India: Case Note: Section 14 IBC- A Bar For Proceedings Against Guarantor Before Debt Recovery Tribunal (DRT)

In the case of Sanjeev Shriya v. State Bank of India and Ors. Writ C No. 30285 of 2017 connected with Deepak Singhania and Another v. State Bank of India, Writ C No. 30033 of 2017, the Hon'ble Allahabad High Court has decided the question of the liability of personal guarantors of a company where moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (Code) is in force.

Factual background:

The petitioners were ex-directors of M/s LML Limited (Company) and they had executed a deed of guarantee dated 28.03.2005 in favor of State Bank of India (SBI). The Company was declared as sick industrial company by the Board of Industrial and Financial Reconstruction on 08.05.2007. Thereafter, SBI filed an application under Section 19(3) of the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) before Hon'ble DRT for recovery of debt against the Company as principal borrower and the petitioners as the guarantors. An interim order dated 30.03.2017 was passed by Hon'ble DRT requiring the Company and the guarantors to disclose particulars/ assets specified by SBI. Meanwhile, the Company approached the Hon'ble Adjudicating Authority (NCLT, Allahabad) by preferring a company petition under Section 10 of the Code seeking initiation of corporate insolvency resolution procedure. The Hon'ble Adjudicating Authority, vide its order dated 30.05.2017 admitted the application and declared moratorium under Section 14. In furtherance to the order of the Hon'ble Adjudicating Authority, the petitioners sought a stay of the DRT proceedings on the grounds that the matter is pending before Hon'ble Adjudicating Authority and that moratorium has been issued. On 06.07.2017, Hon'ble DRT passed an order stating that the Hon'ble Adjudicating Authority's order dated 30.05.2017 is qua proceedings only against the Company and there is no order to restrain proceedings against individual guarantors/ mortgagors. The petitioners have challenged the order dated 06.07.2017 passed by the Hon'ble DRT.


Whether SBI can be allowed to pursue proceedings, under Section 19 of the RDB Act, for recovery of loan amount taken by the Company before Hon'ble DRT against the guarantors when the Hon'ble Adjudicating Authority has already issued moratorium under Section 14 of the Code?

Petitioner's submissions:

It was submitted by the petitioners that the proceedings before Hon'ble DRT is without jurisdiction, as the insolvency proceeding has commenced under the Code and moratorium has been issued under Section 14 and the parties have already appeared before the interim resolution professional. It was argued that Hon'ble DRT cannot adjudicate upon any claims of alleged debt and without crystallization/ determination of debt, Hon'ble DRT cannot proceed against the guarantors. The action initiated by Hon'ble DRT is contradictory to the aim and object of the Code, which has been enacted to consolidate and amend the laws relating to re-organization and insolvency resolution. Further, Hon'ble DRT has erred in law while interpreting the order of the Hon'ble Adjudicating Authority - to state that there is neither any specific order by the Hon'ble Adjudicating Authority nor there is any restriction to proceed against individual guarantors.

Respondent's submissions:

The Respondent has raised a preliminary objection stating that the writ petition is liable to be dismissed because of availability of efficacious alternative remedy, that is, the validity of DRT order can be challenged before the Hon'ble Debt Recovery Appellate Tribunal. It was argued that under the Code, there is no restriction on proceedings against the guarantor independently and that the rights of the bank are flowing from the deed of guarantee executed by the petitioners. Further, the recovery proceedings were initiated by the bank - before the Hon'ble DRT - prior to the Hon'ble Adjudicating Authority's order dated 30.05.2017 and the said order does not affect the DRT proceeding against petitioners as guarantors.


It was held by the Hon'ble High Court that the liability of the Company and petitioners is co-extensive but the entire proceeding is still in a fluid stage and for the same cause of action, two split proceedings cannot go simultaneously before Debt Recovery Tribunal as well as National Company Law Tribunal. It was held that the liability has not been crystallized either against the principal debtor or guarantors and hence, the proceeding pending before the Hon'ble Debt Recovery Tribunal cannot continue and the same was stayed till finalization of corporate insolvency resolution process or till the Hon'ble National Company Law Tribunal approves the resolution plan under Section 31 or passes an order for liquidation of corporate debtor under Section 33, as the case may be.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions