In the absence of a valid repayment plan post-rejection by creditors, bankruptcy proceedings against a personal guarantor can justifiably be initiated by the court.

ORDER

1. This present application is filed by the Applicant/Financial Creditor under Section 121 & Section 123 r/w 60(2) of the Insolvency and Bankruptcy Code, 2016 (hereafter referred as IBC,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 the initiation of the Bankruptcy Process against Smt. P. Kameswari, (herein after referred as the Respondent No. 1,/the Personal Guarantor), to the M/s Viceroy Hotels Limited (herein after referred as Respondent No. 2/Corporate Debtor).

2. The brief averments of the Applicant:

2.1 It is averred that, the Corporate Debtor/Respondent No. 2 was the principal borrower and availed various credit facilities from the Financial Creditor for projects in Bangalore, Chennai, and Hyderabad, including additional financial assistance by way of Term Loans of Rs. 64 crores for the Hyderabad Project and Rs.28 crores, for the Bangalore Project. These facilities were sanctioned on 31.01.2008, upon execution of the requisite loan and security documents, and the key agreements relevant to the present matter being listed below.

A) Agreement of Loan for overall limit dated 31.01.2008.

B) Agreement of Hypothecation of goods and assets dated 31.10.2008.

C) Deed of Guarantee for overall Limit dated 31.01.2008.

D) Letter regarding grant of individual limit within the overall limit dated 31.01.2008.

2.2 For the availed loan facilities, the Personal Guarantor executed the guarantee to secure the repayment obligations arising from the financial assistance extended to the Corporate Debtor. Subsequently, the Corporate Debtor had committed ‘default’ by violating the terms of sanction and in repayment of the outstanding dues of the loan amount of Rs.64 crores funded to its Hyderabad project. Thus, on 01.08.2011, the accounts of the Corporate Debtor were declared as ‘Non-Performing Asset’ (NPA).

2.3 That the Respondent herein acknowledged the outstanding liabilities by executing revival letters on 25.10.2010, 14.02.2012, and 22.05.2014, confirming the dues as on 29.03.2014. Subsequently, as the default persisted, on 26.09.2012, the Applicant Bank issued notices under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 , (“SARFAESI”), to the Respondents herein granting a 60-day period to clear the liabilities, which the Respondents failed to comply with. Therefore, the date of default in repayment of the outstanding amount by the Personal Guarantor was 25.11.2012.

2.4 Consequently, as neither the Corporate Debtor nor the Personal Guarantor repaid the outstanding amounts, on 02.03.2015, the Applicant initiated proceedings vide O.A. No. 248/2015, before the Hon’ble Debt Recovery Tribunal, (DRT), Hyderabad, for recovery of the outstanding dues of Rs.99,29,76,364.37/-. However, the above Application was later kept in abeyance due to the commencement of CIRP and the declaration of moratorium against the Corporate Debtor by this Tribunal vide order dated 12.03.2018, in CP.(IB).No.219/7/HDB/2017.

2.5 Pursuant thereto, on 27.10.2020, the Applicant issued a Demand Notice in Form-B to the Personal Guarantor demanding payment of the defaulted dues within 14 days. In response to the said Demand Notice, on 10.12.2020, the Personal Guarantor, referred to the pendency of Writ Petitions Nos. 10096, 10065, and 10158 before the Hon’ble Supreme Court regarding initiation of insolvency proceedings against the Personal Guarantor.

2.6 However, the Hon’ble Supreme Court, by its judgment dated 21.05.2021, in Lalit Kumar Jain v. Union of India (Transferred Case (Civil) 245/2020), upheld the validity of the Noti