A valid invocation of a personal guarantee is essential for establishing liability; failure to comply with the terms of the Deed of Guarantee results in dismissal of the insolvency petition.

ORDER

PER: BENCH

The present Petition has been filed, vide Diary No.416 dated 01.04.2024, by Bank of Baroda (hereinafter referred to as the “Petitioner” or “Financial Creditor”) through its Chief Manager, Mr. Thamarai Selvan, who has authorisation letter dated 22.11.2018, under section 95 of the Insolvency and Bankruptcy Code, 2016 (herein after referred to as the “IBC” or “Code”) read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019 (hereinafter referred to as the “Personal Guarantors Rules”) seeking to initiate Personal Insolvency Resolution Process (hereinafter referred to as the “PIRP”) against Mr. Rayapati Sambasiva Rao (hereinafter referred to as the “Respondent No.1” or “Personal Guarantor”), who is the Personal Guarantor on the loan accounts of M/s. Transstroy India Limited (hereinafter referred to as the “Respondent No.2” or “Corporate Debtor” or “Principal Borrower”) and who has extended the Personal Guarantee to the Financial Creditor.

2. The registered office of the Corporate Debtor is at # 5-91-25, 4^th Line, Lakshmipuram, Chandramouli Nagar, Guntur, which is situated in the State of Andhra Pradesh. Therefore, this Petition is within the territorial jurisdiction of this Bench.

FACTS OF THE CASE:

3. Facts of the case, as stated in the Petition filed by the Financial Creditor, have been summarised below:

(i) The Financial Creditor namely, Bank of Baroda, is a body corporate constituted by and under the Banking Companies (Acquisition and Transfer of Undertakings) Act 1979 having its head office at Mandvi, Baroda and branches across India, one inter alia Stressed Assets Management Branch at 4^th Floor, JBAS Building, No.45, Moore Street, Chennai-600001.

(ii) The Respondent No 1 namely, Mr. Rayapati Sambasiva Rao, who a resident of 5-91-26, 4^th Line, Lakshmipuram. Chandramouli Nagar, Guntur, Andhra Pradesh, 522007 is the Personal Guarantor for the credit facilities granted to the Corporate Debtor M/s Transstroy India Limited, a company incorporated under the Companies Act, 1956, having its registered office at R/o 5-91-25, 4^th Line, Lakshmipuram, Chandramouli Nagar, Guntur, Andhra Pradesh, 522007 and Corporate Office at H.No.8-2-293/82/A/61/1, Plot No. 60 & 61 A, Road No. 1 & 5, Jubilee Hills Co-operative House Building Society Ltd, Hyderabad, Telangana-500033.

(iii) The Corporate Debtor had been granted various credit facilities by the Bank of Baroda (erstwhile Dena Bank and the erstwhile Vijaya Bank) along with other Banks. The erstwhile Dena Bank and Vijaya Bank amalgamated with Bank of Baroda, who entitled to recover the due payable to the erstwhile Vijaya Bank in addition to the dues payable to it. The limits granted to it by the Bank of Baroda is secured by the Personal Guarantee of the Respondent No.1 vide Guarantee Agreement dated 28.02.2017, [Annexed as Annexure-6A (page 68-72E) of the Application.]

(iv) The Respondent No.1/ Personal Guarantor undertook to indemnify and keep indemnified the Financial Creditor against all losses of the said Principal sum, interest or other money due and all costs, charges and expenses, whatsoever, which the lead Bank may incur by reason of any default on the part of the Respondent No.2/ Corporate Debtor.

(v) The Respondent No.2/ Corporate Debtor fully availed the facilities and thereafter failed and neglected to pay the instalments of principal and interest, which fell due. Apart from the defaults, the Respondent No.2/ Corporate Debtor also failed to adhere to the terms of the loan agreement(s). Thereafter, the Financial Creditor made