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2025 Supreme(Online)(NCLT) 413
NATIONAL COMPANY LAW TRIBUNAL
Shri. Jyoti Kumar Tripathi, Shri. Ravichandran Ramasamy, JJ
C J Davis Resolution Professional in the matter of Resolution Process of the Personal Guarantor – Appellant
Versus
Mr Tenny Jose – Respondent
IA(I.B.C) - 267/2024
For the Petitioner:SHIYAS K.R
For the Respondent:JOSSY STEEPHEN KATTUR
The bankruptcy of a Personal Guarantor affects their financial obligations, and the Tribunal must consider justice when directing payments.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 94 and Section 112 - Personal Guarantor's failure to pay Rs.2,00,000/- for resolution process expenses - Tribunal dismissed the request to direct the Personal Guarantor to pay due to his admitted bankruptcy - Respondent No.2 directed to pay Rs.1,16,809/- towards PIRP costs based on voting share. (Paras 14, 15, 16)
(B) Bankruptcy Process - The bankruptcy of a Personal Guarantor affects their financial obligations, and the Tribunal must consider the interests of justice when directing payments. (Paras 13, 14)
Facts of the case:
The Applicant, a Resolution Professional, sought payment from the Personal Guarantor for resolution process expenses, which was not complied with despite reminders. The Personal Guarantor claimed financial distress and submitted a repayment plan that was rejected.
Findings of Court:
The Tribunal found merit in directing Respondent No.2 to pay a portion of the PIRP costs, acknowledging their willingness to contribute.
Issues: The main issues were whether the Personal Guarantor should be compelled to pay the expenses despite his bankruptcy and the obligation of Respondent No.2 to cover costs.
Ratio Decidendi: The Tribunal ruled that the bankruptcy of the Personal Guarantor precludes the enforcement of payment obligations against him, while Respondent No.2 is liable to pay its share of the PIRP costs.
Result: The application is disposed of with directions to Respondent No.2.
ORDER
Per Coram
1. This is an applicant filed by Mr. CJ Davis, Former Resolution Professional in the matter of Resolution Process of the Personal Guarantor, Mr. Tenny Jose (Respondent No.1) under Rule 11 of NCLT Rules, 2016. The two main reliefs, as prayed for by the Applicant herein, are reproduced as follows:
a. Pass an order directing Respondent No.1 to pay Rs.2,00,000/- forthwith to the Applicant failing which appropriate order and action may be taken against Respondent No.1 for disobeying the order of this Hon’ble Tribunal in the interest of justice.
b. Pass an order directing Respondent No.2 to pay the contribution towards the PIRP cost forthwith in the interest of justice.
2. The Applicant submitted that, on 22.12.2023, this Tribunal issued a pre-admission order in CP(IBC)/51/KOB/2023, appointing Applicant as the Resolution Professional in an application by Mr. Tenny Jose under Section 94 of the Insolvency and Bankruptcy Code, 2016 (the Code). This Tribunal directed Respondent No. 1, the Personal Guarantor, to pay Rs. 2,00,000/- for resolution process expenses. Despite this order and reminders on 23.12.2023 and 05.01.2024. Respondent No. 1 failed to comply, claiming insufficient funds. Nonetheless, the Applicant submitted his report on 04.01.2024, recommending the admission of the Personal Guarantor. Consequently, on 08.02.2024, this Tribunal admitted the Personal Guarantor for the resolution process and reaffirmed the appointment of the Applicant as Resolution Professional.
3. The Applicant stated that the public announcement is made, inviting claims from creditors of the Personal Guarantors through major newspapers, with all related expenses borne by the Applicant. The Applicant instructed the Personal Guarantor to submit a repayment plan by 24.02.2024, provided on 12.03.2024. During the First Meeting of the Committee of Creditors, the Applicant presented expenses of Rs. 2,09,896, but it was not approved due to concerns over non-payment by the Personal Guarantor. Subsequently, a revised repayment plan was submitted on 30.04.2024, proposing an upfront payment of 60 Lakhs within 30 days of the Repayment Plan’s approval, indicating the availability of funds but a lack of intention to pay.
4. It is further stated that the Personal Guarantor’s repayment plan was rejected by the Committee of Creditors, offering only Rs.12.85 Crore against Rs.86.13 Crores in admitted creditor claims. Consequently, the Resolution Professional submitted a report and an application IA(IBC)/239/KOB/2024 under Section 112, requesting rejection of the repayment plan and permission for bankruptcy filings, which this Tribunal granted vide order dated 05.06.2024. In the Committee of Creditors meeting on 06.05.2024, the Applicant presented total expenses from 22.12.2023 to 27.04.2024, resulting in approval of a monthly fee of Rs.50,000 and Resolution Process costs of Rs.2,36,696. The total PIRP cost is Rs.3,88,696. Since no payment has been received the Applicant requested the Committee of Creditors to share costs. Even if the Committee agreed to bear the cost, the South Indian Bank (Respondent No.2) directed the Resolution Professional to address this issue before this Tribunal.
5. It is also submitted that the State Bank of India, another Financial Creditor holding a 50.65% voting share, has contributed Rs. 1,96,875/-. The Applicant requested Respondent No. 2 to pay Rs. 1,91,821/- on 20.04.2024, later they had paid only Rs. Rs.75,012/. Respondent No. 1 has not complied with this Tribunal’s order and is intentionally withholding payment, despite the Applicant’s financial capability. This is evidenced by the Personal Guarantor’s willingness to pay Rs. 60 Lakhs if the plan is approved. Respondent No. 1, who initiated the resolution process for his benefit, has a total default of Rs. 86 Crores to creditors.
6. Respondent No.1 submitted that he is in dire financial distress, lacking any means to make payments. A proposed repayment plan involving the sale of all
