Summary
The tribunals extended a corporate debtor’s insolvency moratorium to its managing director as personal guarantor and restrained the bank from proceeding against him. The Supreme Court held that Section 14 protected the corporate debtor alone, distinguished the separate individual-insolvency scheme, and treated the 2018 exclusion of sureties as clarificatory and retrospective.
Issues
- Whether a corporate debtor’s Section 14 moratorium also protected its personal guarantor.
- Whether Sections 31 and 60 or the individual-insolvency provisions supported extension of that moratorium.
- Whether the 2018 amendment excluding sureties applied retrospectively.
Provisions considered
- Section 14, including amended Section 14(3)(b), Insolvency and Bankruptcy Code, 2016The corporate moratorium did not extend to personal guarantors; the express 2018 surety exclusion clarified that existing position and operated retrospectively. (¶¶ 14, 17, 23, 25, 27, 28, 29)
- Section 31(1), Insolvency and Bankruptcy Code, 2016A resolution plan’s binding effect on guarantors did not confer moratorium protection; it supported continuation of their payment obligations. (¶¶ 14, 22)
- Sections 2(e) and 60(2)–(4), Insolvency and Bankruptcy Code, 2016The jurisdictional scheme for personal-guarantor bankruptcy did not bar SARFAESI proceedings or extend Section 14. The Court considered the limited commencement position then prevailing. (¶¶ 10, 14, 18, 19, 20, 21)
- Sections 96 and 101, Insolvency and Bankruptcy Code, 2016Their separate debt-based moratoria contrasted with Section 14’s corporate-debtor protection; the Court used them for interpretation despite their then-uncommenced status. (¶¶ 14, 23, 24)
Held
- Section 14 repeatedly refers to the corporate debtor and its property, without extending its protection to personal guarantors. SARFAESI proceedings against the personal guarantor could therefore continue notwithstanding the corporate insolvency process. (¶¶ 17, 20)
- Sections 2(e) and 60 dealt with the applicable insolvency forum and did not convert SARFAESI enforcement into bankruptcy or confer the corporate moratorium on the guarantor. The individual-insolvency provisions had not been brought into force at the time addressed by the judgment. (¶¶ 19, 20, 21)
- A binding resolution plan under Section 31 did not relieve a guarantor through Section 14. The separate moratoria in Sections 96 and 101, framed by reference to debts, reinforced the distinction from corporate-debtor protection. (¶¶ 22, 23, 24)
- The 2018 amendment expressly excluding a surety in a guarantee to a corporate debtor clarified what was already implicit in Section 14. The legislative history and Insolvency Law Committee report supported retrospective operation of that clarification. (¶¶ 25, 27, 28, 29)
Result
Appeals allowed; the tribunal judgment extending the corporate moratorium to the personal guarantor was set aside.