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2024 Supreme(Online)(NCLT) 4335
NATIONAL COMPANY LAW TRIBUNAL
Dr. Venkata Ramakrishna Badarinath Nandula, MEMBER (JUDICIAL), Shri Charan Singh, MEMBER (TECHNICAL)
State Bank of India – Appellant
Versus
Satyanarayana Malla & Varam Bio Energy Pvt Ltd – Respondent
Company Petition IB/96/2021 | IA(IBC) 709/2024
For the Applicant:Ms. Sarvani Desi Raju, Advocate
For Respondent No. 1:Mr. Purna Chandra Rao, Advocate
Court ruled the IBC application timelines are directory, allowing for late filings to enable access to justice and uphold creditor rights.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 121 - Application for bankruptcy of a personal guarantor filed by creditor - Application allowed despite the delay - Decision to condone the delay noted as directory, ensuring compliance with the IBC procedural requirements - Requirement for a repayment plan by the guarantor underscored. (Paras 19, 20)
(B) Bankruptcy Proceedings - Courts may permit late applications if no adverse consequences prescribed, emphasizing access to justice over strict procedural adherence.
Facts of the case:
The applicant, a financial creditor, sought to initiate bankruptcy proceedings against the personal guarantor after the corporate debtor defaulted on multiple loans totaling Rs. 69,14,54,733/-. The personal guarantor failed to present a feasible repayment plan, prompting the application.
Findings of Court:
The Tribunal found adherence to the IBC procedural requirements and noted that despite the delay in applying for bankruptcy, the court upheld it based on the directory nature of the deadlines set by IBC.
Issues: The main issue was whether the bankruptcy application could be admitted despite being filed beyond the 3-month timeframe prescribed by Section 121(2) of the IBC.
Ratio Decidendi: The court ruled that the timelines under IBC are directory rather than mandatory, enabling the applicant to file late without penalty, underscoring the importance of justice over rigid adherence to deadlines.
Result: Application for bankruptcy process against the personal guarantor is allowed.
ORDER
1. This is an application filed by the Applicant/Financial Creditor under Section 121 of the Insolvency and Bankruptcy Code, 2016 (IBC) r/w Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019 to initiate Bankruptcy Process against the personal guarantor to the corporate debtor i.e M/s. Varam Bioenergy Private Limited, inter alia, seeking the following reliefs:
a) To pass an order admitting the instant petition and order for initiating Bankruptcy Proceedings against the personal Guarantor/ Respondent No.1 herein.
b) To appoint Mr. Dantu Indu Sekhar as the Bankruptcy Trustee
2. Brief of averments of the application as follows:
2.1. It is stated that the Corporate Debtor availed Credit facilities for an amount of Rs. 69,14,54,733/- from the Financial Creditor for business needs, as per the Sanction Letters dated 23.10.2006, 05.02.2007, 31.03.2009, 09.11.2010, 29.08.2011 and 07.12.2012, a copy of which is enclosed as (Annexure 8). In view of the sanction letters the financial creditor and the Corporate Debtor executed a Joint Term Loan (Consortium) Agreement dated 18.07.2007 (Annexure 9) and Inter-Se Agreement dated 29.08.2012 2.2. Pursuant to the said sanction letters, the Personal Guarantor executed the following deeds, namely, • Deed of Guarantee dated 09.02.2007 (Annexure 14);
• Deed of Guarantee for overall limits dated 29.09.2009 (Annexure 15);
• Supplementary Deed of Guarantee for increase in overall limits dated 22.08.2011 (Annexure 16);
• Deed of Guarantee dated 01.02.2012 (Annexure 17);
• Deed of Guarantee dated 23.01.2013 (Annexure 18);
• Deed of Guarantee dated 25.03.2013 (Annexure 19)
ensuring repayment of the financial assistance provided to the Corporate Debtor. Under the said agreements, the Personal Guarantor agreed to pay all amounts due without delay and to indemnify the Financial Creditor against any losses resulting from the default committed by the Corporate Debtor. Furthermore, the 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 the Corporate Debtor.
2.3. It is stated that the Corporate Debtor after availing the aforesaid loan facilities violated the terms of the Sanction Letters and other loan documents by committing default in repaying the loan amounts. Thus, the accounts of the Corporate Debtor were classified as NPA by the Financial creditor on 31.12.2010 and by State Bank of Hyderabad on 15.09.2011. Since there was default, the financial creditor issued demand notices under SARPAESI Act, 2002 to the respondents on 17.10.2014 (Annexure 22) calling upon for the repayment of the loan availed.
2.4. As the corporate debtor failed to repay the same, the financial creditor filed an application before the Learned D.R.T, Chennai vide O.A. No. 147 of 2015, wherein the Learned D.R.T, Chennai issued a Recovery Certificate vide DRC NO. 132 of 2018 on 06.03.2018 directing the corporate debtor to pay the debt amount within 30 days. It is stated that the corporate debtor again failed to repay the loan amounts. Aggrieved by the same, the financial creditor filed an application under section 7 of the IBC for initiating Corporate Insolvency Resolution Process (CIRP) before this Tribunal vide CP (IB) No. 377/7/HDB/2018 and the same was admitted on 18.07.2019. Thereafter, a Demand Notice Dated: 12.10.2020 was issued to the Personal Guarantor demanding the Payment of the default amount. Despite receipt of the demand notice the Personal Guarantor failed to acknowledge the same.
2.5. Subsequently, this Adjudicating Authority, vide order dated 23.07.2021, passed an interim moratorium and appointed RP under Section 97(5) of the Code and thereafter directed the RP to file his report under Section 99 of t
