The court established that a Personal Guarantor can be declared bankrupt if they fail to submit a repayment plan as required under the Insolvency and Bankruptcy Code.

ORDER

1. This Application is filed by the Applicant / Financial Creditor under Section123 r/w 60(2) of the Insolvency and Bankruptcy Code, 2016 r/w Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019 inter alia, seeking initiation of Bankruptcy Proceedings against the Respondent No.1 herein Mr. Virigneni Anjaiah, Personal Guarantor of M/s. Sri Pavana Keerthi Hotels India Private Limited u/s 123 of IBC 2016.

2. The averments of the Applicant in brief are as follows:

2.1 It is averred that the Respondent No.2 / Corporate Debtor is the Principal Borrower and availed term loan of Rs.19.28 crores for the establishment of hotel which was repayable in 94 monthly installments along with interest @ base rate 3% and TPA – 0.5% commencing from June 2015. The loan payment period ended in March, 2021. Respondent No.2 after fully availing credit facilities failed to adhere to the repayment terms and hence the loan became irregular. Andhra Bank Holding account of the Corporate Debtor assigned the debt to the applicant. Therefore, the applicant is the assignee of the debt portfolio of Respondent No.2.

2.2 It is submitted that pursuant to the said sanction, the Respondent No.1 Mr. Virigneni Anjaiah, S/o. Guravaiah stood as a Personal Guarantor for the credit facilities sanctioned by the Applicant to Corporate Debtor vide Deed of Guarantee dated 20.10.2014 ensuring repayment of the financial assistance provided to the Corporate Debtor. Under this Deed of Guarantee, Respondent No. 1/ Personal Guarantor agreed to pay all amounts due on demand without delay and to indemnify the Financial Creditor against any losses resulting from the Corporate Debtor’s default.

2.3 It is averred that Respondent No.2 failed to make repayment/instalment as per the terms and conditions, the loan became irregular and the Loan account was classified as NPA on 29.09.2015 as per RBI Guidelines. After declaration of NPA, the Bank filed an OA. No. 403/2017 before DRT-I, Hyderabad claiming an amount of Rs.32,19,88,213/- which was the due amount along with interest against the Corporate Debtor and its personal guarantors.

2.4 It is further averred that the Learned DRT after adjudication, granted a decree on 09.02.2019 along with a Recovery Certificate dated 09.07.2019 for the said amount and a demand notice was issued by the Recovery Officer, DRT on 22.07.2020 to the Judgment Debtors for the payment of said amount. But the said amount was not paid by the guarantors/Corporate Debtor.

2.5 It is stated that the Andhra Bank vide assignment deed dated 27.09.2017 assigned the debt portfolio of Corporate Debtor to the applicant/Financial Creditor. The said assignment deed is registered with concerned SRO. Therefore, the applicant/Financial Creditor being assignee is entitled to recover the debt from Corporate Debtor/ Respondent No.2. The total debt amount of Rs. 25,71,79,268/- as on 06.06.2017 along with interest @ 12% is due and payable by the Corporate Debtor.

2.6 The applicant invoked the guarantee executed by the Respondent No.1/Personal Guarantor by issuing a demand notice dated 29.12.2021 in Form-B under Rule 7 (1) of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtor) Rules, 2019. But the Respondent No.1/ Personal Guarantor failed to make payment of Rs.37,02,00,931/- along with interest and charges from 30.11.2021 as per the terms and conditions of Guarantee deed.

2.7 The Respondent No.2/ Corporate Debtor was admitted to CIRP vide CP(IB) No. 153/7/HDB/2021 vide order dated 11.04.2022 by