Maganti Venkata Srinivas vs Union Of India
2023 Latest Caselaw 2117 AP

                           HIGH COURT OF ANDHRA PRADESH


MAIN CASE No: W.P.No.10094 of 2023

                       PROCEEDING SHEET

Sl.                                                                           OFFICE
        DATE                               ORDER
No.                                                                           NOTE.

01.   20.04.2023   RC,J


                                  W.P.No.10094 of 2023

                           Notice before admission.
                           Learned counsel for the petitioner is permitted
                   to take out personal notice on the respondents and

file proof of service before the Registry.

Post on 04.05.2023.

________ RC, J

I.A.No.01/2023

Heard the learned counsel for the petitioner. Learned counsel for petitioner submitted that, 3rd respondent has invoked Section 95 of IBC, 2016 and filed C.P.(IB) No.02 of 2023 on the file of Hon‟ble National Company Law Tribunal, i.e., 2nd respondent NCLT, which is the contrary to the IBC, 2016.

He further contended that, the 3rd respondent without initiating proceedings under IBC, 2016 against the Principal Debtor, initiated proceedings against petitioner who is guarantor. In fact, he can only file before Debt Recovery Tribunal under IBC 2016.

(Contd..,) He further contended that, the present case falls within Part-III of the IBC, 2016. He further submitted that, instead of approaching the adjudicating authority-Debt Recovery Tribunal, the 3rd respondent has knocked the doors of NCLT(2nd respondent) who has no jurisdiction to entertain and proceed with the case. In the said circumstances, if the 2nd respondent proceeds with the C.P., the petitioner would be put to great hardship. As such, the present writ petition is filed. In support of his contentions, learned Senior counsel for the petitioner has drawn the attention of the Court to the provision Section 79(1) of IBC, 2016 and relied on judgment in Rohit Nath Vs KEB Hana Bank Ltd.

He further contended that, the said judgment has persuasive value. As such, prayed to consider the said judgment and pass appropriate orders.

Perused the record.

Section 79(1) of IBC, 2016 reads as follows: "79. In this Part, unless the context otherwise requires,--

(1) "Adjudicating Authority" means the Debt Recovery Tribunal constituted under sub- section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993;

(2)..."

Learned Counsel for the petitioner relied on judgment in Rohit Nath Vs KEB Hana Bank Ltd, which reads as follows:

"...12. Section 79(1) of the Code defines the expression "Adjudicating Authority" wherever such expression appears in Part III of the Code:

"79. Definitions.

In this Part, unless the context otherwise requires, -

(1) "Adjudicating Authority" means the Debt Recovery Tribunal constituted under sub- section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);

(2) ...."

Thus, a creditor may apply to the jurisdictional Debts Recovery Tribunal for initiating an insolvency resolution process against appropriate persons under Section 95 of the Code. Section 60 of the Code, which is included in Part II thereof, identifies the adjudicatory authority in relation to insolvency resolution and liquidation for corporate persons. Section 60(1) of the Code mandates that insolvency resolution and liquidation for corporate persons, including corporate debtors and personal guarantors, may be brought before the National Company Law Tribunal having territorial jurisdiction over the places where the registered office of the corporate person is located. However, a "corporate debtor" is defined in Section 3(8) of the Code to mean a corporate person who owes a debt to any person and a "corporate person", in turn, is defined in Section 3(7) of the Code to mean a company, a limited liability partnership firm or any person incorporated with limited liability under any law for the time being in force but not including any financial service provider.

22. The text of Section 60(2) discloses that Section 60 of the Code would apply to an individual only if there is a corporate insolvency resolution process pertaining to the corporate entity which is the principal debtor, that has been filed or commenced. In other words, in case of company „A‟ being the principal debtor and an individual „P‟ the guarantor promising repayment of the credit facilities obtained by „A‟, if a corporate insolvency resolution process is initiated under the provisions of the Code pertaining to company „A‟, the insolvency resolution process pertaining to guarantor „P‟ would per force be before the same adjudicating authority, viz., the National Company Law Tribunal. But, where there is no corporate insolvency resolution process initiated in respect of company TV, insolvency proceedings pertaining to guarantor „P‟ must necessarily be carried only to the jurisdictional Debts Recovery Tribunal and not to any other forum. To repeat, the provisions of the Acts of 1909 and 1920 will have no manner of application to guarantors who have furnished guarantees in connection with credit facilities obtained by corporate entities..."

The submissions made by the learned counsel for petitioner and the grounds raised in this writ petition prima facie makes out a point for consideration to be decided in this writ petition. There is some force in the contentions of the learned counsel for the petitioner that, if the 2nd respondent proceeds with the C.P., the purpose of filing the writ petition and also the rights of the petitioner would be defeated, as such, this Court is inclined to pass the following order:

There shall be stay of all further proceedings in C.P.(IB) No.03 of 2023 on the file of the Hon‟ble National Company Law Tribunal, Amaravathi.

________ RC, J

BRS