The NCLAT, New Delhi expounded that under Chapter III of the Insolvency and Bankruptcy Code of India, 2016 (hereinafter referred to as “IBC”), the multiplicity of applications against the same Personal Guarantor is not contemplated. Different lenders cannot file manifold applications against the same Personal Guarantor.
The issue framed for adjudication was whether another lender of the same transaction can proceed against the Personal Guarantor when an application is already filed by one lender against the Personal Guarantor under Section 95 of the IBC.
The Tribunal observed that as per Section 96(1)(a) the interim moratorium commences on the date of the application in relation to all the debts. Further, Section 96(1)(b) uses the phrase ‘creditors of the debtor’ which refers to other creditors of the debtor apart from the one who has filed the application based on which interim moratorium commenced.
In the present case, it was ruled that the application by the Respondent was filed after the commencement of the interim moratorium and therefore, the NCLT could not have proceeded ahead with the application.
Brief Facts:
The Respondent preferred an application under Section 95 of the IBC against the Appellant who is the personal guarantor of the Corporate Debtor (Reliance Naval Engineering Ltd.).
The NCLT passed an order directing the Resolution Professional to file a report within 2 weeks and it is against the said order that the present appeal has been preferred.
Contentions of the Appellant:
It was contended that already a Resolution Professional was appointed in the application preferred by the State Bank of India (Both the Central Bank of India and State Bank of India extended credit facilities to the Corporate Debtor). It was argued that the interim moratorium already commenced and therefore, the application by Respondent could not have been filed.
Contentions of the Respondent:
It was argued that the NCLT did not appoint any new Resolution Professional, the same one has been directed to submit the report. Further, it was contended that the analogy of Section 7 is not applicable in proceedings under Section 95 of IBC.
Observations of the Tribunal:
It was observed that the Appellant is the Personal Guarantor of both the lenders i.e., State Bank of India and Central Bank of India.
The issue framed for adjudication was whether another lender of the same transaction can proceed against the Personal Guarantor when an application is already filed by one lender against the Personal Guarantor under Section 95 of the IBC.
The Tribunal observed that as per Section 96(1)(a) the interim moratorium commences on the date of the application in relation to all the debts. Further, Section 96(1)(b) uses the phrase ‘creditors of the debtor’ which refers to other creditors of the debtor apart from the one who has filed the application based on which interim moratorium commenced.
In the present case, the application by the Respondent was filed after the commencement of the interim moratorium and therefore, the NCLT could not have proceeded ahead with the application.
The Appellate Tribunal further expounded that even under Chapter III of the code, the multiplicity of applications against the same Personal Guarantor is not contemplated. Different lenders cannot file manifold applications against the same Personal Guarantor.
The contention of the Respondent that the benefit of Section 60(6) cannot be extended to the creditors of the Personal Guarantor was rejected. It was ruled that the benefit can be claimed by the creditors of the Personal Guarantor who were unable to file the application due to the moratorium under Section 96.
The decision of the Tribunal:
Based on the aforementioned reasons, the order of the NCLT was set aside and accordingly, the appeal was allowed.
Case Title: Bhavesh Gandhi v. Central Bank of India
Coram: Justice Mr. Ashok Bhushan, Mr. Barun Mitra (Technical Member)
Case No: Company Appeal (AT) (Insolvency) No. 923 of 2022
Advocates for Appellant: Advs. Mr. Shikhil Suri, Ms. Komal Gupta, Ms. Mohima Aggarwal
Advocates for Respondent: Advs. Mr. Ravi Raghunath, Ms. Rathina Maravarman, Ms. Aakashi Lodha
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