Bombay High Court Allows Summary Suit Against Principal Borrower Despite Moratorium Against Guarantors Under IBC. The court permitted the plaintiff to proceed only against defendant no.1 (principal borrower) while reserving rights against guarantors under moratorium.

High Court: Bombay High Court Bench: BOMBAY In Favour of Prosecution

Admin

2026-05-18 19:36:08

Font size:

Case Note & Summary

The plaintiff, IL & FS Financial Services Limited, filed a commercial summary suit under Order XXXVII of the Code of Civil Procedure, 1908 to recover Rs. 203,66,31,506/- from the defendants. The suit arose from term loan facilities availed by defendant no.1 (Serveall Constructions Private Limited) and guaranteed by defendant nos.2 to 4 (Housing Development and Infrastructure Limited, Mr. Rakesh Wadhawan, and Mr. Sarang Wadhwan). During the pendency of the summons for judgment, the court noted that the National Company Law Tribunal (NCLT) had passed orders under Section 7 read with Section 14 of the Insolvency and Bankruptcy Code, 2016 against defendant no.2, and separate orders under Section 95 against defendant nos.3 and 4, imposing a moratorium. The plaintiff filed an additional affidavit stating that it sought to proceed only against defendant no.1 (the principal borrower) at this stage and would not press interim relief against the guarantors, reserving the right to proceed after the moratorium ceases. The court heard the plaintiff's counsel on this preliminary point; none appeared for the defendants despite service. The court allowed the plaintiff to proceed against defendant no.1 alone, holding that the summary suit could continue against the principal borrower despite the moratorium against the guarantors.

Headnote

A) Civil Procedure - Summary Suit - Order XXXVII CPC - Proceeding against principal borrower despite moratorium against guarantors - The court held that the summary suit can proceed against the principal borrower (defendant no.1) even though the guarantor defendants (nos.2 to 4) are under moratorium under the Insolvency and Bankruptcy Code, 2016. The plaintiff was allowed to proceed only against defendant no.1 at this stage, reserving the right to proceed against the guarantors after the moratorium ceases. (Paras 1-3)

Issue of Consideration

Whether a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 can proceed against the principal borrower when the guarantor defendants are under moratorium under the Insolvency and Bankruptcy Code, 2016.

Final Decision

The court allowed the plaintiff to proceed with the summons for judgment only against defendant no.1 (principal borrower) at this stage, and the plaintiff shall not press any interim relief against defendant nos.2 to 4 at this stage, reserving the right to proceed after the moratorium ceases to operate against them.

Law Points

Summary suit can proceed against principal borrower even if moratorium is in effect against guarantors under IBC
Order XXXVII CPC
Section 7 and 14 IBC

Case Details

2026 LawText (BOM) (04) 4

Summons for Judgment No. 12 of 2019 in Commercial Summary Suit No. 238 of 2019

2026-04-06

Gauri Godse J.

Mr. Rohan Savant, Mr. Aman Saraf a/w. Mr. Sachin Chandarana and Ms. Aishwarya Mehta i/b. Manilal Kher Ambalal and Co., for the Plaintiff.

Nature of Litigation

Commercial summary suit for recovery of loan amount

Remedy Sought

Recovery of Rs. 203,66,31,506/- with interest and costs

Filing Reason

Default in repayment of term loan facilities by defendant no.1, guaranteed by defendant nos.2 to 4

Previous Decisions

NCLT Mumbai Bench passed order dated 20 August 2019 under Section 7 read with Section 14 IBC against defendant no.2; separate orders under Section 95 IBC against defendant nos.3 and 4, imposing moratorium.

Issues

Whether the summary suit can proceed against the principal borrower when the guarantors are under moratorium under IBC.

Submissions/Arguments

Plaintiff submitted that despite moratorium against guarantors, the summons for judgment can proceed qua defendant no.1, the principal borrower. Plaintiff sought to proceed only against defendant no.1 at this stage and reserved right to proceed against guarantors after moratorium ceases.

Ratio Decidendi

A summary suit under Order XXXVII CPC can proceed against the principal borrower even if the guarantor defendants are under moratorium under the Insolvency and Bankruptcy Code, 2016, as the moratorium does not bar proceedings against the principal debtor.

Judgment Excerpts

Learned counsel for the plaintiff submitted that despite the said orders, the summons for judgment can proceed qua defendant no.1, who is the principal borrower. the plaintiff seeks to proceed only against defendant no. 1 at this stage and shall not press any interim relief against defendant nos. 2 to 4 at this stage, by reserving the right to proceed after the moratorium ceases to operate against them.

Procedural History

The plaintiff filed Commercial Summary Suit No. 238 of 2019 and Summons for Judgment No. 12 of 2019. During proceedings, the court noted NCLT orders imposing moratorium against defendant nos.2 to 4. The court directed the plaintiff to file an additional affidavit, which was done on 17 September 2025. The matter was heard on 2 December 2025 and judgment pronounced on 6 April 2026.