2022 (6) TMI 211 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Personal Guarantor of the Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - service of demand notice - opportunity to seek replacement of Resolution Professional, was provided or not - violation of principles of natural justice - HELD THAT - It is evident from a reading of the Section along with the Rule, that what the Creditor has to serve is the copy of the application made under sub-section (1) to the Debtor. Reading Rule 7(2) with Rule 3 shows that the application filed under sub-section (1) of Section 95 shall be submitted in Form -C and the Creditor will serve forthwith a copy of the application to the Guarantor and the Corporate Debtor for whom the Guarantor is a Personal Guarantor. Thus, what has to be served is the copy of application which has been submitted - The procedure thus prescribed will give the Personal Guarantor, notice of the application already filed before the Adjudicating Authority. Section 95(5) requires the Creditor to provide a copy of the application made under sub-section (1) , to the Debtor. Thus, serving advance copy is not contemplated. The arguments that Section 98 provides for replacement of the Resolution Professional and hence the Guarantor should have an opportunity to seek replacement of Resolution Professional and hence he should be heard before appointment of IRP was also considered and held that going through Section 98 of IBC, 2016, it is found that Section 98 is not stage specific. Section 98 itself shows that the section could be resorted to even at stages like implementation of repayment plan which would be a stage beyond Section 116, where implementation and supervision of repayment plan is provided for. Any amount of audience is provided to the debtor before the Resolution Professional submits a report. Section 99 (2) of IBC gives an opportunity to the debtor to prove repayment of debt claimed as unpaid by the creditor. Section 99 (4) of IBC, empowers the Resolution Professional to seek further information or explanation in connection with the application as may be required from the Debtor or the Creditor or any other person, who, in the opinion of the Resolution Professional, may provide such information. Hence it is not as if, the Debtor is not provided an audience before the submission of the report. Hence there are no violation of principles of natural justice by not giving an opportunity to the Debtor for making his submissions before the appointment of IRP. This Tribunal is of the considered opinion that there is no hurdle to entertain this application under Section 95 of IBC, 2016, since the application is found to be complete - Application admitted - moratorium declared.

Summary

Issues involved:
Petition to initiate Corporate Insolvency Resolution Process (CIRP) against Personal Guarantor under Section 95 of IBC, 2016.

Analysis:
1. Background and Facts: The State Bank of India filed a petition against the Personal Guarantor seeking to initiate CIRP as the Corporate Debtor failed to repay outstanding debt despite various agreements and settlements.

2. Provisions of Sections 95, 97, 99, and 100 of IBC: The judgment discussed the procedural aspects under Sections 95, 97, 99, and 100 of IBC, emphasizing the timeline for various stages of the insolvency resolution process and the role of Resolution Professional. It cited relevant judgments to support the interpretation of these sections.

3. Notice to Respondent: The judgment clarified that no right of audience is provided to the Respondent before appointing the IRP under Sections 97 and 100 of IBC. It highlighted that the legislature's intent was to provide notice at specific stages, ensuring compliance with natural justice principles.

4. Role of Resolution Professional: The judgment addressed the arguments regarding the replacement of Resolution Professional under Section 98 and emphasized that the Debtor's opportunity to seek replacement arises after the appointment of IRP. It concluded that no notice is required for the Respondent at the stage of IRP appointment.

5. Appointment of Insolvency Resolution Professional (IRP): The Tribunal appointed Mr. Maligi Madhusudhana Reddy as the IRP, directing him to file his consent and submit a report within 10 days. The order was communicated to the Petitioner and Financial Creditor for compliance.

6. Conclusion: The Tribunal found no hindrance to entertain the application under Section 95 of IBC, appointing Mr. Maligi Madhusudhana Reddy as the IRP. The judgment emphasized adherence to the procedural requirements and timelines outlined in the IBC for a smooth insolvency resolution process.

This detailed analysis of the judgment provides insights into the legal reasoning, procedural compliance, and the Tribunal's decision regarding the petition to initiate CIRP against the Personal Guarantor under Section 95 of IBC, 2016.