Mr. V. Ramakrishnan had given personal guarantee to a corporate debtor with the Appellant-State Bank of India. He is considered as the personal guarantor by the State Bank of India under the subsection (22) of the section 5. As he is the personal guarantor the bank invoked its right to recover an amount of Rs. 61, 13, 28, 785.48/- under the Securitization and reconstruction of financial assets (SARFAESI ACT, 2002) and enforcement of security interest act, 2002 in 4th August, 2015. The corporate debtor challenged the note before the high court of Madras and was dismissed on 17th November. Possession note was issued by the State Bank of India on 18th November, 2016. The corporate debtor invoked I&B code and interim resolution professional was appointed by issuing Moratorium period. But the State Bank of India continued to take the essential measures under SARFAESI Act, 2002. The corporate debtor filed an application for stay at the Adjudicating Authority, Chennai and was successful to get the stay until the Moratorium period is completed. The I&B code of 2016 has been classified into three parts
- Insolvency resolution and liquidation for corporate persons
- Insolvency resolution and bankruptcy for individuals and partnership fis
The second point that is “Insolvency resolution and liquidation for corporate persons” states that the liquidation proceedings and insolvency resolution must be imposed only on corporate persons but not on any individual even if it is personal guarantor also the law is not applicable for him. Subsection 8 of the section 5 in the I&B code states that, even if the money wasn’t paid to the bank in time and has been disbursed making it a financial debt, the bank cannot impose any insolvency or liquidation proceeding against the personal guarantor as stated in the 2nd part of I&B code.
The part 3 of the I&B code gives a clear picture about the insolvency resolution and bankruptcy for the individuals and partnership firms. If a case has been filed against the corporate debtor and another case must be filed against the personal guarantor and make him involve in the case, then it is mandatory to file the same Adjudicating Authority hearing the insolvency resolution process or the liquidation process under the subsections 2 & 3 where the insolvency resolution process or bankruptcy process is proceeded for the personal guarantor. This gives a provision for the financial creditors like State Bank of India to proceed against the personal guarantor and invoke their right to claim the possessions of the personal guarantor. Approval of resolution plan which means the Adjudicating Authority is satisfied with the details provided by the corporate debtor, then the resolution act is imposed on the debtor, stakeholders, personal guarantors and the employees of the debtor. The Approval of resolution not only gives the Adjudicating Authority to impose the act on only debtors but it also states that the employees of the debtors are also considered. The “Moratorium” is for both corporate debtor and personal guarantor and thus the banks cannot interfere in the issue till 18th September, 2017.