2022 (10) TMI 926 - 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 - existence of debt and dispute or not - HELD 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 . 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. It was held that the argument, that before report of Resolution Professional the Debtor must get a chance to seek replacement of Resolution Professional and thus notice was required to be given, has no substance. It is clearly held that, it is only after the Resolution Professional is appointed by the Adjudicating Authority under Section 97(5), that the step under Section 98 is contemplated - Also there is 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 - Petition admitted - moratorium declared.

Summary

Issues:
1. Application filed by the Central Bank of India seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the Personal Guarantor and Corporate Debtor.
2. Interpretation of Sections 95, 97, 98, 99, and 100 of the Insolvency and Bankruptcy Code, 2016 regarding the rights of the parties involved in the insolvency resolution process.
3. Whether the Personal Guarantor should be heard before the appointment of the Interim Resolution Professional (IRP) and the impact of principles of natural justice on the process.

Analysis:
1. The application was filed by the Central Bank of India against the Personal Guarantor and Corporate Debtor to initiate CIRP. The Corporate Debtor had availed credit facilities and defaulted on repayment, leading to the application under Section 95 of the IBC. The Tribunal clarified that the application was effectively against the Personal Guarantor and formally included the Corporate Debtor based on the facts presented.

2. The Tribunal extensively analyzed Sections 95, 97, 98, 99, and 100 of the IBC, focusing on the procedural requirements and rights of the parties involved. It highlighted the timelines and stages of the insolvency resolution process, emphasizing that no right of audience is provided to the Respondents before the appointment of the IRP. The judgment referred to relevant legal precedents and interpretations to support the conclusion that notice before the admission under Section 100(1) was not mandated, and the principles of natural justice were adequately addressed within the existing framework.

3. The issue of whether the Personal Guarantor should be heard before the appointment of the IRP was thoroughly discussed. The Tribunal examined Section 98 of the IBC, which allows for the replacement of the Resolution Professional at various stages, concluding that notice before the appointment of the IRP was not required. It emphasized that the debtor had opportunities to present their case during the process, ensuring compliance with the principles of natural justice. Legal judgments from the Bombay High Court and NCLAT were cited to support the decision that no notice was necessary for the Respondent at the stage of the IRP appointment.

In conclusion, the Tribunal found no hindrance to entertain the application under Section 95 of the IBC, appointing an Insolvency Resolution Professional and outlining the necessary steps for further proceedings. The judgment provided a detailed analysis of the legal provisions and principles governing the insolvency resolution process, ensuring procedural adherence and fairness to all parties involved.