Important judgment on Personal Guarantor liability

NCLT Mumbai Bench Order dt 20 August 2020 in the matter of SBI vs Anil Ambani

The NCLT has clarified the law with respect to initiation of insolvency proceedings against a Personal Guarantor irrespective of pendency of CIRP pending against the Corporate Debtor. Section 60(2) and Section 95 of IBC.

Reference was made to the judgement in the matter of Gauri Shankar Jain v. Punjab National Bank 2019 SCC Online Calcutta 7288 and State Bank of India v. Ramakrishnan: (2018) 17 SCC 394. 

The NCLT distinguished the judgement of NCLAT in Dr. Vishnu Kumar Agarwal v. M/s. Piramal Enterprises Limited (Company Appeal (AT) (Insolvency) No. 346 & 347 of 2018 decided on 08.01.2019 as not applicable to the case in hand.

The Calcutta HC in the matter of Gauri Shankar had looked into the matter and detail and confirmed that the "the liability of a guarantor of a debt of a corporate debtor does not stands reduced/extinguished upon an Insolvency Resolution Plan in respect of the corporate debtor, being approved under the Insolvency and Bankruptcy Code, 2016"

The NCLT has thus held that

"a discharge which the principal debtor may secure by operation of law in bankruptcy or in liquidation proceedings does not absolve the surety of his liability. The Hon?ble Court have also held that the fact that the Company i.e. principal debtor has gone into liquidation would not have any effect on the liability of the guarantor. The principle thus laid down applies on all fours to the case at hand. In view of such authoritative pronouncement by the Hon?ble Apex Court, it is clear that notwithstanding pendency of the Resolution Plans, the personal guarantor can be proceeded against under section 60(2) read with sections 95 and 97(3) of the Code."

A Resolution Professional has been appointed to initiate steps for insolvency plan against the personal assets of Anil Ambani in terms of Section 60 read with Section 95 & 97 of IBC 2016..