HYDERABAD: The Telangana High Court has allowed a writ petition filed by Union Bank of India, restoring the bank’s action under the SARFAESI Act, 2002, in the auction sale of a Jubilee Hills property belonging to Telugu film producer Bandla Ganesh and his father, who had stood as personal guarantors for the corporate borrower, Sri Parameshwara Poultry Farm Pvt. Ltd.
A bench of Justices Moushumi Bhattacharya and Gadi Praveen Kumar set aside the orders of the Debt Recovery Tribunal-II, Hyderabad, which had annulled the auction sale, directed restoration of possession to the guarantors, and ordered refund of the auction purchaser’s sale consideration of Rs 8.50 crore with 6% interest.
Senior counsel BS Prasad, appearing for the bank, and advocate Mayur Reddy, representing the auction purchaser, argued that the Tribunal had committed jurisdictional errors by overlooking documentary evidence, and settled legal principles governing the interplay between the Insolvency and Bankruptcy Code, 2016 (IBC) and the SARFAESI Act.
The bench accepted the contention that the corporate insolvency resolution process initiated against the principal borrower before the National Company Law Tribunal did not extend the moratorium to personal guarantors. Relying on the Supreme Court’s ruling in Lalit Kumar Jain v. Union of India, the court held that proceedings against personal guarantors remain unaffected unless separate insolvency proceedings are initiated against them in accordance with the IBC.