The moratorium under Sec. 14 of the IBC does not apply to guarantors of a company under moratorium.

JUDGMENT

1. The petitioner is before this Court calling in question the orders dtd. 9/4/2018 passed by the 1st respondent/Deputy Registrar of Chits and the order dtd. 23/3/2022 passed by the 5th respondent/Joint Registrar of Chits in the dispute and in the appeal, whereby both the Authorities have declined to accede to the submissions made or the contentions so advanced by the petitioner.

2. Heard Sri.S.Vivekananda, learned counsel appearing for petitioner and Sri.Sainath, learned counsel appearing for respondent No.2.

3. The petitioner stood as a guarantor to the tune of Rs.25.00 lakhs loan availed by the principal borrower/3 rd respondent, a subscriber of the chit fund that was floated by the 2nd respondent. The amount having not repaid leads the 2nd respondent to institute proceedings before the Deputy Registrar of Chits. The Deputy Registrar of Chits passes an award in terms of his order dtd. 9/4/2018 whereby, both the petitioner and the principal borrower and respondent No.4 being the guarantor to the chit prize money given to the 3rd respondent, are held to be liable jointly and severally for paying an amount of Rs.13,29,142.00 with interest at 21% per annum on the principal amount of Rs.8,00,000.00. The petitioner calls this in question before the 5th respondent/Joint Registrar of Chits who confirms the order passed by the Deputy Registrar of Chits and dismisses the appeal so filed before him in terms of an order dtd. 23/3/2022. It is the aforesaid orders that are called in question in the subject petition.

4. Learned counsel for petitioner would seek to contend that the orders of both the Authorities were without jurisdiction, in the light of the order of a moratorium against the 3rd respondent who was the subscriber of the chits from the hands of the 2nd respondent and in the teeth of the said moratorium, learned counsel would submit that, these orders would be a nullity in law and therefore, seeks quashment of the said orders.

5. Alternate submission made by the learned counsel for petitioner is that he was not aware of the borrowals between the principal borrower and the 2nd respondent and has now secured certain documents and therefore, the matter was remitted back to the hands of the Joint Registrar of Chits for a reconsideration.

6. Learned counsel for the 2nd respondent would vehemently refute the submissions to contend that the petitioner was all along aware of all the transactions and has contested the matter before the concerned authorities as aforequoted and would submit that the moratorium would not be applicable to the petitioner, as he is not a Corporate at all.

7. I have given my anxious consideration to the submissions made by the learned counsel for both the parties and perused the material on record.

8. The afore-narrated facts are not in dispute. The subscriber to the chit is the 3rd respondent is also not in dispute. The petitioner stands guarantee to the amount of Rs.25.00 lakhs that was taken from the 2nd respondent by the 3rd respondent/principal borrower M/s. Padmabalaji Steels Private Limited. The contention of the petitioner that the orders are a nullity in law in the teeth of moratorium being ordered and further proceedings could not have been taken is unacceptable for the reason that the 3rd respondent is placed under moratorium in terms of Sec. 14 of the Insolvency and Bankruptcy Code, 2016 ('IBC' for short).

9. Sec. 14 of the IBC itself carves out an exception that moratorium shall have an effect from the date of such order till the completion of the corporate insolvency resolution process. The order of moratorium in terms of Sec. 14 would be applicable only to a Corporate and neither to the Director nor the guarantor of the Company which is under moratorium. Therefore, the solitary submission made by the learned counsel for petitioner that the orders are without jurisdiction in the teeth of the said moratorium is inapplicable, in the light of the very provision under which the 3rd responde