2021 (9) TMI 256 - AT - Insolvency and Bankruptcy

Acceptance or rejection of the Application - default in repayment of the loan for which the personal guarantee has been given - receipt of Report under Section 99 of the IBC when the matter is taken up under Section 100 of the IBC - HELD THAT - There is no dispute that CIRP was initiated against the Corporate Debtor and that the said matter is at the stage of liquidation. The Learned Counsel for the Respondents as well as the Learned Counsel for the Appellant have referred to judgment of this Tribunal in RAVI AJIT KULKARNI, PERSONAL GUARANTOR OF PRATIBHA INDUSTRIES LIMITED AND ORS. VERSUS STATE BANK OF INDIA 2021 (9) TMI 60 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI and the Learned Counsel for both sides agree that the Personal Guarantor of Corporate Debtor may be given the opportunity before the Resolution Professional and orders on similar lines as in the matter of Mr. Ravi Ajit Kulkarni vs. State Bank of India could be passed. Thus, at the stage at which the matter stood such finding in advance should not have been recorded as the said stage would be after receipt of Report under Section 99 of the IBC when the matter is taken up under Section 100 of the IBC. In the present matter, now the Personal Guarantor is already available and did appear before the Adjudicating Authority to submit that the impugned order should be recalled. As such, the requirement of serving formal notice would not be necessary but the matter needs to be sent back to the Adjudicating Authority so that the procedure is duly followed as indicated by us in the matter of Mr. Ravi Ajit Kulkarni vs. State Bank of India - appeal allowed in part.

Issues:
1. Appellant challenging impugned orders dated 22nd March, 2021 and 9th June, 2021 passed by the Adjudicating Authority.
2. Allegation of violation of principles of natural justice due to lack of notice to the Appellant.
3. Dispute regarding default in repayment of loan by the Personal Guarantor.
4. Interpretation of Sections 95, 99, and 100 of the Insolvency and Bankruptcy Code, 2016.
5. Comparison with the judgment in the case of "Mr. Ravi Ajit Kulkarni vs. State Bank of India."
6. Consideration of limited notice to Personal Guarantors before the appointment of Resolution Professional.
7. Setting aside premature observations made by the Adjudicating Authority.
8. Remitting the matter back to the Adjudicating Authority for compliance with procedural requirements.

Analysis:
The Appellant, a Personal Guarantor of the Corporate Debtor, filed an Appeal against orders passed by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016. The first impugned order appointed a Resolution Professional under Section 95 of the IBC, seeking a report under Section 99, while the second order rejected the Appellant's application to set aside the initial order due to lack of notice. The Appellant contended a violation of natural justice principles and disputed the default in loan repayment. The Tribunal referenced a previous judgment and emphasized the need for Personal Guarantors to be given an opportunity before the Resolution Professional, following principles of natural justice. The Tribunal highlighted the importance of limited notice to Personal Guarantors before the Resolution Professional's appointment, as per Section 99 requirements.

The Tribunal noted that premature findings on default by the Adjudicating Authority were set aside, and the matter was remitted back for proper procedure. The Resolution Professional was directed to provide an opportunity to the Appellant under Section 99 and submit a fresh report. The Adjudicating Authority was instructed to proceed in accordance with the law and the Tribunal's observations. Compliance timelines were set, and the Appeal was partly allowed, with costs not specified. The judgment stressed the significance of procedural fairness, adherence to statutory provisions, and the rights of Personal Guarantors in insolvency proceedings.

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