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TMI Blog2022 (5) TMI 1584X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Section 60(1). Section 60(2) has been engrafted to cover the specific situation and the provision is an addition to and is supplemental to provision of Section 60(1). This Tribunal had occasion to consider this very question in State Bank of India Stressed Asset Management Branch [ 2022 (1) TMI 1294 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI] . In the above case also the Application under Section 95(1) filed by the Bank was rejected on the same very ground that no insolvency resolution process or the liquidation is pending against the Corporate Debtor before the NCLT and it was held that The Adjudicating Authority erred in holding that since no CIRP or Liquidation Proceeding of the Corporate Debtor are pending the application under Section 95(1) filed by the Appellant is not maintainable. The Application having been filed under Section 95(1) and the Adjudicating Authority for application under Section 95(1) as referred in Section 60(1) being the NCLT, the Application filed by the Appellant was fully maintainable and could not have been rejected only on the ground that no CIRP or Liquidation Proceeding of the Corporate Debtor are pending before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very of dues of Rs.97,76,57,936/- as on 31.03.2021, an Application under Section 95(1) as per Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 dated 22.04.2021 was filed by the Bank being CP (IB) No. 166(KB)2021. In the Application, both the parties appeared and were heard. The Application was rejected by following order dated 15.09.2021:- 2. This is an application filed under sec. 95(1) of the IBC seeking initiation of Insolvency Resolution Process against the guarantor. It is seen that principal borrower Srimunisuvrata Agri International Limited is neither under CIRP nor under liquidation. Although applications under sec.7 against the principal borrower has been filed and are pending consideration. Sec. 60(2) of the Code requires that for an Insolvency Resolution Process to be initiated against the guarantor there must be CIRP or liquidation is pending against the principal borrower/corporate debtor. Since that requirement is not satisfied in the present case. At this point of time C.P.(IB)/166(KB)2021 is premature and is dismissed as such. Liberty, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lalit Kumar Jain vs. Union of India Ors.- (2021) 9 SCC 321 (Para 108). It is submitted that the Application filed under Section 7 against the Principal Borrower is not pending as on date since the Application has not yet been admitted by the Adjudicating Authority. 7. We have heard Learned Counsel for the parties and perused the record. 8. The only reason by which Applications under Section 95(1) of the Code filed by the Appellant against the Personal Guarantors have been rejected is that CIRP against the Principal Borrower has neither been initiated nor liquidation proceedings are pending against the Principal Borrower. 9. Chapter VI of the Code contains heading Adjudicating Authority for Corporate Persons . Section 60 falls for consideration in the present Appeal is 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is located. Who shall be the Adjudicating Authority with regard to Corporate persons including the Personal Guarantors is to be found from sub-section (1) of Section 60. The Adjudicating Authority relying on sub-section 60(2) has taken the view that since insolvency resolution process or liquidation proceedings against the Principal Borrower/ Corporate Debtor is not pending before the NCLT, hence, the Application filed by the Appellant-Bank is premature and consequently rejected. 11. The question to be answered in this Appeal is as to whether pendency of corporate insolvency resolution process or liquidation proceedings against the Principal Borrower/ Corporate Debtor is condition precedent for initiating CIRP against the Personal Guarantor. The submission is that sub-section (2) of Section 60 has to be given overriding effect over Section 60(1) and filing of Application against the Personal Guarantor is only permissible when condition under sub-section (2) of Section 60 is fulfilled. When we look into this statutory scheme of Section 60, it is clear that sub-section (1) is a substantive provision providing for that who shall be the Adjudicating Authority for Corporate Person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Sub-Section 1 of Section 60 provides that Adjudicating Authority for the corporate persons including corporate debtors and personal guarantors shall be the NCLT. The Sub-Section 2 of Section 60 requires that where a CIRP or Liquidation Process of the Corporate Debtor is pending before a National Company Law Tribunal the application relating to CIRP of the Corporate Guarantor or Personal Guarantor as the case may be of such Corporate Debtor shall be filed before such National Company Law Tribunal. The purpose and object of the sub-section 2 of Section 60 of the Code is that when proceedings are pending in a National Company Law Tribunal, any proceeding against Corporate Guarantor should also be filed before such National Company Law Tribunal. The idea is that both proceedings be entertained by one and the same NCLT. The sub-section 2 of Section 60 does not in any way prohibit filing of proceedings under Section 95 of the Code even if no proceeding are pending before NCLT. 8. The use of words a and such before National Company Law Tribunal clearly indicates that Section 60(2) was applicable only when a CIRP or Liquidation Proceeding of a Corporate Debtor is pendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022 was filed in which initially an interim order was passed by the Hon ble Supreme Court on 21.03.2020. However, Civil Appeal subsequently came to be dismissed on 06.05.2022. The order of the Hon ble Supreme Court on 06.05.2022 is as follows:- We have heard learned Solicitor General and learned senior counsel for the parties and perused the record. We do not see any cogent reason to entertain the Appeals. The judgment impugned does not warrant any interference. The Appeals are dismissed. 16. The dismissal of Civil Appeal by the Hon ble Supreme Court on 06.05.2022 clearly approved the view taken by this Tribunal in State Bank of India Stressed Asset Management Branch (supra). 17. We may now notice the judgment of the Hon ble Supreme Court in Lalit Kumar Jain (supra). The Hon ble Supreme Court in the above case had occasion to consider the provisions of the Code including Section 60. The Notification dated 15.11.2019 issued by the Ministry of Corporate Affairs in exercise of powers conferred by sub-section (3) of Section 1 of the Code came for consideration by which Notification several provisions relating to only as far as they relate to Personal Guarantors of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government and the Board to frame rules and regulations on how to allow the pending actions against a personal guarantor to a corporate debtor before the Adjudicating Authority. The intent of the notification, facially, is to allow for pending proceedings to be adjudicated in terms of the Code. Section 243, which provides for the repeal of the personal insolvency laws has not as yet been notified. Section 60(2) prescribes that in the event of an ongoing resolution process or liquidation process against a corporate debtor, an application for resolution process or bankruptcy of the personal guarantor to the corporate debtor shall be filed with the concerned NCLT seized of the resolution process or liquidation. Therefore, the Adjudicating Authority for personal guarantors will be the NCLT, if a parallel resolution process or liquidation process is pending in respect of a corporate debtor for whom the guarantee is given. The same logic prevails, under Section 60(3), when any insolvency or bankruptcy proceeding pending against the personal guarantor in a court or tribunal and a resolution process or liquidation is initiated against the corporate debtor. Thus if A, an individual is the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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