9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (4) TMI 372 - Tri - Insolvency and BankruptcySeeking for impleading the legal heir of deceased Personal Guarantor - Rule 53 of the NCLT Rules, 2016 - HELD THAT - Section 5(22) of the IBC, 2016 makes it clear that the Personal Guarantor is an individual who stood as a Guarantor to a Corporate Debtor and, therefore, on his demise the proceedings against the Personal Guarantor would abate. Besides that, the proceedings under IBC, 2016 is not in the nature of recovery and therefore it would be proper to close the proceedings on the death of the Personal Guarantor. It may also be mentioned that the case of proceedings under Section 95 of the IBC, 2016 for initiation of Insolvency Proceedings against the Personal Guarantor is not a case for recovery of any amount because that will go contrary to the scheme of IBC, 2016. In such a situation on the demise of the Personal Guarantor, an individual who has given the guarantee in favour of the Corporate Debtor, the question of continuing the proceedings against such a dead person through his legal heirs will not arise. Application dismissed.
Issues:
Impleading legal heir of deceased Personal Guarantor in insolvency resolution process. Analysis: The Tribunal addressed an application filed by a financial asset reconstruction company seeking to implead the legal heir of a deceased Personal Guarantor in an insolvency resolution process. The case involved the demise of Smt. Susan Zachariah, the Personal Guarantor, and the subsequent claim made by her legal heir, Mr. John Zachariah. The Demand Notice sent to the deceased Guarantor was returned with the endorsement "Addressee Expired," indicating her passing. The applicant relied on Rule 53 of the NCLT Rules, 2016, which allows for the substitution of legal representatives in case of a party's death during proceedings. However, the Tribunal delved into the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC) to determine the fate of the proceedings in light of the Guarantor's demise. The Tribunal examined Section 5(22) of the IBC, defining a "Personal Guarantor" as an individual providing surety in a contract of guarantee to a Corporate Debtor. It emphasized that the proceedings against a Personal Guarantor would abate upon their death, as the IBC proceedings are distinct from recovery actions. The Tribunal highlighted that continuing proceedings against a deceased Guarantor through their legal heirs would contradict the IBC's framework, especially in cases where the Guarantor's role was not related to debt recovery. In this context, the Tribunal concluded that pursuing the case against the deceased Guarantor's legal heir was not warranted. In its decision, the Tribunal declined the application for impleading the legal heir of the deceased Personal Guarantor, thereby dismissing the application. The ruling was grounded in the understanding that the nature of the proceedings under the IBC, 2016, did not align with pursuing actions against the legal heirs of a deceased Personal Guarantor, emphasizing the unique characteristics of insolvency proceedings compared to debt recovery processes. The judgment, dated March 17, 2022, elucidated the legal principles governing the substitution of legal representatives in cases of a party's demise during ongoing proceedings before the Tribunal, providing clarity on the implications of a Personal Guarantor's death in insolvency matters.
|
