The court clarified that initiation of IBC proceedings by creditors against a guarantor is permissible and does not violate previous injunctions, emphasizing the legal right of creditors under the IBC.

JUDGMENT

Manmohan, J.

CM APPL.12152/2022 in FAO (OS) (COMM) No.15/2021

1. The Respondent No.1-bank has filed the present application seeking clarification of the order dated 3rd December, 2021 to the effect that this Court never prohibited Respondent No.1-bank from initiating or maintaining proceedings under the Insolvency and Bankruptcy Code, 2016 (for short `IBC') against the Appellant-Zee.

2. It is the case of the Respondent No.1-bank/applicant that the Appellant-Zee is the guarantor to the loan availed by the Respondent No.2 from Respondent No.1-bank in terms of the Debt Service Reserve Account Guarantee Agreement dated 29th August, 2018 (for short `DSRA Guarantee Agreement'), which provides that in case of default of Respondent No.2, Respondent No.1-bank can invoke the DSRA Guarantee Agreement and recover the amount that is due from Respondent No.2, from Appellant-Zee. On 1st October, 2020, Respondent No.1bank issued notice to Appellant-Zee invoking the DSRA Guarantee Agreement and calling upon the Appellant-Zee to pay the amount of Rs.83,70,14,289/-.

PROCEEDINGS BEFORE THE LEARNED SINGLE JUDGE AND DIVISION BENCH

3. The Appellant-Zee filed a civil Suit being CS(OS)(COMM) No. 500/2020, along with an application being I.A.10556/2020 seeking the interim relief that the Respondent No.1-bank be restrained from seeking recovery of any amount under the DSRA Guarantee Agreement in terms of the Respondent No.1-bank's notice dated 01st October, 2020. The reliefs sought for in the interim application being I.A. 10556/2020 are reproduced hereinbelow:

"i. Staying the effect and implementation of the demand raised by Defendant No.1 under its letter dated 01 October 2020;

ii. Directing Defendant No.2 to replenish the DSRA Account with amount equivalent to one quarter's interest and directing Defendant No.1 to accept the same;

iii. Restraining Defendant No.1 and/or its associates/agents/employees from seeking recovery of the demand under the communication dated 01 October 2020 and/or recovering any amount beyond the scope of guarantee provided by the Plaintiff in terms of the DSRA Guarantee Agreement dated 29 August 2018.

iv. Restraining Defendant No.1 and/or its associates/agents/employees formal or informal, to the stock exchanges, credit information companies and credit rating agencies in relation to the Plaintiff arising from/relating to the purported defaults under the DSRA Guarantee Agreement dated 29 August 2018...."

4. The interim reliefs prayed for were rejected by learned Single Judge by way of the impugned order dated 21st December, 2020. The relevant portion of the impugned order is reproduced hereinbelow:

"16. Given these circumstances, I am not persuaded to hold that Zee has been able to make out a prima facie case for grant of ad-interim injunction. Furthermore, if I were to grant an injunction, as sought by Zee, it would debilitate the Bank's ability to take recourse to remedies which are available to it in law for recovery of its dues. Therefore, in my opinion, the balance of convenience would tilt in favour of the Bank. I am also not convinced that irreparable injury or harm would be caused to Zee as, at the end of the day, refusal of injunction would involve outflow of funds, save and except, the apprehension of Zee that the Bank would communicate the information to the stock exchanges, credit information companies, and credit rating agencies. Insofar as the apprehension with regard to the flow of informat