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Section 96 of IBC does not provide any immunity to Debtor in the matter of proceedings under RBI Master Circular for Willful Default | Recovery proceedings or insolvency proceedings will have no bearing on willful default proceedings under RBI Master Circular against Debtor – Jagdish Prasad Saboo v. IDBI Bank Ltd. – Gujarat High Court

Hon’ble Gujarat High Court held that:
(i) A careful reading of Section 96 would indicate that the interim moratorium which commences on the date of the application is ‘debtcentric’. It will apply in relation to all the debts and the legal action or proceedings pending in respect of the debt which shall deemed to have been stayed. The creditors of the debtor are prohibited from initiating any legal action or proceedings in respect of any debt. Section 96 does not provide any immunity to the debtor in the matter of the proceedings under the RBI Master Circular for ‘willful default’.
(ii) The interim moratorium commenced under Section 96 will apply only to such legal action or proceedings, which are in respect of recovery of any debt and does not apply to any action against the debtor, which does not have any relation to the restructuring of debts, which would have to be included in the repayment plan to be prepared under Section 105 of the Code on admission of the application by the adjudicating authority.
(iii) Recovery proceedings or the proceedings under Section 96 of the IBC or the insolvency proceedings, in our considered opinion, would have no bearing on the willful default proceedings, which only aim at dissemination of information of the default already committed.

Section 96 of IBC does not provide any immunity to Debtor in the matter of proceedings under RBI Master Circular for Willful Default | Recovery proceedings or insolvency proceedings will have no bearing on willful default proceedings under RBI Master Circular against Debtor – Jagdish Prasad Saboo v. IDBI Bank Ltd. – Gujarat High Court Read Post »

Whether the interim moratorium under Section 96 of IBC pertaining to personal insolvency proceedings will bar the proceedings under Section 7 against Corporate Debtor(Principal Borrower) – Furnace Fabrica (India) Ltd. Vs. State Bank of India – NCLT Kochi Bench

In this case, application filed by Corporate Debtor to stay CIRP proceedings u/s 7 of IBC, in view of the interim moratorium continuing in the matter of personal insolvency resolution of the guarantors of the Corporate Debtor.

NCLT Kochi Bench held that:

(i) Moratorium u/s 96 will only affect the debts of the personal guarantor.
(ii) The cause of action for section 7 is the default in loan repayment by CD whereas the cause of action of section 95 is the non-payment of debt on invocation of guarantee. Both are separate contracts governed under the contract act and remedy under one contract shall not extinguish the other in law.
(iii) The word “in relation to” and “any” in Section 96 which is the primary contention of the applicant cannot be stretched to mean that the debt of guarantor which are also debts of the CD in first instance, and all the proceedings which arise out of these debts come under moratorium.
(iv) Any action against the particular guarantor/debtor pertaining to these debts shall be in moratorium. It does not curtail the right of cause of action from separate contractual arrangements.
(v) The moratorium under section 96 is having larger scope than moratorium under section 14 but the liability falls from different persons in the eye of law.
(vi) The FC has the right to move against either or both the CD and personal guarantor simultaneously, independently or jointly. Any other interpretation of the word ‘moratorium’ will defeat the purpose envisaged in IBC.
(vii) The moratorium under section 96 and 101 of the Code cannot be meant to prohibit the right to action under section 7 or 9 or 10 of IBC which lie against a company or body corporate and not against an individual as under PIRP.

Whether the interim moratorium under Section 96 of IBC pertaining to personal insolvency proceedings will bar the proceedings under Section 7 against Corporate Debtor(Principal Borrower) – Furnace Fabrica (India) Ltd. Vs. State Bank of India – NCLT Kochi Bench Read Post »

Interim Moratorium under Section 96 of IBC cannot be extended to the proceedings with respect to a borrower, who has been declared as a Wilful Defaulter – Jagdish Prasad Saboo Vs. IDBI Bank Ltd. – Gujarat High Court

Hon’ble High Court held that the intention of the moratorium, granted under Section 96 of the IBC cannot be extended to the proceedings with respect to a borrower, who has been declared as a Wilful Defaulter. The interim moratorium under Section 96 of the IBC can be referred only to the debt, as mentioned therein. The Apex Court in the case of P Mohanraj has not dealt with the aspect of Wilful Defaulter and has only confined its observations with regard to the proceedings under Section 138 of the N.I. Act and with regard to recovery proceedings of debt, as envisaged under Section 96 of the IBC. The proceedings of declaring the borrower, as per the master circular as a Wilful Defaulter, are in absolutely different realm than the recovery proceedings of debt and hence, the provision of Section 96 of the IBC cannot be extended to the petitioner, which has been declared as Wilful Defaulter.

Interim Moratorium under Section 96 of IBC cannot be extended to the proceedings with respect to a borrower, who has been declared as a Wilful Defaulter – Jagdish Prasad Saboo Vs. IDBI Bank Ltd. – Gujarat High Court Read Post »

Interpretation of the phrases “all the debts” and “any legal actions or proceedings pending in respect of any debt” as are referred to in Section 96 of IBC and proceedings under Section 138 of NI Act, 1881 even a cheque was issued by the Personal Guarantor in his personal capacity and was not in any manner in discharge of any corporate debt – Vijay Kumar Ghai Vs. Pritpal Singh Babbar – Punjab & Haryana High Court

Whether criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881, would also remain stayed in terms of Section 96 of the Code, even where the cheque in question was not issued to discharge a corporate debt, though issued by a personal guarantor qua a corporate debtor. The Hon’ble High Court held that personal guarantors to corporate debtors are to be treated differently from other categories of individuals who would be covered by Part III of the Code, with it to be again observed that personal guarantors have however only been defined in Section 5(22) falling in Part II thereof and not in Part III. Though in the opinion of this court otherwise a proceeding under Section 138 of the Act, qua a debt as is wholly incurred qua an individual who is not in any manner connected to the corporate debtor that the petitioner stood a personal guarantor for, nor to the corporate debt itself, would need to proceed independently so as not to make the complainant in such proceedings under Section 138 suffer further delays, especially when in the present case he has already suffered a delay of about 10 years since his complaint was initially filed, however, in the light of the aforesaid observations as also the fact that Section 96 of the Code does not specifically carve out any exception qua such a debt as is subject matter of an instrument in the context of which a complaint under Section 138 of the Act has been filed, this court would have to interpret the terms “all the debts” and “any legal action or proceedings pending in respect of any debt” as occur in Section 96 of the Code, to mean that it would cover all such debts including any debt not pertaining to a corporate debtor for whom the accused in such a complaint under Section 138 stood as a personal guarantor to, even in his capacity as a Director of such corporate debtor.

Interpretation of the phrases “all the debts” and “any legal actions or proceedings pending in respect of any debt” as are referred to in Section 96 of IBC and proceedings under Section 138 of NI Act, 1881 even a cheque was issued by the Personal Guarantor in his personal capacity and was not in any manner in discharge of any corporate debt – Vijay Kumar Ghai Vs. Pritpal Singh Babbar – Punjab & Haryana High Court Read Post »

No notice is required to be issued to the Personal Guarantor at the initial stage when the Resolution Professional is appointed – M/s Siemens Financial Services Pvt. Ltd. Vs. Mr. Vinod Sehwag – NCLT New Delhi Bench Court-II

Adjudicating Authority passed ex parte order without issuing notice to the Applicant and appointed RP on application filed u/s 95 against Personal Guarantor. The same is challenged.
NCLT held that there is no separate provision available in the Code for this AA to either impose or suspend the interim moratorium, till the time the Application is actually admitted or rejected and initiation of the interim-moratorium under Section 96 causes no prejudice to the Personal Guarantor.
The intention of legislature is not to make this Adjudicating Authority- a trial court at the time of appointing RP under Section 97. The Adjudicating Authority is empowered under Rule 51 of NCLT Rules, 2016 to regulate its own procedure and further decide what shall be the appropriate stage of issuing notice. The stage of issuance of notice shall come when the RP shall recommend in his report that the IR Process may be initiated against the Personal Guarantor. Then, before initiating the IR Process, a notice shall be issued to the personal guarantor as to why the IR Process shall not be initiated against it. The Scheme of Insolvency Resolution Process in Chapter III of the IBC, 2016 does not warrant and provide issuance of notice at the stage of appointing RP under Section 97 of IBC, 2016 for the purpose of examining an Application preferred under Section 95 of IBC, 2016 and it does not amount to violation of the Principles of Natural Justice.

No notice is required to be issued to the Personal Guarantor at the initial stage when the Resolution Professional is appointed – M/s Siemens Financial Services Pvt. Ltd. Vs. Mr. Vinod Sehwag – NCLT New Delhi Bench Court-II Read Post »

Whether the institution or continuation of a proceeding under Section 138/141 of the Negotiable Instruments Act can be said to be covered by the moratorium provision under Section 14 of the IBC – P. Mohanraj & Ors. Vs. M/s. Shah Brothers Ispat Pvt. Ltd. – Supreme Court

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Whether the institution or continuation of a proceeding under Section 138/141 of the Negotiable Instruments Act can be said to be covered by the moratorium provision under Section 14 of the IBC – P. Mohanraj & Ors. Vs. M/s. Shah Brothers Ispat Pvt. Ltd. – Supreme Court Read Post »

Section 14(3) of the Code (introduced vide 2018 amendment) which states that provisions of moratorium shall not apply to a surety in a contract of guarantee for corporate debtor, is retrospective – State Bank of India Vs. V. Ramakrishnan & Anr.- Supreme Court

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Section 14(3) of the Code (introduced vide 2018 amendment) which states that provisions of moratorium shall not apply to a surety in a contract of guarantee for corporate debtor, is retrospective – State Bank of India Vs. V. Ramakrishnan & Anr.- Supreme Court Read Post »

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