by personal guarantors. The petitioners, who provided personal guarantees for a loan, contended that the sale should be halted due to ongoing insolvency proceedings. The respondents argued that Section 14 of the IBC, providing protection, does not extend to personal guarantors, citing a Supreme Court ruling. They also highlighted the e-Auction sale notice issued by the bank under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002.

The respondents asserted that the safeguard under Section 14 of the IBC does not cover personal guarantors, as per a Supreme Court decision. They emphasized that the petitioners must seek recourse under Section 17(1) of the SARFAESI Act through the Debts Recovery Tribunal to challenge the actions taken. The Court noted the availability of an alternative remedy under the SARFAESI Act and declined to entertain the Writ Petition to scrutinize the SARFAESI Act proceedings.

During the hearing, the petitioners offered to deposit a specified amount within ten days to demonstrate their good faith. The Court, considering both parties' arguments, disposed of the Writ Petition. It granted the petitioners the liberty to approach the Debts Recovery Tribunal within two weeks to challenge the actions under the SARFAESI Act, subject to depositing the specified amount. The Court allowed the proposed e-Auction to proceed but delayed finalization for three weeks. Failure to comply would allow the respondents to proceed further in accordance with the law.

 

 

 

 

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