The approval of a resolution plan under the Insolvency and Bankruptcy Code does not discharge the guarantor's liability, and the bank retains the right to proceed against collateral securities under the SARFAESI Act.

JUDGMENT

Sanjeev Narula, J. The Petitioner, who stood as a guarantor to a loan facility, is aggrieved with the recovery action initiated by the bank, against the borrower and himself, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. According to him, once a resolution plan qua the borrower was approved under Section 31 of the under the Insolvency and Bankruptcy Code, 2016, the bank's claims stood addressed. Thus, it could not have sought recovery for amounts over and above the amount approved by the NCLT, and seeks a mandamus to that effect. Is the petition maintainable for the above reliefs, is the short question before this court.

2. Briefly stated, Mr. Sanjay Sarin [`Petitioner'], stood as a guarantor to a loan of Rs.34 crores advanced by Canara Bank (formerly known as Syndicate Bank) [`Respondent No. 1'] to the borrower - Alphabet Heights Pvt. Ltd. (formerly known as Maple Realcon Private Ltd.) [`Respondent No. 3']. Subsequently, corporate insolvency resolution proceedings [`CIRP'] under the Insolvency and Bankruptcy Code, 2016 [`IBC'] were initiated against Respondent No. 3 (which became the corporate debtor) in 2018. Respondent No. 1 participated in the said proceedings as a financial creditor, and filed its claim (for Rs.10,35,18,740/-) before the National Company Law Tribunal, New Delhi Bench [`NCLT']. A resolution plan, accepted by the Committee of Creditors [`CoC'] was approved by the NCLT vide approval Order dated 20th February 2020 [`Approval Order']. Under the approved resolution plan, the resolution applicant - Apex Heights Pvt. Ltd. [`Respondent No. 2'], was to make payment of Rs.10,35,00,000/- to Respondent No. 1 (Rs.03 crores in FDR on the date of the Approval Order, and the remaining in 24 equal instalments), but it defaulted.

3. Thereafter, proceedings were initiated by Respondent No. 1 under Section 13(4) of the SARFAESI Act, and in furtherance thereto, proceedings were also instituted under Section 14 of the SARFAESI Act, for taking possession of the security offered by the Guarantor - being the dwelling unit of the Petitioner - as well as for appointment of a receiver. The Petitioner is aggrieved by such action of Respondent No. 1.

PETITIONER'S SUBMISSIONS

4. Mr. Mrinal Harsh Vardhan, counsel for the Petitioner, has contended as follows:

4.1. The impugned SARFAESI action has been initiated with the sole intent to recover amounts in excess of the resolution plan, and is thus, ex facie illegal and ultra vires the approval order of the NCLT.

4.2. During the pendency of CIRP, Respondent No. 1 had issued a demand notice dated 26th July 2019 under Section 13(2) of the SARFAESI Act, calling upon Respondent No. 3 and Petitioner to pay dues worth Rs.12,31,43,655/-. Respondent No. 1 had then participated in the CIRP as a financial creditor and submitted its claims in Form C (for Rs.10,35,18,740/-). Respondent No. 2 proposed a resolution plan, which was accepted by the majority of the CoC, of which Respondent No. 1 was also a member. It was then approved by the NCLT vide the Approval Order noted above and became binding upon Respondent No. 1 in the following terms:

"(...) Coming to the only other Financial creditor being a secured creditor i.e. Syndicate bank which had cast a dissenting vote in respect of the Resolution plan. The Plan provides that their claim of Rs.10,35,00,000/- shall be extinguished in fully by releasing the matured proceeds under an FDR for Rs.3 Crores held by them towards partial discharge of their admitted liability. The same can be appropriated immediately on pronouncement of this order. The remaining amount shall be paid in 24 equal monthly instalments.

It is directed that the title documents of the project land shall be released by Syndicate Bank to the Resolution Applicant immediately on furnishing fresh personal guarantees & securities by the ex-Directors who have undertaken to do so. The Resolution Applicant shall ensure that