The National Company Law Tribunal, Kolkata dealt with a petition under Section 95(1) of the IBC, 2016 filed by the State Bank of India to initiate Insolvency Resolution Process in respect of Respondent/Guarantor.
FACTS:
It was alleged that the Corporate Debtor M/s EMC Limited had obtained various credit facilities from the applicant bank and that the respondent/guarantor herein of the Corporate Debtor had executed various banking and guarantee documents at the time of availing the said credit facilities. The said guarantor thereby guaranteed prompt repayment and discharge of all dues payable by the Corporate Debtor by executing Deed of Guarantee.
It was contended that the applicant/Financial Creditor issued a notice to the principal borrower and guarantors under Section 13(2) of the SARFAESI Act, 2002 demanding a sum of Rs.1554,13,93,164.90 plus interest. But despite said notice, neither the principal borrower nor the personal guarantor paid up the dues. It was also brought into notice that under Section 128 of the Indian Contract Act, 1872, the guarantor is also equally liable to pay the entirety of the dues.
THE TRIBUNAL HELD:
The National Company Law Tribunal acknowledged fact that the legislature endeavors to ensure that no personal guarantor escapes liability in such bankruptcy and insolvency issues. The Tribunal reiterated that to deal with the personal guarantors of the corporate debtor, proceedings under Section 95(1) of the Code to initiate insolvency resolution process or bankruptcy, can be initiated and continued against the guarantors.
The Tribunal enunciated that the Code also provides that, “The proceedings against the corporate guarantors and personal guarantors of the Corporate Debtor could also be tried before the National Company Law Tribunal along with the Corporate Debtor and even if the Corporate Debtor has already been liquidated or its resolution plan has also been approved, the Corporate guarantors and personal guarantors continue to face the proceedings before the National Company Law Tribunal, for which, the provision has also been made in the Code. It vests with the powers of the Debt Recovery Tribunal in the National Company Law Tribunal. The provisions of sections 60 and 95(1) of this Code read together ensure that none of the Corporate guarantors or personal guarantors of the corporate debtor escape their liability under any circumstances till they either satisfy the claims of all the creditors or till they are either liquidated like the Corporate Debtor, or are declared bankrupt.”
Upon being satisfied that the jurisdiction for such matters lies with the NCLT and liability of the Corporate Debtor and its Guarantors is co-extensive, joint and also several, the court appointed a Resolution Professional under Section 97(5)(6) of the Insolvency and Bankruptcy Code, 2016 for examination of the application. Until the submission of the report the court abstained the respondent to initiate any legal action in respect to the debt.
Members: Mr. Harish Chander Suri (technical) and Mr. Rohit Kapoor (judicial)
Case title: State Bank of India v. Shri Manoj Toshniwal
Case Details: C.P (IB) No.210/KB/2021
Applicant’s Advocate: Mr. Ramesh Chandra Prusti
Respondent’s Advocate: Mr. Mainak Bose
Dated: 14th January 2022
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