STATE BANK OF INDIA versus V. RAMAKRISHNAN & ANR.

Citation: [2018] 10 S.C.R. 974 · Decided: 14-08-2018 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Appeal(s) allowed

Cited by 12 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2018] 10 S.C.R.
STATE BANK OF INDIA
v.
 V. RAMAKRISHNAN & ANR.
(Civil Appeal No. 3595 of 2018)
AUGUST 14, 2018
[R. F. NARIMAN AND INDU MALHOTRA, JJ.]
Insolvency and Bankruptcy Code, 2016: s.14 – Applicability
of, in case of personal guarantor – Whether s.14 of the Code which
provides for a moratorium for the limited period mentioned in the
Code, on admission of an insolvency petition, would apply to a
personal guarantor of a corporate debtor – Held: s.14 is applicable
only in case of corporate debtor – Said section does not mention
about the personal guarantor – So far as personal guarantors are
concerned, Part III has not been brought into force, and neither
has s.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
shall continue to be proceeded against under the aforesaid two
Insolvency Acts and not under the Code –  The scheme of s.60(2)
and (3) of the Code is clear – the moment there is a proceeding
against the corporate debtor pending under the 2016 Code, any
bankruptcy proceeding against the individual personal guarantor
will, if already initiated before the proceeding against the corporate
debtor, be transferred to the National Company Law Tribunal or, if
initiated after such proceedings had been commenced against the
corporate debtor, be filed only in the National Company Law
Tribunal – However, the Tribunal is to decide such proceedings
only in accordance with the Presidency-Towns Insolvency Act, 1909
or the Provincial Insolvency Act, 1920, as the case may be –
Presidency-Towns Insolvency Act, 1909 – Provincial Insolvency Act,
1920 – Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 – Banks/Banking.
Allowing the appeals, the Court
HELD: 1.1 Under Part II of the Code, which deals with
“Insolvency Resolution and Liquidation for Corporate Persons”,
a financial creditor or a corporate debtor may make an application
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[2018] 10 S.C.R. 974
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to initiate this process. Once initiated, the Adjudicating Authority,
after admission of such an application, shall by order, declare a
moratorium for the purposes referred to in Section 14.  [Para 16]
[989-E-F]
M/s. Sicom Investments and Finance Ltd. v. Rajesh
Kumar Drolia and Anr. (2017) SCC Online Bom 9725;
Sanjeev Shriya v. State Bank of India and Ors. (2018)
2 All LJ 769 (decided on 06.09.2017) – referred to
1.2  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 Section 14 does not apply to personal guarantors
of a corporate debtor. [Para 17] [989-F-H]
2.1  Section 60 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, 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
28.08.2017, the Government of India, through the Ministry of
Finance, cautioned that Section 243 of the Code, which provides
for the repeal of said enactments, has not been notified till date,
STATE BANK OF INDIA v. V. RAMAKRISHNAN & ANR.
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SUPREME COURT REPORTS
[2018] 10 S.C

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