The Single Bench of the Delhi High Court in the case of Sanjay Sarin vs The Authorised Officer, Canara Bank & Ors. consisting of Justice Sanjeev Narula observed that discharge of the corporate debtor from a debt owed by it to its creditors, by way of an involuntary process such as insolvency proceedings, does not absolve the guarantor of its liability since it arises out of an independent contract.
Facts
The Petitioner, who stood as a guarantor to a loan facility, was aggrieved with the recovery action initiated by the bank, against the borrower and himself, under the SARFAESI Act, 2002. According to him, once a resolution plan qua the borrower was approved u/s 31 of the under the Insolvency and Bankruptcy Code, 2016, the bank’s claims stood addressed. Thus, it could not have sought recovery for amounts over and above the amount approved by the NCLT and sought a mandamus to that effect. If the petition was maintainable for the above reliefs, was the short question before this court.
Contentions Made
Petitioner: The impugned SARFAESI action was initiated to recover amounts more than the resolution plan which is ex facie illegal and ultra vires the approval order of the NCLT. On a conjoint reading of Section 31(1) and 238 of IBC, it is evident that the provisions of the IBC must prevail, and therefore, the proceedings initiated by Respondent No. 1 after the approval of the resolution plan are in contravention of the IBC. Any deviation from the terms laid out in the resolution plan is detrimental to the interest of the majority stakeholders, and therefore, the Court should intervene and interdict the proceedings initiated by the bank under Section 13(4) of SARFAESI Act.
Respondent: The remedy available with the Petitioner, if any, in respect of Section 13(4) of the SARFAESI Act, cannot be exercised before this Court. Petitioner, as a guarantor, is not discharged of its liability on account of sanction and approval of a resolution plan by the NCLT.
Observations of the Court
Relying on Phoenix ARC Pvt. Ltd. v. Vishwa Bharti Vidya Mandir & Ors the Bench reiterated that where proceedings are initiated under the SARFAESI Act, and the borrower is aggrieved by any of the actions of the bank for which the borrower has remedy under the SARFAESI Act, no writ petition should be entertained.
Relying on Lalit Kumar Jain v. Union of India, it was also noted that discharge of the corporate debtor from a debt owed by it to its creditors, by way of an involuntary process such as insolvency proceedings, does not absolve the guarantor of its liability since it arises out of an independent contract. Thus, the passing of a resolution plan does not ipso facto discharge the personal guarantor.
It further noted that u/s 33(3) of IBC, Respondent No. 1 has the right to proceed against the collateral securities for recovery of its dues which are independent of the resolution plan approved by the NCLT.
Judgment
The Bench did not find any merit in the present petition, which was dismissed accordingly.
Case: Sanjay Sarin vs The Authorised Officer, Canara Bank & Ors.
Citation: W.P.(C) 2983/2022 & CM APPL. 8630/2022
Bench: Justice Sanjeev Narula
Decided on: 8th August 2022
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