Proceedings against the personal guarantor of a corporate debtor may be pursued independently

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Supreme Court bench made up of Justice S Abdul Nazeer and Justice Vikram Nath see its decree of 06.05.2021 in the event of Mahendra Kumar Jajodia v State Bank of India Civil Appeal No. 1871/2022) dismissed the civil appeal against the judgment of the National Company Law Appeals Tribunal (NCLAT) in the case of SBI vs. Mahendra Kumar Jajodia.

The NCLAT held that even in the absence of any ongoing corporate insolvency resolution or winding-up proceedings, the claim under Section 95(1) of the Bankruptcy Insolvency Code 2016 against the personal guarantors of the debtor company is maintained under Article 60(1) of the Code before the National Court of Companies with territorial jurisdiction of the place of the registered office of the Legal Person.

There was confusion as to where the insolvency proceedings will be filed against the personal guarantor and the NCLAT voids its order of 01.27.2022 authorized the same, but the confusion continues as the Supreme Court voids its order of 2022.03.21 relying on submissions in Lalit Kumar Jain v Union of India, 2021 (9) SCC 321 stayed the execution of NCLAT Judgment.

NCLAT, in its order dated 27.01.2022, upheld the appeal filed by State Bank of India against the order dated 05.10.2021 of NCLT Kolkata in which NCLT Kolkata dismissed the claim filed by SBI under section 95 of the code on the ground that since no CIRP or liquidation is pending against the debtor company, the claim under section 95 is not admissible before the NCLT. The NCLAT quashed the order and found that;

“11. The Adjudicatory Authority erred in finding that since no CIRP or Liquidation Proceedings of the Debtor Company are pending, the petition under Article 95(1) filed by the Appellant is inadmissible The request having been filed under Article 95(1) and the Adjudicating Authority for the request under Article 95(1) as referred to in Article 60 (1) being the NCLT, the Claim filed by the Appellant was fully admissible and could not be dismissed on the sole ground that no CIRP or Liquidation Proceeding of the Debtor Company is pending before the NCLT. the order of October 05, 2021 made by the contracting authority. law. ”

The Supreme Court has now voided its order of 06.05.2022 dismissed the appeal and upheld the NCLAT order of 01.27.2022 stating that we find no compelling reason to interfere with the NCLAT order and, therefore, a Code Section 95 application may be filed against the debtor company’s personal guarantor before NCLT even if there is no CIRP or liquidation proceeding pending against the debtor company before such NCLT.

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