Case Note & Summary
The appeal was filed by Mahdoom Bava Bahrudeen Noorul Ameen (Appellant) under Section 61(3) read with Section 61(1) of the Insolvency and Bankruptcy Code, 2016 (IBC), challenging the order dated June 13, 2024, passed by the National Company Law Tribunal, New Delhi (Adjudicating Authority) in CP (IB) No. 24(ND)/2023. By the impugned order, the Adjudicating Authority initiated Personal Insolvency Resolution Process against the Appellant, who was a Personal Guarantor (PG) for credit facilities availed by NaftoGaz India Pvt Ltd (Corporate Debtor) from State Bank of India (SBI) and State Bank of Bikaner & Jaipur (SBBJ) between 2007 and 2012. The loan accounts were classified as Non-Performing Assets (NPA) on January 28, 2012 (SBBJ) and June 13, 2012 (SBI). The Corporate Debtor went into liquidation on October 8, 2012, by order of the Delhi High Court. SBI issued a demand notice under Section 13(2) of the SARFAESI Act on December 26, 2013, and filed Original Application No. 133 of 2014 before the Debt Recovery Tribunal, New Delhi, which was pending. On June 28, 2021, SBI issued a demand notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019, demanding payment of Rs. 264.61 crores. The Appellant opposed the application on grounds of limitation and pendency of other proceedings. The Adjudicating Authority admitted the application, leading to the present appeal. The NCLAT dismissed the appeal, holding that the debt was due and default occurred, the application was within limitation as the guarantee was continuing, and the pendency of other proceedings did not bar the IBC action. The Tribunal upheld the order of the Adjudicating Authority.
Headnote
A) Insolvency and Bankruptcy Code - Personal Guarantor - Initiation of Insolvency Resolution Process - Section 95 read with Section 61 IBC - The appeal challenged the order of NCLT admitting an application under Section 95 against a personal guarantor. The Tribunal held that the existence of other proceedings (SARFAESI, DRT) does not bar initiation under IBC, and the application was within limitation as the debt continued to be due. (Paras 1-31)
B) Limitation - Personal Guarantor - Applicability of Limitation Act - Section 95 IBC - The Appellant argued that the application was barred by limitation as the NPA date was in 2012. The Tribunal held that the debt is a continuing guarantee and the demand notice under Rule 7(1) was issued in 2021, within three years from the date of default as per the guarantee terms. (Paras 20-25)
C) Insolvency and Bankruptcy Code - Personal Guarantor - Pendency of other proceedings - Section 95 IBC - The Appellant contended that simultaneous proceedings under SARFAESI and DRT should preclude IBC action. The Tribunal held that the IBC is a separate code and there is no bar on multiple remedies. (Paras 26-30)
Issue of Consideration
Whether the Adjudicating Authority was justified in initiating Personal Insolvency Resolution Process against the Appellant (Personal Guarantor) under Section 95 of the IBC despite the existence of pending proceedings under SARFAESI Act and before DRT, and whether the application was barred by limitation.
Final Decision
The appeal is dismissed. The order dated June 13, 2024, passed by the Adjudicating Authority (NCLT, New Delhi) in CP (IB) No. 24(ND)/2023 is upheld. No order as to costs.
Law Points
- Personal Guarantor
- Insolvency Resolution Process
- Section 95 IBC
- Section 61 IBC
- Limitation
- Debt default
- Guarantee
- Corporate Debtor liquidation
- SARFAESI Act
- DRT proceedings
Case Details
2024 LawText (NCLAT) (01) 132
Company Appeal (AT) (Insolvency) No. 1324 of 2024
Arun Baroka (Member Technical)
Mr. Siddharth Khattar, Mr. Divij Andley, Mr. Gaurav Parewa (for Appellant); Mr. Siddharth Sangal, Mr. Chirag Sharma, Ms. Richa Mishra, Ms. Harshita Agarwal (for Respondent No.1)
Mahdoom Bava Bahrudeen Noorul Ameen
State Bank of India, Mr. Deepak Mittal
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Nature of Litigation
Appeal against order initiating Personal Insolvency Resolution Process against a Personal Guarantor under Section 95 of IBC.
Remedy Sought
Appellant sought setting aside of the order dated June 13, 2024, passed by NCLT, New Delhi, admitting the application under Section 95 IBC.
Filing Reason
Appellant challenged the initiation of Personal Insolvency Resolution Process on grounds of limitation and pendency of other proceedings (SARFAESI and DRT).
Previous Decisions
NCLT, New Delhi, by order dated June 13, 2024, admitted the application under Section 95 IBC and initiated Personal Insolvency Resolution Process against the Appellant.
Issues
Whether the application under Section 95 IBC was barred by limitation?
Whether the pendency of proceedings under SARFAESI Act and before DRT precludes initiation of insolvency resolution process under IBC?
Submissions/Arguments
Appellant argued that the debt became due in 2012 when the account was declared NPA, and the application under Section 95 filed in 2023 was barred by limitation.
Appellant contended that simultaneous proceedings under SARFAESI and DRT should bar IBC action.
Respondent No.1 (SBI) argued that the guarantee was a continuing guarantee and the demand notice under Rule 7(1) was issued in 2021, within limitation.
Respondent No.1 submitted that IBC is a separate code and there is no bar on multiple remedies.
Ratio Decidendi
The initiation of Personal Insolvency Resolution Process under Section 95 IBC against a personal guarantor is not barred by the pendency of other proceedings such as under SARFAESI Act or before DRT. The limitation for filing an application under Section 95 is governed by the Limitation Act, and in case of a continuing guarantee, the period of limitation runs from the date of demand notice under Rule 7(1) of the Personal Guarantor Rules, which was within three years from the date of default.
Judgment Excerpts
This is an appeal filed under Section 61(3) in conjunction with Section 61(1) of the Insolvency and Bankruptcy Code, 2016 (“IBC”).
Through this order, the Personal Insolvency Resolution Process was initiated against the Appellant, who is the Personal Guarantor (PG).
The Tribunal held that the debt is a continuing guarantee and the demand notice under Rule 7(1) was issued in 2021, within three years from the date of default as per the guarantee terms.
The Tribunal held that the IBC is a separate code and there is no bar on multiple remedies.
Procedural History
The Respondent No.1 (SBI) filed an application under Section 95 of IBC before the Adjudicating Authority (NCLT, New Delhi) seeking initiation of Personal Insolvency Resolution Process against the Appellant (Personal Guarantor). The Adjudicating Authority admitted the application by order dated June 13, 2024. Aggrieved, the Appellant filed the present appeal under Section 61(3) read with Section 61(1) of IBC before the National Company Law Appellate Tribunal.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: 61(1), 61(3), 95
- Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019: Rule 7(1)
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: 13(2)
