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TMI Blog2022 (6) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... sent Application is filed by State Bank of India, represented by its Assistant General Manager through Resolution Professional(for brevity 'Applicant/Financial Creditor'), under Section 95(1) of the Insolvency and Bankruptcy Code, 2016, (for brevity 'IBC'/'Code'), r/w Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 with a prayer to initiate Insolvency Resolution Process against Mrs. Nuzhat Aisha Nazeer(hereinafter called as Respondent/Personal Guarantor ) who is the Personal Guarantor for the credit facilities extended by the Applicant, State Bank of India, to the Corporate Debtor, M/s. Scotts Garments Limited (hereinafter called as 'Corporate Debtor'). 2. It is stated that the Financial Creditor had executed various credit facilities in favour of the Corporate Debtor for which the Respondent stood as the Personal Guarantor. However the Corporate Debtor failed to repay the credit facilities extended by the Applicant for which the Corporate Debtor was classified as Non-Performing Asset on 18.03.2018. It is further stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016. The grounds for admission of the application recorded in the report are as follows:- (i) The Personal Guarantor had committed default in repayment of his debts. (ii) The RP submits that the present application satisfies the requirements of provisions of section 95 of the Code. (iii) The RP submits that based on his examination the present application deserves to be admitted under section 100 of the Code. (iv) The RP submits that considering the facts of the case and the debtor/personal guarantor does not satisfy the requirement under section 80(2) and hence is not eligible for a fresh start under Chapter II. (v) The RP submits that the report is presented to this Tribunal with a recommendation of accepting the present application as the Personal Guarantor has not repaid the debt due to the Creditor. 5. From the report of the Resolution Professional there does not appear any request for issuance of any direction for the purpose of conducting negotiations between the Financial Creditor and the Personal Guarantor for arriving at the repayment plan. 6. The Respondent/Personal Guarantor has filed its objection to the RP Report vide Diary No. 656. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. Hence, the Respondent's debt as claimed by the Applicant has not been crystallised and there exists a genuine dispute with respect to the same. And the Application is liable to be dismissed as the debt claimed is disputed. 10. The Learned Counsel for the respondent further submits that, on assuming that the Personal Guarantor is not discharged, the liability of the Personal Guarantor is co-extensive with that of the principal borrower in terms of Section 128 of the Indian Contract Act, 1872. It is submitted that, on approval of the Resolution Plan, the liability of the Personal Guarantor stands reduced to the extent stated in the Resolution Plan. Furthermore, if held liable, the personal guarantor can be held liable only to the extent contemplated in the approved Resolution Plan. It is submitted Section 134 of the Indian Contract Act, 1872 provides that a surety is discharged when creditor releases the principal debtor resulting in the discharge of the principal debtor. It is submitted that this principle be applied pro-rata when a part of the debt is discharged in the hands of the principal debtor. 11. The Applicant/Financial Creditor vide Diary No. 984 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not considered as a variance in terms since such process is of involuntary nature and also arising out of a statute. It was further held that upon payment as per the Resolution Plan, the Corporate Debtor is completely discharged of all liabilities, while the liability of the guarantors continues. The Counsel further cited the judgment of Hon'ble NCLAT in the matter of Lalit Mishra and Ors. v. Sharaon Bio Medicine Ltd. , wherein it is held that restructure of Financial debt as part of resolution plan approved by NCLT under the Code, did not envisage complete discharge of the liability of the personal guarantee of the guarantor of the Corporate Debtor. 13. It is further submitted that the liability of the Guarantor does not get absolved by the acceptance of the Resolution Plan or by liquidation of the Corporate Debtor as contended by the Respondent. The Applicant further cited the judgment of the Hon'ble Apex Court in the matter of Maharashtra State Electricity Board v. Official Liquidator ., AIR 1982 SC 1497 wherein it is held that a discharge which the principal debtor may secure by operation of law in bankruptcy or in liquidation proceedings in the case of a Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in place of interim moratorium, which begins with the date of admission of the application and shall cease to have effect at the end of the period of 180 days, as provided under Sec 101 of IBC, 2016. 19. During the moratorium period; (i) Any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed; and (ii) The creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt; and (iii) The debtor shall not transfer, alienate, encumber, or dispose of any of his assets or his legal rights or beneficial interest therein; (iv) The provisions of this section shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. 20. The Resolution Professional viz., Mr. Hem Chandra, who has been appointed under section 97 vide Order dated 02.12.2021, is directed to cause a public notice published on behalf of the Adjudicating Authority within 7 days of uploading of this Order on the website of the NCLT, Bengaluru inviting claims from all Creditors, who shall register their claims as provided under Section 103 within 21 days of s ..... 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