Bar under Section 68 of Transfer of Property Act, 1882 cannot be extended to proceedings u/s 95 of the IBC | Merely because a Secured Creditor has taken action to realise/enforce its security interest, the secured creditor is not precluded from initiating insolvency resolution process of the Personal Guarantor | There cannot be dismissal of the insolvency proceedings merely on account of failure of the assignee to make necessary amendments to the cause title and the captioned Petition – YES Bank Ltd. Vs. Mrs. Sakshi Jiwarajka Personal Guarantor to JSK Marketing Ltd. – NCLT Mumbai Bench
Hon’ble NCLT Mumbai Bench held that:
(i) It is trite to say that proceedings under Section 95 of the Code is for insolvency resolution of the Personal Guarantor to the Corporate Debtor and not for mere recovery of debt by the creditor. Therefore, the bar u/s 68 which applies to suits for mortgage money, cannot be extended to proceedings u/s 95 of the Code as the debt recovery proceedings and the insolvency resolution process stand on totally different footing.
(ii) Merely because a secured creditor has taken action to realise/enforce its security interest in the mortgaged property, the secured creditor is not precluded from initiating insolvency resolution process of the Personal Guarantor unless of course the debt is recovered in full.
(iii) Mere assignment of debt cannot be said to be a variance in the terms of the contract between the principal debtor and the creditor. After assignment of debt, the assignee steps into the shoes of the creditor and exercises the same rights under the contract which the assignor/erstwhile creditor had against the debtor.
(iv) There cannot be dismissal of the insolvency proceedings initiated by the Petitioner herein merely on account of failure of the assignee to make necessary amendments to the cause title and the captioned Petition to continue to proceedings especially when the substitution application was already allowed by this Court.