The court established that recovery proceedings under the SARFAESI Act can be initiated against personal guarantors even when insolvency proceedings are ongoing against the principal borrower.

JUDGMENT

1. These writ petitions have been filed by the petitioners being aggrieved with the impugned notices dated 16.5.2022 issued by the respondent-bank demanding peaceful possession of secured assets of the petitioners, which were mortgaged with the respondent-bank against a loan advanced to M/s Super Shiv Shakti Chemicals Private Limited, Bhilwara (for short 'the principal borrower').

2. Brief facts of the case are that the principal borrower obtained loan from the respondent-bank and in respect of the same, the petitioners stood as guarantors for repayment of the loan and created security interest of their residential houses in favour of the respondent-bank. When the principal borrower failed to repay the loan amount as per the terms and conditions of the loan agreement, the respondent-bank declared the debt as a NonPerforming Asset (for short 'NPA') on 30.3.2017 and recalled the advance granted to the principal borrower and notices under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the SARFAESI Act') were issued to the petitioners on 5.2.2019. When the petitioners have failed to pay the dues of the respondent-bank, notices under Section 13(4) of the SARFAESI Act were issued by the respondent-bank on 15.5.2019 and symbolic possession of the properties, description of which was mentioned in the notices, was taken by the respondent-bank. The property in question was put to auction under Rule 8(6) of the Security Interest (Enforcement) Rules.

3. The petitioners have preferred SBCWP Nos.17345/2019 and 17347/2019 before this Court claiming that without auctioning the property of the principal borrower, the respondent-bank is auctioning the residential properties of the petitioners. This Court, in the above-referred writ petitions, has passed order that the respondent-bank may carry out the auction proceedings of the petitioners' residential properties, but the same shall not be finalized with a further direction that the possession of the subject properties shall also not be taken from the petitioners, without leave of the Court. However, later on, the above referred writ petitions were withdrawn by the petitioners on 3.2.2021 with liberty to file fresh writ petition, as the respondent-bank has not conducted e-auction as per the notice issued by it.

4. Subsequently, the respondent-bank has filed application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short 'the IB Code') before the National Company Law Trilbunal, Jaipur (for short 'the NCLT') for initiation of Corporate Insolvency Resolution Process (for short 'the CIRP') against the principal borrower. Pursuant to that, a Resolution Professional was appointed to proceed the CIRP.

5. During pendency of the insolvency proceedings against the principal borrower before the NCLT, the respondent-bank has again issued notices on 11.2.2021 whereby, the residential houses of the petitioners were put to auction. The petitioners have again preferred SBCWP No.4070/2021 and 4092/2021 before this Court and this Court vide order dated 5.3.2021 has interfered in the matter and while issuing notices to the respondent-bank has ordered that the respondent-bank may carry out the auction proceedings of the petitioners' residential properties, but the same shall not be finalized with a further direction that the possession of the subject property shall also not be taken from the petitioners, without leave of the Court. On 9.3.2022, the above-referred writ petitions were dismissed as rendered infructuous by this Court while granting liberty to the petitioners to avail appropriate remedy available to them under the law, if occasion so arises, probably because the auction proceedings could not take place.

6. After that, the respondent-bank has issued notices to the petitioners under Section 13(4) of the SARFAESI Act on 16.5.2019, however, when the petitioners have failed to satisfy the liabilities,