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Sanjay Sarin vs The Authorised Officer Canara Bank And Anr. - (High Court of Delhi) (08 Aug 2022)

When borrower is aggrieved by any of the actions of the bank for which the borrower has remedy under the SARFAESI Act, no writ petition should be entertained



The Petitioner, who stood as a guarantor to a loan facility, is aggrieved with the recovery action initiated by the bank, against the borrower and himself, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. According to him, once a resolution plan qua the borrower was approved under Section 31 of the under the Insolvency and Bankruptcy Code, 2016, the bank's claims stood addressed. Thus, it could not have sought recovery for amounts over and above the amount approved by the NCLT, and seeks a mandamus to that effect.

The law relating to maintainability of a writ petition in matters relating to SARFAESI Act is no longer res integra. The Supreme Court in Phoenix ARC Pvt. Ltd. v. Vishwa Bharti Vidya Mandir and Ors., has held that where proceedings are initiated under the SARFAESI Act, and the borrower is aggrieved by any of the actions of the bank for which the borrower has remedy under the SARFAESI Act, no writ petition should be entertained.

Discharge of the corporate debtor from a debt owed by it to its creditors, by way of an involuntary process such as insolvency proceedings, does not absolve the guarantor of its liability, since it arises out of an independent contract. Thus, the passing of a resolution plan does not ipso facto discharge the personal guarantor. As regards the extent of liability of a personal guarantor is concerned, the same would have to be determined in light of the agreement between the borrower, i.e., the corporate debtor, and the personal guarantor, for which the appropriate forum would be the Debt Recovery Tribunal and not this Court. Thus, if the Petitioner is not absolved of his liability, the proceedings initiated by the bank under the SARFAESI Act cannot be held to be unconstitutional or in derogation of the Approval Order of the NCLT.

In relation to the other grievance raised by Respondent No. 1 qua non-implementation of the resolution plan, it must be noted that the aggrieved party is actually Respondent No. 1, who has not been paid in terms of the resolution plan approved by NCLT. As pointed out by the counsel for Respondent No. 1, there has been a default on the part of the resolution applicant in payment of instalments, and as per the counter affidavit, 15 instalments amounting to Rs. 4,53,60,000 remain pending. It is therefore for Respondent No. 1 to now take action for recovery of its dues from the resolution applicant, as it may deem fit, utilizing any remedy available to it under law.

Respondent No. 1 certainly has the right to proceed against the collateral securities for recovery of its dues - which are independent of the resolution plan approved by the NCLT. If the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected, may make an application to the Adjudicating Authority for an order for liquidation.

Where a resolution applicant succeeds as a corporate debtor, but fails to comply with its assurance in terms of the resolution plan, then subsequent step to be taken has been specified in Section 33(3) of the IBC. Therefore, Petitioner's grievance regarding non-implementation of the resolution plan, too, cannot be a ground for this Court to entertain the instant petition. Present Court finds no merit in the present petition.


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