SANJEEV SHRIYA V. STATE BANK OF INDIA 

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INTRODUCTION

In the case of Sanjeev Shriya v. State Bank of India and 6 other, the Hon’ble Allahabad High Court has barred parallel proceedings in Debt Recovery Tribunal [DRT] and National Company Law Tribunal [NCLT] The state bank of india filed a petition under section 19[3]  of recovery of debt due to bank and financial institution act, 1993. The High Court, in exercise of its writ jurisdiction, by the present order under analysis, however, set aside the order of the DRT and has stayed proceedings against the directors as well .The high court gave a decision in favour of guarantee [petitioner].

FACTS OF THE CASE

The case facts are that the petitioner is also the director of M/S L.M.L Limited, Kanpur (“Company”) who executed a deed of guarantee in favour of State Bank of India [SBI] for a loan granted by SBI to the Company [AS A DEED] after that the company was declared as a “SICK INDUSTRIAL COMPANY” and it was declared by the board of industial and financial reconstruction. In 2017 the state bank of india filed an original application under section 19[3] of recovery of debt due to bank and financial institution act ,1993 [ THE RDDB, ACT OF 1993]. 

As the petitioners were guarantors of the corporate debtor and SBI filed application  before the Debt Recovery Tribunal, Allahabad [DRT] for recovery of the amount due to it against the corporate debtor. Subsequently, the Company approached the NCLT under Section 10 of the Insolvency and Bankruptcy Code, 2016 to initiate a Corporate Insolvency Resolution Process [CIRP]. The NCLT admitted the application and declared an adjournment [MORTORIUM] on proceedings against the Company [NCLT ORDER] under section 14 of code . After that order the guarantee approached Allahabad high court against the said order of NCLT and filed a petition.

ISSUES RAISED

The main issue of that case was whether the creditor could be allowed to pursue proceedings under recovery of debt due to bank and financial institution act ,1993 when the NCLT had already issued adjournment order under code ?

CONTENTIONS OF PETITIONER

• The petitioner raised the substantial question of law as whether the SBI is allowed to pursue proceedings under section 19[3] of the act 1993 for the recovery of loan of the amount that is taken by the company before DRT ?
• also argued that the respondent had deliberately moved to NCLT just to take advantage of present proceedings and the proceedings before DRT were without the jurisdiction even the adjournment order has been issued thus, it would prevail the provision of 1993 act 
• the action made by DRT were contradictory to the code 

CONTENTIONS OF RESPONDET 

• The respondent argued that there is no provision under the code which restrict the independent guarnteer to present in the proceedings as its the right under deed of guarantee
• also there is no coincide between DRT proceedings for recovery of debt and NCLT proceedings

JUDGEMENT

The court held that there is something to change in order or something that is unstable which is said by the court of Allahabad that the proceedings are in a fluid stage . The Court also held went on to stay the proceedings against the guarantors before the DRT. Furthermore, it was held that compensation has been provided under the code and the liability of the Company has not yet cleared against either the principal debtor or the guarantors.

Also the high court reffered to a certain earlier decision to hold that unless the liability of debtor is determined the guarntors could not be held liable and because of having fluid stage the proceedings shall not be continued and it should be avoided.. 

The court stayed their proceedings until the DRT finallised their decision for corporate insolvency 11. It has been submitted that Section 6 (Corporate Insolvency Resolution Process) of the IBC 2016 deals with persons who may initiate a corporate insolvency resolution process. Sections 10 deals with initiation of corporate insolvency resolution process by corporate application. Section 14 relates to Moratorium and provides that on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following namely the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority.

CONCLUSION

In conclusion, the case of SANJEEV SHRIYA V. STATE BANK OF INDIA AND 6 OTHER where the petitioners are the guarntors of corporate debtor and the respondent who were the state bank of india filed the original application in tribunal court for the recovery of the amount of loan . there are subsequent proceedings are held of that case in DRT and NCLT where the court stated that to stayed their proceedings until the DRT finalised their decision .

REFERENCES

• https://www.scconline.in
• https://ibbi.gov.in 
• https://theindianlawyer.in 

This Article is written by Deeya student of Vivekananda Institute of Professional Studies, GGSIPU; Intern at Legal Vidhiya.

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