IA(I.B.C)/1988(KB)2024

in

C.P.(IB)/285(KB)2024

AnApplication under Section 95(1) of theInsolvency andBankruptcy Code,2016read with

Rule7(2) of theInsolvency andBankruptcy (Application toAdjudicating Authorityfor

Insolvency ResolutionProcess for Personal GuarantorstoCorporateDebtors)Rules, 2019

In thematter of:

UCOBank

…FINANCIAL CREDITOR

Versus

Rahul Gupta

…RESPONDENT/PERSONALGUARANTOR

Dateofpronouncement: 08/01/2025

CORAM:

Smt. BidishaBanerjee, Member (Judicial)

ShriD.Arvind, Member (Technical)

Appearance(via videoconferencing/physically)

Forthe Financial Creditor

Ms.Pallavi Ray, Adv.

Mr. Rahul Sharma, Adv.

OR DE R

Per:Bidisha Banerjee,Member (Judicial)

1. TheCourt Convened in a hybrid mode.

2. This C.P. (IB)/ 285 (KB)2024 has been preferred by the Financial Creditor to seek

initiation of Insolvency Regulation Process against the Respondent Personal Guarantor to Corporate Debtor Rule, 2019 (“Personal Guarantors Rules”) and Regulation 4(2) of IBBI (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 (‘Personal Guarantors Regulations’) in terms of Section 99 (1) of the Insolvency and Bankruptcy Code, 2016 read with applicable

Regulation of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors), 2016.

3. In terms of Section 99 of the IBC, report was called for from the RP appointed in the matter, namely, Mr. Sudipta Ghosh, the RP has forwarded the following report prayer in terms ofSection 99(7) ofIBC, which is extracted hereunder for clarity: -

4. A bare perusal of the report extracted above indicates that no Corporate Insolvency Resolution Process or CIRP has been initiated against the principal borrower M/s HARIDRA VINTRADE PRIVATE LIMITED.

5. At hearing it was argued that in absence of any CIR proceeding initiated against the principal borrower the present petition under Section 95(1) seeking to initiate insolvency proceedings against the Personal Guarantor of the Principal Borrower is not maintainable before this Adjudicating Authority i.e., NCLT. It would eventually liebefore thejurisdictional theDebt Recovery Tribunal (DRT.

6. Thus, the issues that have cropped up for determination in the present matter are two folds are:

(i) Whether proceedings against Personal Guarantor under Section 95 of the Code is maintainable even when no CIRP proceedings have been initiated against the Corporate Debtor/ Principal Borrower (ii) Whether the present application under Section 95(1)

of the Code against the Personal Guarantor would be maintainable before this forum, or should the creditor approach the Learned Debt Recovery Tribunal (DRT) for its relief.

7. To determine the same, we would refer to a few statutory provisions in this context as under:

A. Liability of the Personal Guarantors is co-extensive with the Principal Debtor:

Section 128 of the Indian Contract Act, 1872, stipulates that the liability of the surety or guarantor is co-extensive with the principal debtor unless it is otherwise provided by the contract.

There is no quarrel over the proposition and the celebrated decisions of Lalit Kumar Jain v. Union of India reported in (2021) 9 SCC 321 and Dilip B Jiwrajka vs Union of India & Ors. in Writ Petition (Civil) No. 1281 of 2021 also propound the same.

B. Adjudicating Authority for Personal Guarantors:

Section 179 of the I&B Code, 2016, expressly stipulates what would be the Adjudicating Authority for individuals and partnership firms. It lays down the following:

179. (1) Subject to the provisions of section 60, the Adjudicating Authority, in relation to insolvency matters of individuals and firms shall be the Debt Recovery Tribunal having territorial jurisdiction over the place where the individual debtor actually and voluntarily resides or carries on business or personally works for gain and can entertain an application under this Code regarding such person.

(2) The Debt Recovery Tribunal shall, notwithstanding anything contained in any other law for t