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2022 (5) TMI 754 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Personal Guarantors to Corporate Debtors - default committed under Indian Contract Act - HELD THAT - On going through the report dated 13.11.2021 filed by the IRP. It is noted under section 128 of Indian Contract Act, 1872 that when a default is committed, the Principal Borrower and Surety are jointly and severally liable to Creditor and Creditor has the right to recover its dues from either of them or from both of them simultaneously - In this application filed by the Financial Creditor, a Deed of Guarantee dated 25.04.2014 is executed between the SBI led Consortium and the Personal Guarantor. Clause 24 of the Deed of Guarantee states that this Guarantee shall be irrevocable and the obligations of the Guarantors hereunder shall be discharged except by performance and then only to the extent of such performance, such obligation shall not be conditional on the receipt of any prior notice by the Guarantors or by the Borrower and the demand notice by the Lenders shall be sufficient notice to or demand on the Guarantors. Based on the judgment of Hon'ble Supreme Court in LALIT KUMAR JAIN VERSUS UNION OF INDIA AND ORS. 2021 (5) TMI 743 - SUPREME COURT , the Personal Guarantor cannot be discharged from his liability upon the approval of Resolution Plan under section 31 of IBC, 2016. Therefore, the liability of the Personal Guarantor continues and the Financial Creditor is in condition to realize the default amount from the Personal Guarantor. On-going through the averments in the IBA, the reply of Respondents after the report of the Resolution Professional as also the report of Resolution Professional narrated, it is opined that this is a fit case for admission and proceed against the Personal Guarantor/Respondent and initiate Corporate Insolvency Resolution Process. It is also seen from the report of Resolution Professional that he has not recommended for a negotiation between the parties for arriving at an amicable settlement for repayment. Application admitted - Moratorium declared.
Issues Involved:
1. Initiation of insolvency process against the Personal Guarantor. 2. Validity of the Deed of Guarantee. 3. Liability of the Personal Guarantor post-approval of the Corporate Debtor's Resolution Plan. 4. Admissibility of the application under Section 95 of IBC, 2016. 5. Appointment and duties of the Interim Resolution Professional (IRP). Issue-wise Detailed Analysis: 1. Initiation of Insolvency Process Against the Personal Guarantor: The application was filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) by the Financial Creditor, State Bank of India (SBI), to initiate insolvency proceedings against the Personal Guarantor for a default amount of Rs. 176,45,58,095.31/-. The Tribunal noted the Supreme Court's decision in Lalit Kumar Jain vs. Union of India & Ors., which upheld the vires of the notification regarding the insolvency process for Personal Guarantors to Corporate Debtors. Consequently, the NCLT is the competent forum for such applications. 2. Validity of the Deed of Guarantee: The Deed of Guarantee dated 25.04.2014, executed by the Personal Guarantor in favor of the SBI led Consortium, was scrutinized. Clause 24 of the Deed states that the Guarantee is irrevocable and the obligations are discharged only by performance. The Tribunal emphasized that the Deed of Guarantee remains valid and enforceable, allowing the CIRP to proceed against the Personal Guarantor. 3. Liability of the Personal Guarantor Post-Approval of the Corporate Debtor's Resolution Plan: The Tribunal referenced the Supreme Court's judgment in Lalit Kumar Jain vs. Union of India & Ors., which clarified that the approval of a resolution plan does not discharge the Personal Guarantor from liabilities under the contract of guarantee. The liability of the Personal Guarantor continues independently of the Corporate Debtor's insolvency proceedings, allowing the Financial Creditor to realize the default amount from the Personal Guarantor. 4. Admissibility of the Application Under Section 95 of IBC, 2016: The Tribunal reviewed the IRP's report, which recommended the admission of the application. Key points included: - The debt amount exceeds the threshold of Rs. 1000 as per Section 78 of IBC, 2016. - The Personal Guarantor's liability is co-extensive with that of the principal debtor under Section 128 of the Indian Contract Act, 1872. - The application was filed in the prescribed Form C with the necessary fee. The Tribunal found the application fit for admission and proceeded to initiate the CIRP against the Personal Guarantor. 5. Appointment and Duties of the Interim Resolution Professional (IRP): The Tribunal appointed Sunil Kumar Agarwal as the IRP, directing him to publish a public notice inviting claims from creditors and to prepare a list of creditors. The IRP is tasked with preparing a repayment plan in consultation with the debtor, which may involve restructuring the debtor's debts or affairs. The IRP must submit the repayment plan along with a report to the Tribunal within the stipulated timeframe and conduct a meeting of creditors if necessary. Order: The Tribunal ordered the initiation of the Insolvency Resolution Process against the Personal Guarantor, declaring a moratorium on all debts for 180 days or until the Tribunal passes an order on the repayment plan. The IRP was directed to publish a notice, prepare a list of creditors, and submit a repayment plan. The Tribunal emphasized compliance with the Code of Conduct and periodic reporting by the IRP.
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