Personal Guarantors can be held liable under Section 95 of the I&B Code when default is established, reaffirming the interpretations of agreements regarding defaults and conversions for debts.

JUDGMENT

(Hybrid Mode)

[Per: Justice Sharad Kumar Sharma, Member (Judicial)]

1. The Appellants, in each of these Company Appeals, appear before this Appellate Tribunal in their respective capacities as Personal Guarantors as well as Directors of M/s. JBM Homes Private Limited, the Corporate Debtor.

2. The precise facts pleaded in the instant Company Appeals by the Appellants, challenging the impugned order dated 21.03.2025 (a common date in all the appeals), are as follows: Company Petition C.P. (IB)/262/2021 is with respect to the Personal Guarantor, Mr. B. Nirmal Kumar. Another Company Petition, C.P. (IB)/260/2021, relates to Mr. B. Kamalesh Kumar, the Personal Guarantor/Director of the Corporate Debtor, who is a party in the proceedings of C.P. (IB)/260/2021. Yet another Company Petition, C.P. (IB)/259/2021, relates to Mr. B. Anand Kumar, also a Personal Guarantor/Director of the Corporate Debtor; and finally, Company Petition C.P. (IB)/261/2021 relates to Ms. N. Rekha, who likewise holds the status of Personal Guarantor/Director of the Corporate Debtor. The impugned orders have been passed in the above company petitions against the respective personal guarantors/appellants herein.

3. Before we proceed to deal with the factual aspects in each of these Company Appeals, arising from the order passed on 21.03.2025, which resulted in initiation of proceedings under Section 95 of the I&B Code, 2016, against the Personal Guarantors (the Appellants herein), it becomes necessary to note that none of the Appellants, who are the opposite parties in the Company Petitions, raised any objection as to their status as Personal Guarantors/Directors of the Corporate Debtor.

4. In accordance with the records placed before us, and as contended, Respondent Nos. 1 and 2, who are the Financial Creditors, have their head offices at Mumbai. Respondent No. 1 subscribed to Optionally Fully Convertible Debentures (OFCDs) issued by the Corporate Debtor (CD) under the Share Subscription-cum-Debenture Subscription and Shareholders Agreement (SSDSHA) dated 23.03.2015 and the related Supplementary Agreements dated 24.03.2018 and 24.07.2018. Respondent No. 2, Vistra ITCL (India) Limited, is the Debenture Trustee appointed under the Debenture Trust Deed dated 23.03.2015.

5. Respondent Nos. 1 and 2 jointly initiated proceedings under Section 95 (1) of the I&B Code, 2016, read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019. Under these provisions, proceedings were initiated by Respondents 1 and 2 under of the I&B Code, 2016, against the Appellants, who are Personal Guarantors of the Corporate Debtor. It is pertinent to mention that in prior proceedings, IA (IB) 812/2020, the Corporate Debtor had already been admitted into CIRP by order dated 07.09.2021; subsequently, in IA(IBC)/919/CHE/2022, an order of liquidation was passed on 12.09.2023. Neither the order initiating CIRP nor the order of liquidation, as detailed above, has been challenged by the Corporate Debtor; accordingly, for all practical purposes, the order initiating CIRP dated 07.09.2021 and the liquidation order dated 12.09.2023 have attained finality qua the Appellants.

6. When initiating proceedings under Section 95 of the I&B Code, 2016, against the Appellants (the Personal Guarantors/Directors), the Respondents had contended that Respondent No. 1 had invested an amount of Rs.18.39 crore in the CD by subscribing to 1,83,90,180 Optionally Fully Conv