AA Has Jurisdiction to Entertain Personal Guarantors’ Insolvency Without Pending CIRP Against Corporate Debtor | NCLAT

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insolvency proceedings of personal guarantors

Case Details: Mahendra Kumar Agarwal v. PTC India Financial Services Ltd. - [2023] 154 taxmann.com 666 (NCLAT-Chennai)

Judiciary and Counsel Details

    • Justice M. Venugopal, Judicial Member & Shreesha Merla, Technical Member
    • Sandeep Bajaj, Adv. for the Appellant. 
    • Ms Pragya Chauhan, Adv. & Devvart Rana for the Respondent.

Facts of the Case

In the instant case, Respondent No. 1-financial creditor extended a term loan facility to the corporate debtor. In pursuance of the said loan, the appellant stood as a personal guarantor. However, the corporate debtor defaulted in making repayment of the loan amount and respondent No. 1 filed an application u/s 95 of the IBC before the Adjudicating Authority (NCLT) against the appellant.

The NCLT by the impugned order admitted the said application. The appellant submitted that the NCLT had failed to take into consideration that there were no pending CIRP or liquidation proceedings, against the principal borrower.

The NCLAT observed that a guarantee is an independent obligation of the guarantor, which is evident from a personal guarantee and there is no requirement enabling a person to exhaust any remedy against a corporate debtor, prior to issuance of demand in terms of personal guarantee.

The NCLAT, further observed that the NCLT has jurisdiction to entertain/initiate, insolvency proceedings of personal guarantors, even when no CIRP proceedings, are pending, against the corporate debtor.

NCLAT Held

The NCLAT held that the NCLT was entitled to initiate the CIRP against the appellant and in any event since CIRP proceedings, were pending and continued to be pending, against the corporate debtor, the impugned order passed by the NCLT admitting the petition under section 95 of the IBC against the appellant was free from any legal flaws.

List of Cases Reviewed

List of Cases Referred to

    • State Bank of India v. V. Ramakrishnan [2018] 96 taxmann.com 271/149 SCL 107 (SC) (para 10)
    • Insta Capital (P.) Ltd. v. Ketan Vinod Kumar Shah [CP(IB) No. 1365/MB-IV/2020, dated 10-8-2021] (para 14)
    • Altico Capital India Ltd. v. Rajesh Patel [I.A. No. 1062 of 2021 in CP (IB) No. 293 of 2020, dated 9-7-2021] (para 15)
    • Rohit Nath @ Rohit Rabindranath v. KEB Hana Bank Ltd. [2021] 129 taxmann.com 98/[2022] 169 SCL 176 (Mad.) (para 15)
    • Punjab National Bank Housing Finance Ltd. v. Mohit Arora [Co. Petition No. (IB) 395(No.) 2021, dated 29-9-2021] (para 16)
    • Surendra B. Jiwrajka v. Omkara Assets Reconstruction (P.) Ltd. [2021] 132 taxmann.com 111 (Bom.) (para 21)
    • Surendra B. Jiwrajka v. Omkara Assets Reconstruction (P.) Ltd. [Petition(s) for Special Leave to Appeal (C) No. (s) 16464 of 2021, dated 28-10-2021] (para 22)
    • Surendra B. Jiwrajka v. Omkara Assets Reconstruction (P.) Ltd. [Petition(s) for Special Leave to Appeal (c) Nos. 16464 of 2021, dated 29-10-2021] (para 23)
    • State Bank of India v. Mahendra Kumar Jajodia [2022] 136 taxmann.com 371/171 SCL 232 (NCL-AT) (para 24)
    • State Bank of India v. Ms. Savita Satish Gowda [IA No. 2733 of 2021 in CP(IB)-1062/MB/2021, dated 20-1-2022] (para 25)
    • Mahendra Kumar Jajodia v. State Bank of India [2022] 139 taxmann.com 350/172 SCL 665 (SC) (para 26)
    • Babu A. Dhammanagi v. Union of India [2022] 138 taxmann.com 406/172 SCL 89 (Kar.) (para 27)
    • Satyan Kasturi v. State Bank of India [Comp. Cas. (AT) (CH) (Ins.) of 239 of 2022, dated 25-8-2022] (para 28)
    • Axis Trustee Services Ltd. v. Brij Bhushan Singal 2021) SCC Online Del. 4501 (para 29)
    • UCO Bank Flagship Corporate Branch v. Navin Kumar Jain [2022] 142 taxmann.com 80 (NCLAT – New Delhi) (para 30)
    • Vijay Kumar Gai v. Pritpal Singh Babbar 2022 SCC Online P & H 1672 (para 31)
    • Sudip Dutta @ Sudip Bijoy Dutta v. State Bank of India [2022] 143 taxmann.com 366 (NCLAT – New Delhi) (para 32)
    • Vikas Bhawanishankar Sharma v. Union of India [Writ Petition (Civil) No. 385 of 2022, dated 11-7-2022] (para 33)
    • State Bank of India v. Sanjay Singhal [CP(IB)-157 (PB)/2021, dated 26-8-2022] (para 34)
    • Lalit Kumar Jain v. Union of India [2021] 127 taxmann.com 368 (SC) (para 42)
    • Rajahmundry Electric Supply Corporation Ltd. v. A. Nageshwara Rao [1956] 26 Comp. Case 91 (SC) (para 51)
    • Shapoorji Pallonji Finance (P.) Ltd. v. Rekha Singh [Comp. App (AT) (Ins.) Nos. 397, 398 and 399 of 2022, dated 18-1-2023] (para 52)
    • Axis Trustee Services Ltd. v. Brij Bhushan Singal [2022] 144 taxmann.com 139/[2023] 175 SCL 402 (Delhi) (para 53)
    • Bank of Bihar Ltd. v. Dr. Damodar Prasad AIR 1969 SC 297 (para 54)
    • State Bank of Bihar Ltd. v. Index Port Registered AIR 1992 SC 1740 (para 54)
    • Industrial Investment Bank of India v. Biswanath Jhunjhunwala [2011] 3 taxmann.com 77 (SC) (para 54)
    • United Bank of India v. Satyawati Tondon AIR 2010 SC 3413 (para 54)
    • Ferro Alloys Corpn. Ltd. v. Rural Electrification Corpn. Ltd. [2019] 101 taxmann.com 283/151 SCL 567 (NCL-AT) (para 54).

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