2022 (10) TMI 808 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Personal Guarantor of the Corporate Debtor - Section 95 of IBC, 2016 - HELD THAT - 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 . What is contemplated is that the application in Form C should be submitted and then the Creditor should serve forthwith a copy of the application to the Guarantor and the Corporate Debtor for whom the Guarantor is a Personal Guarantor. 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. 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 - Petition admitted - moratorium declared.

Summary

Issues:
Petition under Section 95 of IBC seeking CIRP against Personal Guarantor and Corporate Debtor.

Analysis:
1. The Petitioner, a Financial Creditor, filed a petition under Section 95 of IBC against the Personal Guarantor and Corporate Debtor to initiate Corporate Insolvency Resolution Process (CIRP). The application primarily targeted the Personal Guarantor, with the Corporate Debtor being formally added. The Corporate Debtor availed credit facilities from the Petitioner and defaulted in repayment, leading to the application for CIRP against the Personal Guarantor.

2. Despite issuing notices, none of the Respondents appeared. The legal provisions under Section 95 and 97 of IBC were discussed, emphasizing that no right of audience is available to the Respondents before the appointment of the Resolution Professional. The timeline for various stages of the proceedings was highlighted, along with the importance of the Resolution Professional's report in the decision-making process.

3. The judgment referred to a case from the Bombay High Court regarding the timelines and procedures outlined in IBC sections 95 to 100. It was noted that while the principles of natural justice require furnishing the report to debtors and creditors, a specific timeline for submission of the report is not prescribed. The importance of providing an opportunity for parties to be heard before the Adjudicating Authority's decision under Section 100 was emphasized.

4. The argument regarding the replacement of the Resolution Professional under Section 98 was addressed, clarifying that the Debtor's right to seek replacement arises after the Resolution Professional's appointment. The judgment highlighted that Section 99 of IBC provides ample opportunity for the Debtor to present their case before the Resolution Professional submits a report, ensuring compliance with principles of natural justice.

5. The Tribunal concluded that no notice was required for the Respondent at the stage of appointing the Interim Resolution Professional (IRP). Mr. Madasa Kumar was appointed as the IRP, and the Tribunal directed him to submit a report within 10 days. The order was communicated to the parties involved for necessary compliance, ensuring a smooth transition into the CIRP process.

This detailed analysis of the judgment showcases the application of legal provisions, procedural timelines, and principles of natural justice in the context of initiating CIRP against a Personal Guarantor and Corporate Debtor under the Insolvency and Bankruptcy Code.