The court affirmed that bankruptcy proceedings can be initiated against a personal guarantor due to the failure of the individual insolvency resolution process, highlighting the creditor's rights and the responsibilities of the appointed bankruptcy trustee.

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.14.35 Crores consisting of Rs.8.85 Crores in the form of Cash Credit and Rs.5.50 Crore in the form of Bank Guarantee limit in favour of Respondent No.2/Corporate Debtor vide sanction letter dated 17.08.2015. (Annexure III – Page Nos.15-19 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 20.08.2015, 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.20-31 of the Application).

4. On default of payment, the Financial Creditor approached Hon’ble DRT-II, Hyderabad vide OA No.112/2017 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.91/2020 dated 10.01.2020, wherein Respondent No.1 was referred to as defendant No.5. 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.32-37 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 Company, the outstanding total amount payable to the Financial Creditor is Rs.30,86,62,247/- (Rupees Thirty Crores Eighty Six Lakhs Sixty Two Thousand Two Hundred and Forty Seven Only) including a principal amount of Rs.9,40,43,475.84 (Rupees Nine Crores Forty Lakhs Forty Three Thousand Four Hundred Seventy Five and Eighty Four Paisa Only) and interest amount of Rs.21,46,18,772/- (Rupees Twenty One Crores Forty Six Lakhs Eighteen Thousand Seven Hundred and Seventy Two Only) calculated until 20.11.2024. (Annexure VI – Page No.38 of the Application).

6. The Financial Creditor’s application CP (IB) 368/95/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. Interim moratorium was ordered against Respondent No.1 by this Tribunal by appointing Mr. Murali Mohan Chevuturi as Resolution Professional. Based on the recommendations filed by Resolution Professional under Section 99 of IBC, and on merits of the matter, this Tribunal, vide orders dated 06.07.2023 admitted the Respondent No.1 into Individual Insolvency Resolution Process. (Annexure VII – Page Nos.39-47 of the Application).

7. The Personal Guarantor did not submit any Repayment Plan in the PIRP.

The Resolution passed in the 1^st meeting of the creditors held on 21.10.2023 and the Resolution Professional filed IA (IBC) No.1070/2024 with this Tribunal seeking closure of the Personal Insolvency Resolution Process with an option to the Creditor to see