The court established that the procedure for initiating bankruptcy against a personal guarantor must comply with specified statutory provisions.

Sr. No. 33

Under Section 121(1) of the Insolvency and Bankruptcy Code, 2016 read with Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtor) Rules,

2019

In the matter of

Small Industries Development

Bank of India …Petitioner/

Financial Creditor

Versus

Smt. Kaushaliya Omprakash Agarwal

…Personal Guarantor

ORDER SHEET OF THE HEARING ON 13.08.2025

Coram

Hon’ble Member (Judicial) : Sh. Sushil Mahadeorao Kochey

Hon’ble Member (Technical) : Sh. Prabhat Kumar

Appearances:

For the Applicant : Mr. Vikram Chaudhery, Advocate

For the Respondent : None present

ORDER

1. This Petition has been filed by the Small Industries Development Bank of India (“Petitioner/ Financial Creditor”) under Section 121 of the Insolvency and Bankruptcy Code, 2016 (“Code”) read with Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019 seeking to initiate Bankruptcy Process against Smt. Kaushaliya Omprakash Agarwal, being the Personal Guarantor (“PG”) of Kosas Exports Limited (“Corporate Debtor”).

Brief Background

2.1 Small Industries Development Bank of India, the Financial Creditor, sanctioned Secured Business Loan of Rs. 7 crores in favour of Kosas Exports Limited, the Corporate Debtor, vide Sanction Letter dated 24.02.2014. Consequently, a Loan Agreement was executed between the Financial Creditor and the Corporate Debtor on 26.02.2014 and an unconditional and irrevocable Deed of Guarantee dated 26.02.2014 was executed by Smt. Kaushaliya Omprakash Agarwal in favour of the Financial Creditor to secure the financial assistance availed by the Corporate Debtor.

2.2 The Corporate Debtor was irregular in making repayment of the disbursed loan amounts from 10.12.2014 and thus, the Financial Creditor issued a Recall Notice dated 08.03.2016, calling upon the Corporate Debtor to repay the entire outstanding principal amount of the loan along with the applicable interest and other dues. However, the Corporate Debtor failed to discharge his liabilities and hence, the Financial Creditor invoked the unconditional and irrevocable guarantee given by the Personal Guarantor herein, demanding the repayment of the entire outstanding amounting to Rs. 7,28,75,463/- along with further interest@ 12.75% p.a. w.e.f. 19.04.2016 till the repayment of the amount.

2.3 The Corporate Debtor proposed One Time Settlements on 08.06.2019 and 05.11.2020, but they were rejected by the Financial Creditor. The Financial Creditor, on 24.11.2021, offered to settle the dues in accordance with the One Time Settlement Scheme for MSMEs – Non- Discriminatory & Non-Discretionary (OTS-NDND 2022) floated by the Financial Creditor, but no response was received from the Corporate Debtor.

2.4 Subsequently, on 19.10.2022, the Applicant issued a Demand Notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019 to the Personal Guarantor seeking payment of the default amount of Rs. 17,63,58,362/-

within 14 days from the receipt of the said Demand Notice.

2.5 Since the Financial Creditor did not receive the payment, they filed a Company Petition under Section 95 of the Code, CP(IB) No. 176 of 2023, seeking the initiation of the Insolvency Resolution Process of the Personal Guarantor which was admitted by this Tribunal on 12.07.2024 and Mr. Rishabh Chand Lodha was appointed as the Resolution Professional of the Personal Guarantor.

2.6 During the course of the Insolvency Resolution Process, on non-receipt of Repayment Plan from the Personal Guarantor, the Resolution Professional has duly filed a Report under Section 106 of the Code before this Tribunal, whereby this Tribunal vide its order dated 25.11.2024 observed that – “non-receipt of repayment plan would tantamount to rejection of plan in terms of section 114 of the c