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2025 Supreme(Online)(NCLT) 2155
NATIONAL COMPANY LAW TRIBUNAL
Shri. Rajeev Bhardwaj, J, Shri. Sanjay Puri, T
BANK OF MAHARASHTRA – Appellant
Versus
Shri K. Srinivasa Rao – Respondent
IA (IBC)41/2025 | CP (IB) 382/95/HDB/2022
For the Appellants/Petitioners: Ms. Aishwarya
For the Respondents:
The court determined that the failure of the personal guarantor to submit a repayment plan justified the initiation of bankruptcy proceedings under the Insolvency and Bankruptcy Code.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 123, 60(2), 125, 126, 128, 130, 136, 140, 141 - Bankruptcy proceedings initiated against personal guarantor due to default in repayment by corporate debtor - Application allowed based on failure to submit repayment plan - Bankruptcy order issued against personal guarantor. (Paras 1, 11, 12)
(B) Personal Guarantor's Obligations - The personal guarantor is liable to indemnify the financial creditor for any losses incurred due to the corporate debtor's default, as per the Deed of Guarantee. (Paras 3, 4)
Facts of the case:
The financial creditor filed an application under the Insolvency and Bankruptcy Code to initiate bankruptcy proceedings against the personal guarantor after the corporate debtor defaulted on a loan of Rs. 5.00 crores, leading to an outstanding amount of Rs. 17,91,91,118. (Paras 2, 5)
Findings of Court:
The court found that the personal guarantor failed to appear and did not submit a repayment plan, justifying the initiation of bankruptcy proceedings. (Paras 10, 11)
Issues: The court addressed whether the personal guarantor should be declared bankrupt due to the corporate debtor's default and the absence of a repayment plan. (Paras 10, 11)
Ratio Decidendi: The court ruled that the failure to submit a repayment plan and the corporate debtor's default warranted the initiation of bankruptcy proceedings against the personal guarantor. (Paras 11, 12)
Result: The personal guarantor is hereby ordered to be BANKRUPT.
| Table of Content |
|---|
| 1. initiation of bankruptcy proceedings (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. closure of insolvency resolution process (Para 7 , 11 , 12) |
| 3. appointment of bankruptcy trustee (Para 13 , 14 , 15) |
| 4. duties and powers of bankruptcy trustee (Para 16 , 17 , 18) |
| 5. notice and claims from creditors (Para 19 , 20) |
| 6. restrictions on bankrupt (Para 21 , 22 , 23) |
| 7. trustee's reporting obligations (Para 24 , 25 , 26 , 27 , 28) |
| 8. issuance of order copies (Para 29 , 30) |
ORDER
1. The Petitioner /Financial Creditor has filed this Application under Section 123 R/w 60(2) of the IBC, 2016 R/w Rule 7 of the IBBI (Application to Adjudicating Authority Bankruptcy Process for Personal Guarantors to Corporate Debtor) Rules, 2019 to initiate Bankruptcy Proceedings against the Personal Guarantor/Respondent No.1 to Corporate Debtor.
2. The Petitioner is a Financial Creditor, who had granted aggregate credit facilities of Rs.5.00 Crores in the form of Cash Credit in favour of Respondent No.2/Corporate Debtor vide sanction letter dated 05.01.2012. (Annexure III – Page Nos.13-18 of the Application).
3. The Respondent No.1 has provided his personal guarantee securing the repayment of the financial assistance availed by the Corporate Debtor vide Deed of Guarantee dated 13.01.2012, under which Respondent No.1 undertook to pay on demand forthwith, without demure all the amounts payable by the Corporate Debtor. Personal Guarantor undertook to indemnify and keep the Financial Creditor indemnified against all losses, costs, claims, damages whatsoever which the Financial Creditor may suffer, pay or incur by the reason of or in connection with any such default on the part of Respondent No.2. (Annexure IV – Page Nos.19-24 of the Application).
4. On default of payment, the Financial Creditor approached Hon’ble DRT-I, Hyderabad vide OA No.686/2015 and obtained a decree against Respondent No.2 (Principal Borrower) and the Personal Guarantors, including Respondent No.1. Hon’ble DRT issued Recovery Certificate No. RC No.90/2020 in OA No.686/2015 dated 10.01.2020, wherein Respondent No.1 was referred to as defendant No.3. Despite the Recovery Certificate, the dues were not cleared by the defendants named in the Recovery Certificate dated 10.01.2020 under reference. (Annexure V – Page Nos.25-30 of the Application).
5. The Corporate Debtor had failed to honor its obligations to Financial Creditor and therefore, the loan account of Respondent No.2 was declared as NPA. It is submitted that excluding the total amount of payments made by the Corporate Debtor, the outstanding total amount payable to the Financial Creditor is Rs.17,91,91,118/- (Rupees Seventeen Crores Ninety One Lakhs Ninety One Thousand One Hundred and Eighteen Only) along with principal and interest calculated until 20.11.2024. (Annexure VI – Page No.31 of the Application).
6. The Financial Creditor’s application CP (IB) 382/95/HDB/2022 filed in this Tribunal under Section 95 of the Insolvency and Bankruptcy Code, 2016, praying to admit Respondent No.1 into the individual insolvency resolution process was allowed vide their orders dated 02.05.2023. (Annexure VII – Page Nos.32-39 of the Application).
7. The Personal Guarantor did not submit any Repayment Plan and the Resolution Professional filed IA (IBC) No.1069/2024 with this Tribunal seeking closure of the Personal Insolvency Resolution Process with an option to the Creditor to seek remedies of Bankruptcy under Section 114(1) of IBC, 2016. This Tribunal passed orders in IA (IBC) No.1069/2024 dated 28.08.2024, with the following observations.
"Therefore, the prayer is accepted and the insolvency proceedings are closed. RP is also discharged and liberty is given to the FC to file an application for initiating Bankruptcy Proceedings." (Annexure VIII – Page No.40 of the Application).
8. In view of the above order of this Tribunal and considering the fact that the Individual Insolvency Resolution Process has failed in the matter of Personal Guarantor, the Petitioner
