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2022 (8) TMI 478 - HC - Insolvency and BankruptcyCIRP - Recovery proceedings initiated by the bank under SARFAESI Act - petitioner stood as a guarantor to a loan facility - resolution plan qua the borrower was approved under Section 31 of the under the Insolvency and Bankruptcy Code, 2016 - Parallel proceedings or not - SARFAESI action has been initiated with the sole intent to recover amounts in excess of the resolution plan - vires of approval order of the NCLT or not - HELD THAT - The law relating to maintainability of a writ petition in matters relating to SARFAESI Act is no longer res integra. The Supreme Court in Phoenix ARC Pvt. Ltd. v. Vishwa Bharti Vidya Mandir and Ors. 2022 (1) TMI 503 - SUPREME COURT , has held that where proceedings are initiated under the SARFAESI Act, and the borrower is aggrieved by any of the actions of the bank for which the borrower has remedy under the SARFAESI Act, no writ petition should be entertained. Whether the proceedings are in derogation of the Approval Order of the NCLT - availability of other remedy available - HELD THAT - The issue is settled by Supreme Court in Lalit Kumar Jain v. Union of India 2021 (5) TMI 743 - SUPREME COURT , where the Supreme Court has, in very clear terms, held that discharge of the corporate debtor from a debt owed by it to its creditors, by way of an involuntary process such as insolvency proceedings, does not absolve the guarantor of its liability since it arises out of an independent contract. Thus, the passing of a resolution plan does not ipso facto discharge the personal guarantor. Non-implementation of the resolution plan - HELD THAT - The aggrieved party is actually Respondent No. 1, who has not been paid in terms of the resolution plan approved by NCLT. As pointed out by the counsel for Respondent No. 1, there has been a default on the part of the resolution applicant in payment of instalments, and as per the counter affidavit, 15 instalments amounting to Rs. 4,53,60,000/- remain pending. It is therefore for Respondent No. 1 to now take action for recovery of its dues from the resolution applicant, as it may deem fit, utilizing any remedy available to it under law. Respondent No. 1 certainly has the right to proceed against the collateral securities for recovery of its dues, which are independent of the resolution plan approved by the NCLT. If the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected, may make an application to the Adjudicating Authority for an order for liquidation. Where a resolution applicant succeeds as a corporate debtor, but fails to comply with its assurance in terms of the resolution plan, then subsequent step to be taken has been specified in Section 33(3) of the IBC - Petitioner s grievance regarding non-implementation of the resolution plan, too, cannot be a ground for this Court to entertain the instant petition. There are no merits in the petition - petition dismissed.
Issues Involved:
1. Respondent No. 2's failure to adhere to the payment timelines under the resolution plan. 2. Proceedings initiated by Respondent No. 1 under Section 13(4) of the SARFAESI Act. 3. Institution of proceedings against the Petitioner for possession of the dwelling unit and appointment of a receiver under Section 14 of the SARFAESI Act. Issue-wise Detailed Analysis: 1. Respondent No. 2's failure to adhere to the payment timelines under the resolution plan: The Petitioner contended that Respondent No. 2 defaulted on the payment schedule outlined in the resolution plan approved by the NCLT. As of the judgment date, 15 out of 24 instalments amounting to Rs. 4,53,60,000/- were still pending. The Petitioner argued that the bank's recovery actions were in contravention of the approved resolution plan and sought relief from such actions. 2. Proceedings initiated by Respondent No. 1 under Section 13(4) of the SARFAESI Act: The Petitioner challenged the legality of the SARFAESI proceedings initiated by Respondent No. 1, arguing that the bank could not pursue recovery actions exceeding the amount stipulated in the resolution plan. The Petitioner claimed that the bank's actions were ultra vires the approval order of the NCLT and sought a mandamus to prevent the bank from proceeding with recovery actions. 3. Institution of proceedings against the Petitioner for possession of the dwelling unit and appointment of a receiver under Section 14 of the SARFAESI Act: The Petitioner was aggrieved by the bank's initiation of proceedings under Section 14 of the SARFAESI Act to take possession of his dwelling unit and appoint a receiver. The Petitioner argued that such actions were not permissible once the resolution plan was approved and the loan restructured. Judgment Analysis: Maintainability of Writ Petition: The court referenced the Supreme Court's ruling in Phoenix ARC Pvt. Ltd. v. Vishwa Bharti Vidya Mandir and Ors., which established that writ petitions should not be entertained when proceedings are initiated under the SARFAESI Act, and the borrower has remedies available under the Act. The court also cited similar views expressed in M/s Trinkeshwar Developers and Builders Pvt. Ltd. v. North Municipal Corporation & Ors. Consequently, the Petitioner's challenge to the bank's actions under the SARFAESI Act was deemed non-maintainable as it was already under adjudication before the DRT. Liability of Guarantors Post-Resolution Plan Approval: The court addressed the Petitioner's contention that the guarantor's liabilities were discharged upon the approval of the resolution plan. This argument was refuted by referencing the Supreme Court's judgment in Lalit Kumar Jain v. Union of India, which clarified that the approval of a resolution plan does not discharge the guarantor's liability, as it arises from an independent contract. The court emphasized that the liability of guarantors remains intact despite the corporate debtor's discharge through insolvency proceedings. Non-Implementation of Resolution Plan: The court noted that the primary aggrieved party regarding the non-implementation of the resolution plan was Respondent No. 1, who had not received the due payments. The court highlighted that Respondent No. 1 could pursue recovery from the resolution applicant through available legal remedies, including invoking Section 33(3) of the IBC, which allows for liquidation proceedings in case of resolution plan contravention. Conclusion: The court found no merit in the Petitioner's claims and dismissed the petition along with the pending application. The court did not examine the merits of the inter-se claims of the parties, leaving their rights and contentions open. The judgment underscored that the Petitioner's grievances regarding the bank's recovery actions and the non-implementation of the resolution plan did not warrant intervention by the High Court, given the available remedies under the SARFAESI Act and IBC. Final Order: The petition was dismissed, and the court did not delve into the merits of the inter-se claims, leaving the parties' rights and contentions open for adjudication in appropriate forums.
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