The initiation of insolvency resolution against a personal guarantor is valid when the corporate debtor defaults on repayment, confirming the Financial Creditor's right to recover dues.

ORDER

Per: Bench

1. The Present Application is filed on 04.07.2023 under Section 95 of the Insolvency and Bankruptcy Code. 2016 (hereinafter referred to as IBC, 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 by Canara Bank (hereinafter referred to as "Financial Creditors") for the purpose of initiating insolvency process against Ms. Bhavna Rohit Shah (hereinafter referred to as "Personal Guarantors") for a default amount of Rs.3,85,69,680.95/-. The Respondent/Personal Guarantor stood as Guarantor in respect for repayment of interest, cost, charges and other expenses in respect of Deed of Guarantee dated 18.02.2015 in favour of Applicant. The date of default is stated to be 30.03.2021.

2. In so far as the Personal Guarantor to Corporate Debtor is concerned, the Hon‟ble Supreme Court of India in the Lalit Kumar Jain vs. Union of India & Ors matter of . in the Transferred Case (Civil) No.245/2020 has upheld the vires of the notification issued by the Central Government vide S.O. 4126(E) dated 15.11.2019, in so far as it relates to coming into force of Insolvency and Bankruptcy Process of Personal Guarantors to Corporate Debtor. Thus, when a Corporate Insolvency Resolution Process in relation to Corporate Debtor is pending before this Adjudicating Authority, then as per Section 60(2) of IBC, 2016 the NCLT would be competent forum to file an Application for Personal Guarantor in relation to such Corporate Debtor.

3. It is stated that M/s. Woodman Trading Co. Pvt. Ltd. being principal borrower applied for a loan for its operations from the Applicant Bank which was approved vide letter dated 28.12.2002. The Respondent was Director and personal Guarantor of the Corporate Debtor who executed and signed various standard loan documents in favour of Applicant Bank.

4. It is stated that the Respondent also entered into a Deed of Guarantee, Agreement of hypothecation of goods, stock, Raw Material, Plant Machinery, Fixture, Furniture- Vehicles, Computers and Other Articles was executed with the Financial Creditor on 18.02.2015. The Corporate Debtor and Respondent/Guarantor also executed Revival Letter on 28.12.2018 for total Credit Facilities OF Rs.7.50Crores.

5. However, after availing the Loan/Credit Facilities, the Corporate Debtor failed to maintain financial discipline as per terms and conditions of the loan agreement due to which loan account became irregular. Consequently, the said loan account of the Corporate Debtor was classified as NPA on 30.03.2021 and recalled by Applicant Bank. Further, due to non-payment of the amount by the Corporate Debtor, in compliance with Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtor) Rule, 2019, the Canara Bank served From B (Demand Notice) to the Respondent/Personal Guarantor and requested to pay the unpaid debt in default in full within 14 (fourteen) days from the receipt of this notice dated 11.05.2023.

6. Thereafter, in pursuant to non-receipt of any response, the Canara Bank accordingly filed the petition in „Form- C‟ under Section 95 of the Code 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, against the Personal Guarantors before the Hon‟ble National Company Law Tribunal, Ahmedabad Bench, on 04.07.2023 with respect to the initiation of Indiv