The court upheld the right of financial creditors to initiate bankruptcy proceedings against personal guarantors for non-compliance with financial obligations under the Insolvency and Bankruptcy Code.

ORDER

1. The instant Application has be en filed by State Bank of India (“Applicant/FC) under Section 121 of the Insolvency and Bankruptcy Code, 2016 r/w Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019 to initiate Bankruptcy Proceedings against Mrs. Manepalli Mangatayaru, (Personal Guarantor/R1).

2. The Corporate Debtor has availed various types of financial assistance from the Financial Creditor and its Associate Bank i.e., erstwhile State Bank of Hyderabad and IDBI Bank under different loan documents.

3. The Principal Borrower is Corporate Debtor and Personal Guarantor stood as a guarantor in order to secure the repayment of the financial assistance availed by the Corporate Debtor. As on 20.01.2025 the outstanding amount in default by the Personal Guarantor is Rs.178,07,08,732.11/- (Rupees One Hundred and Seventy Eight Crores Seven Lakhs Eight Thousand Seven Hundred and Thirty Two and Eleven Paise).

4. The Corporate Debtor in order to avail the financial assistance has executed various loans documents and the Personal Guarantor of the Corporate Debtor in order to secure the repayment of the financial assistance availed by the Corporate Debtor has executed Guarantee Agreement in favour of the Financial Creditor. Some of the relevant and important Agreement/Loan documents for the purpose of the captioned matter are detailed below.

5. Subsequent to availing the financial assistance, the Corporate Debtor has committed default due to which loan account of the Corporate Debtor became NPA. On 01.07.2023 the Financial Creditor and its Associate Bank have issued notice under Section 13(2) of the SARFAESI Act, 2002 and on 09.12.2013 and 23.12.2013 recall notice issued to the Personal Guarantor recalling the payment of entire outstanding amounts. The Personal Guarantor has not come forward to repay the outstanding amounts.

6. Neither the Corporate Debtor nor Personal Guarantor which obtained sizeable amounts by way of financial assistance from the Financial Creditor, has paid the outstanding loan amounts. The Financial Creditor and its Associate Bank have exercised rights and remedies available to it at that point of time under the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002 (“SARFAESI Act”) and filed an Original Application No. 372 of 2014 (‘O.A.) before the Hon’ble Debt Recovery Tribunal, Hyderabad (“Hon’ble DRT”).

7. On 30.11.2018 the Hon’ble DRT has passed an order in O.A. directing the Corporate Debtor and the Guarantors to pay an amount of Rs.28,46,62,988.70/- along with pendent lite and future interest @12 p.a. with simple interest on the amount due from the date of filing of O.A. till the full and final realization amount to the Financial Creditor and Rs.17,84,06,792.06/- along with pendent lite and future interest @ 12 p.a. simple interest on the amount due from the date of filing of O.A. till the date of realization of the claim amount to the Associate Bank.

8. The Hon’ble DRT vide its orders dated 29.05.2019 had issued a Recovery Certificate RC No. 61 of 2019 in the O.A. in favour of the Financial Creditor and its Associate Bank for recovering an amount of Rs.28,46,62,988.70/- with cost, expenses and future interest @12% simple interest yearly and interest is Rs.17,83,78,414/- from the date of filing of O.A. till the date of realization of the claim amount to the Financial Creditor and Rs.17,84,06,792.60/- with cost, expenses and future interest @12% simple interest yearly and intere