Insolvency Application Against Personal Guarantor Is Maintainable U/S 60(1) Of IBC Even If No CIRP Process Is Pending Against CD: NCLAT

The NCLAT New Delhi bench of Justice Ashok Bhushan and Mr. Arun Baroka has held that an application under section 95 of the Insolvency and Bankruptcy Code against the personal guarantor is maintainable before the NCLT under section 60 of the code even if no CIRP or Liquidation process is initiated or pending against the corporate debtor before the NCLT. Based on the above, the tribunal held that the applicability of section 60 of the code cannot be ruled out which means that the Adjudicating Authority for the purpose of entertaining the application against the personal guarantor shall be the NCLT even if under section 60 of the code it is stated that when an insolvency or liquidation proceedings against the corporate debtor before the NCLT then application against the personal guarantor of the CD should also be filed before the NCLT. In State Bank of India vs. Mahendra Kumar Jajodia the NCLAT held that “the Application having been filed under Section 95 and the Adjudicating Authority for application under Section 95 as referred in Section 60 being the NCLT, the Application filed by the Appellant was fully maintainable and could not have been rejected only on the ground that no CIRP or Liquidation Proceeding of the Corporate Debtor are pending before the NCLT.” Based on the above, the tribunal observed that the above fully covers the present case which means that an application under 95 can be filed against the personal guarantor before the NCLT even if no insolvency or liquidation proceedings are pending against the corporate debtor before the same NCLT. Based on the above, the tribunal concluded that “from the above it is clear that with regard to maintainability of Application under Section 95 by a Financial Creditor against a Personal Guarantor, even if no insolvency resolution process or liquidation proceedings of a Corporate Debtor is pending, has been held to be maintainable and the view taken by this Appellate Tribunal in Mahendra Kumar Jajodia has also received the approval of the Hon'ble Supreme Court.” Accordingly, the present appeals were dismissed.