Kiran Gupta Vs State Bank of India & Another.
WP(C) 7230/2020 decided on 4th November,2020
Whether bank can institute or continued with proceedings against a guarantor under SARFESI Act when proceedings are the principal borrowers are pending under the Insolvency Code.
The above question of law was argued by the State Bank by relying on the decision of the Apex court in the case of State Bank of India Vs V Ramakrishnan and another (2018) 17 SCC 394(SC) that Section 14 and 31 of the Insolvency Code do not bar initiation and continuation of proceedings against the Guarantyor under the SARFESI Act. The court agreeing with the above in addition noted the provisions of SEction 128 ofthe Contract Act dea;lying providing that liability of a guarantor is co-extensive with that of the principal debtor and not in the alternative, and it cannot be said that proceedings in the NCLT against the principal debtor can be a bar to institution or continuation of proceedings against the guarantor under the SARFAESI Act.

In the above case family house was put to auction. Thus, it is needless to mention that efforts should be made to safeguard the family jewels by planning a discretionary trust and avoid giving guarantee of family jewels.

Ramesh Patodia
05-11-2020