2025 (3) TMI 337 - Tri - IBC

Maintainability of application under Section 94 of the Insolvency and Bankruptcy Code (IBC) - absence of an ongoing CIRP or liquidation against the Corporate Debtor renders the present Petition by the Personal Guarantor non-maintainable - Personal Guarantor has committed a default justifying admission of the insolvency petition or not - fulfilment of conditions under Section 100 of the IBC for initiation of the Insolvency Resolution Process (IRP) against the Personal Guarantor. HELD THAT - IRP has recommended accepting the application for the reason as stated in the report - Resolution Professional report states that no evidence was placed before her that Personal Guarantor paid the amount demanded by the Financial Creditors and as such in over view demanded amount is un-serviced as on the date of order. The IRP had not received any document whereby the personal Guarantee related agreement was cancelled by the guarantor and any of the Financial Creditors - Demand Notices dated 27.09.2024 were issued by the Respondent/FC Canara Bank u/s 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002. Further a Recall Notice dated 07.10.2024 as well as Form-B dated 08.11.2024 was issued by the Respondent/FC Canara Bank for invocation of Guarantee against the Applicant/Personal Guarantor which has not been withdrawn till date. It is stated in the report that the Applicant is eligible under Section 94(4) of the IBC 2016 - It is stated in the said report that all the documents required under Rule 6 along with the Form-A of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantor to Corporate Debtor has been filed. Further the conditions under Section 100 of the IBC are met as there is an undisputed debt of Rs. 9.63 Crore default by the Personal Guarantor and a valid invocation of the guarantee. Conclusion - The application under Section 94 of the IBC was maintainable and that the absence of ongoing CIRP or liquidation against the Corporate Debtor did not affect the petition s validity. Application filed under Section 94(1) of the IBC 2016 is admitted and the Insolvency Resolution Process stands initiated against the Applicant/Personal Guarantor.

ISSUES PRESENTED and CONSIDERED

The Tribunal identified the following primary issues for determination:

(a) Whether the application under Section 94 of the Insolvency and Bankruptcy Code (IBC) is maintainable?

(b) Whether the absence of an ongoing Corporate Insolvency Resolution Process (CIRP) or liquidation against the Corporate Debtor renders the present petition by the Personal Guarantor non-maintainable?

(d) Whether the conditions under Section 100 of the IBC for initiation of the Insolvency Resolution Process (IRP) against the Personal Guarantor are met?

ISSUE-WISE DETAILED ANALYSIS

Issue (a): Maintainability of the Application under Section 94 of the IBC

The legal framework involves Section 94 of the IBC, which allows a personal guarantor to initiate insolvency proceedings. The Tribunal considered whether the application met procedural and substantive requirements under the IBC.

The Court concluded that the application was maintainable as it complied with all necessary procedural requirements, including the submission of essential documents and the IRP's report recommending admission under Section 99 of the IBC.

Issue (b): Impact of Absence of Ongoing CIRP or Liquidation against the Corporate Debtor

The Tribunal examined whether pending CIRP or liquidation proceedings against the Corporate Debtor are a prerequisite for filing an insolvency petition by the Personal Guarantor.

The Court referenced the National Company Law Appellate Tribunal (NCLAT) decision in Anita Goyal v. Vistra ITCL (India) Ltd., which clarified that personal insolvency proceedings against a guarantor are maintainable independently of any CIRP or liquidation against the Corporate Debtor.

The Tribunal concluded that the absence of ongoing CIRP or liquidation proceedings does not render the present petition non-maintainable.

Issue (c): Default by the Personal Guarantor

The Tribunal reviewed whether the Personal Guarantor defaulted on their obligations, justifying the initiation of insolvency proceedings.

Key evidence included the invocation of the personal guarantee by the Financial Creditor and the subsequent default by the Corporate Debtor. The Tribunal noted that the Personal Guarantor's liability is coextensive with that of the Corporate Debtor under Sections 126 to 128 of the Indian Contract Act, 1872.

The Tribunal found that the Personal Guarantor's liability crystallized upon the invocation of the guarantee, and the default was established by the IRP's report.

Issue (d): Conditions under Section 100 of the IBC

The Tribunal assessed whether the conditions for initiating the IRP against the Personal Guarantor were satisfied.

The IRP's report confirmed the existence of an undisputed debt and default by the Personal Guarantor. The Tribunal found no valid objections to the IRP's findings and determined that the conditions under Section 100 of the IBC were met.

SIGNIFICANT HOLDINGS

The Tribunal held that the application under Section 94 of the IBC was maintainable and that the absence of ongoing CIRP or liquidation against the Corporate Debtor did not affect the petition's validity. The Tribunal emphasized the independent right of the Personal Guarantor to seek insolvency resolution.

The Tribunal ordered the initiation of the Insolvency Resolution Process against the Personal Guarantor, declaring a moratorium on all debts as per Section 101 of the IBC. The Tribunal appointed a new Resolution Professional and outlined the procedural steps for publishing a public notice, inviting claims, and preparing a repayment plan.

The Tribunal's decision reinforced the principle that personal guarantors can independently initiate insolvency proceedings and that their liability is coextensive with the Corporate Debtor upon default.

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