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2025 Supreme(Online)(NCLT) 6254
NATIONAL COMPANY LAW TRIBUNAL HYDERABAD BENCH
Rajeev Bhardwaj, J, Sanjay Puri, T
State Bank of India – Appellant
Versus
Yarlagadda Madhu Mohan – Respondent
Transfer Petition No. | IA (IBC/402/2025 in Company Petition IB/222/95/HDB/2022
For the Petitioner: Mr. GP Yash Vardhan, Ld. Counsel
For the Respondent: Ms. Siva Praneetha, Ld. Counsel
The Insolvency and Bankruptcy Code applies to personal guarantors including foreign nationals, reinforcing that legal proceedings are valid regardless of citizenship.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 95, 121 & 123 - Personal Guarantor’s application for Bankruptcy Process initiated by State Bank of India based on failure to pay outstanding dues; total dues amounting to Rs. 372.63 crores; assertion of foreign citizenship by the Personal Guarantor deemed inapplicable by the court - The court emphasized that provisions applicable to personal guarantors include foreign nationals, making proceedings valid irrespective of citizenship. (Paras 5, 6, 8, 9, 10)
(B) Bankruptcy Proceedings - Requirements for initiation under Section 121 met due to non-submission of repayment plans; court recognizes obligations of guarantors irrespective of citizenship and denies claims of jurisdictional excess raised by the Personal Guarantor. (Paras 6, 7, 10, 11)
Facts of the case:
The Financial Creditor, SBI, initiated bankruptcy proceedings against the Personal Guarantor, asserting substantial unpaid debts and the failure to submit a repayment plan despite several opportunities. The Personal Guarantor contested the maintainability of proceedings citing foreign citizenship.
Findings of Court:
The court dismissed the grounds raised by the Personal Guarantor, confirming that the Bankruptcy proceedings were correctly initiated as provided under sections of the Insolvency & Bankruptcy Code, affirming the creditor’s rights.
Issues: The primary issues were the Personal Guarantor's foreign citizenship relevance to jurisdiction under the Code and the applicability of Sections 2 and 3 concerning foreign nationals.
Ratio Decidendi: The court ruled that provisions of the IBC concerning personal guarantors apply to all individuals irrespective of nationality, reinforcing creditor rights in bankruptcy scenarios across jurisdictions.
Result: The Personal Guarantor is ordered to be declared BANKRUPT.
| Table of Content |
|---|
| 1. initiation of bankruptcy due to outstanding debts. (Para 2) |
| 2. opposition to jurisdiction raised by the personal guarantor. (Para 3 , 4) |
| 3. legal provisions apply universally regardless of citizenship. (Para 5 , 6 , 7 , 8 , 9 , 10) |
ORDER
IA (IBC/402/2025 Orders pronounced, recorded vide separate sheets. In the result, the IA(IBC)/402/2025 is allowed.
ORDER
1. The Petitioner /Financial Creditor (FC) has filed this Application under Form B Section 121 r/w 123 of the IBC, 2016, and r/w Rule 7 of the IBBI (Application to Adjudicating Authority Bankruptcy Process for Personal Guarantors to Corporate Debtor) Rules, 2019, to initiate the Bankruptcy Process against the Personal Guarantor/Respondent No.1 of M/s. YKM Entertainment & Hotels Private Limited/Corporate Debtor (CD).
2. Facts of the Case:
a. The Corporate Debtor has availed financial assistance of Rs 263,48,37,487/- from the Financial Creditor and its associate banks from time to time, and in order to secure the repayment of a Guarantee Agreement securing repayment of the financial assistance availed by the CD. The total dues, along with interest and other bank charges, amounted to Rs. 372,63,03,510/- w.e.f. 01.02.20251.
b. The Corporate Debtor has executed various loan 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 a Guarantee Agreement in favour of the Financial Creditor. Some of the relevant/important Agreement/Loan documents2 were executed for the purpose of availing financial assistance. are detailed in pages 8 and 9 of the Application.
c. The Corporate Debtor has defaulted on repayment of the loan amount due, resulting in NPA of the loan account of the CD on 29.11.2016. The Financial Creditor issued notice to the CD and PG on 09.08.2018 under Section 13(2) of the SARFAESI Act for repayment of the outstanding loan amount within 60 days from the date of issue of notice, i.e., 07.10.2018. In spite of serving the notice on 18.08.2018, no payment was made by the Personal Guarantor of the outstanding amount. As such, the debt fell due on 08.10.2018, [the said financial assistance, the Personal Guarantor has executed]
d. After the acquisition of the Associate Banks by the Financial Creditor, the FC filed Original Application No. 767 of 2018 before the Debt Recovery Tribunal, Hyderabad-II (“DRT”), against the Corporate Debtor, the Personal Guarantor, and other defendants seeking recovery of the outstanding loan amount of Rs 1,84,82,88,871, together with interest and other bank charges.
e. It is submitted by the FC that during the pendency of the O.A. before the DRT, the CD offered an OTS to the FC vide letter dated 02.04.2019, wherein the CD admitted its liability towards the FC, which was approved by the FC through its letter dated 01.08.2019 with certain terms & conditions and accepted by the Personal Guarantor/CD on 01.08.2019 on passing of the Resolution at its Board meeting held on 06.08.2019. One crucial condition was that in the event of the CD failing to pay the OTS amount or any instalment within the stipulated time, the FC reserves the right to cancel the OTS altogether and entire dues of the FC claimed before the DRT in the OA, with interest and costs will become due for payment after adjusting the amount recovered under OTS.
f. Another IA No.4620/2019 was filed before the DRT on 13.09.2019 to record the compromise (OTS), wherein the CD and PG admitted the debt, agreeing to the terms and conditions of the settlement. The DRT, while allowing the O.A. vide orders dated 19.09.2019, gave liberty to the FC to approach them for issuance of a Recovery certificate against the CD/Personal Guarantor/other Defendants in the event of default of OTS payment.
g. As the CD/PG failed to pay the amou
