The court clarified that the moratorium under the IBC does not protect personal guarantors, allowing banks to proceed with recovery under the SARFAESI Act.

JUDGMENT

The petitioner an Ex NRI, promoter and a guarantor to the principal borrower, has approached this court challenging the action of the Bank under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), in view of the fact that order under section 14 of the Insolvency and Bankruptcy Code, 2016 has been issued fixing a time line moratorium. Section 60 of the aforementioned Code prohibits the Bank to initiate the proceedings against the personal debt. Since, the bank cannot initiate the steps to recover the amount under SARFAESI Act, in view of the moratorium issued under Section 14 of the Code against the principal borrower, impugned action has been taken against the property belonging to the petitioner being personal guarantor. In view of provision of (1) of the Code of 2016, if any action initiated under SARFAESI Act is without jurisdiction, the remedy is to approach the National Company Law Tribunal.

2. The learned Counsel for the bank submits that the proposition as scouted out is already covered by the judgment of the Honourable Supreme Court inState Bank of India v. V. Ramakrishnan and Another [ (2018) 17 SCC 394 ], holding that Bank is not prevented from initiating the proceedings under the SARFAESI Act against the personal guarantor, de hors moratorium under Section 14 .

3. Having heard the learned counsel for the parties, I am of the view that the proposition as attempted to be build up during the course of hearing is not able to cut ice to bring the case within the realm of Article 226 of the Constitution of India.

4. It would be relevant to mention paragraphs 20, 21, 22, 24 of the judgment referred in State Bank of India (supra).

20. Section 14 refers to four matters that may be prohibited once the moratorium comes into effect. In each of the matters referred to, be it institution or continuation of proceedings, the transferring, encumbering or alienating of assets, action to recover security interest, or recovery of property by an owner which is in possession of the corporate debtor, what is conspicuous by its absence is any mention of the personal guarantor. Indeed, the corporate debtor and the corporate debtor alone is referred to in the said section. A plain reading of the said section, therefore, leads to the conclusion that the moratorium referred to in can have no manner of application to Personal guarantors of a corporate debtor

21. However, Section 2 (e) and Section 60 are strongly relied upon by the learned counsel for the respondents as, according to them, the Code will apply personal guarantors of corporate debtors, and by , proceedings against such personal guarantors will show that such moratorium extends to the guarantor as well. 22. We are afraid that such arguments have to be turned down on a careful reading of the sections relied upon. of the Code, in sub-section (1) thereof, refers to insolvency resolution and liquidation for both corporate debtors and personal guarantors, the adjudicating authority for which shall be the National Company Law Tribunal, having territorial jurisdiction over the place where the registered office of the corporate person is located. This sub-section is only important in that it locates the Tribunal which has territorial jurisdiction in insolvency resolution processes against corporate debtors. So far as personal guarantors are concerned, we have seen that Part III has not been brought into force, and neither has Section 243, which repeals the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920. The net result of this is that so far as individual personal guarantors are concerned, they will continue to be proceeded against under the aforesaid two Insolvency Acts and not under the Code. Indeed, by a Press Release dated 28-8-2017, the Government of India, through the Ministry of Finance, cautioned that Section 243 of the Code, which provides for the repeal of the said e