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HIGH COURT OF KERALA
AMIT RAWAL, J
M.K.ASHRAF, – Appellant
Versus
STATE BANK OF INDIA, – Respondent
Based on the provided legal document, the key points are as follows:
The court clarified that the moratorium under the Insolvency and Bankruptcy Code (IBC) does not extend to personal guarantors of corporate debtors. Therefore, banks are permitted to initiate recovery proceedings against personal guarantors under the SARFAESI Act, even during the moratorium period (!) .
The judgment emphasizes that Section 14 of the IBC explicitly pertains only to corporate debtors and does not mention personal guarantors. Consequently, the moratorium does not apply to actions against guarantors (!) .
The provisions of the IBC, particularly Sections 60 and 2(e), do not automatically extend the moratorium to personal guarantors. The insolvency resolution process under the IBC applies primarily to corporate entities, with individual guarantors continuing to be governed by existing insolvency laws unless specific notifications are made (!) (!) .
The court noted that the legal framework and the current notification status indicate that proceedings against personal guarantors are still permissible under existing laws, including the SARFAESI Act, regardless of the moratorium issued against the corporate debtor (!) .
The final decision was to dismiss the writ petition, affirming that the bank's recovery actions against the personal guarantor are valid and not barred by the moratorium under the IBC (!) .
The judgment references relevant legal provisions and procedural notices but clarifies that the applicable laws and notifications do not prevent recovery proceedings against personal guarantors during a moratorium period (!) (!) .
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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 S
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