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2026 Supreme(Online)(NCLT) 187
NATIONAL COMPANY LAW TRIBUNAL
Rajeev Bhardwaj, Judicial Member, Sanjay Puri, Technical Member
Bank of Baroda – Appellant
Versus
R. Srikanth Reddy – Respondent
Company Petition IB/250/121/HDB/2023 U/s 121 of IBC
For the Applicant: Mr. Srikanth Rathi, Ld. Counsel from O/o. Mr. VVSN Raju, Ld. Counsel.
For the Respondent: Ms. K. Srilatha, Ld. Counsel.
Bankruptcy process under Section 121 IBC can be initiated against personal guarantor post-rejection of repayment plan within 90 days; prior Section 95 admission estops denial of guarantee liability despite coercion claims.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 121, 123, 125, 128, 129, 130, 132-137, 138, 140, 141, 155 r/w Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019 and Regulations, 2019 - Bankruptcy process for personal guarantor - Petition filed by financial creditor after rejection of repayment plan by Committee of Creditors - Objections regarding authorisation of signatory, limitation, coercion in executing guarantee deed, lack of acknowledgement of debt, and selective action against guarantors rejected - Guarantee agreement dated 30.01.2014 held valid, subsisting and invoked - Application filed within 90 days of rejection of repayment plan, maintainable - No viable resolution or repayment plan forthcoming - Bankruptcy order passed, Bankruptcy Trustee appointed with directions for administration of estate, public notice, reports, and restrictions on bankrupt. (Paras 5.1 to 5.4)
(B) Authorisation for filing petition - Board Resolution and Power of Attorney authorising Chief Manager to institute proceedings upheld - Objection on lack of authority dismissed. (Para 5.2)
(C) Continuation of proceedings - Application filed in continuation of earlier Section 95 proceedings closed with liberty to file bankruptcy application - Contentions relating to prior proceedings irrelevant. (Para 5.3)
Facts of the case:
Financial creditor filed petition under Section 121 r/w Section 60(2) seeking initiation of bankruptcy process against personal guarantor of corporate debtor in liquidation, which had defaulted on consortium loans guaranteed up to Rs.720 crore. Account classified as NPA, recovery certificate obtained, prior insolvency proceedings under Section 95 admitted but repayment plan rejected.
Findings of Court:
Personal guarantor declared bankrupt, Bankruptcy Trustee appointed to administer estate, issue public notice, submit reports, take custody of assets excluding exempted ones, and enforce restrictions.
Issues: Whether bankruptcy proceedings can be initiated absent resolution/repayment plan; validity of authorisation; limitation; enforceability of guarantee despite alleged coercion and lack of subsequent acknowledgement.
Ratio Decidendi: Bankruptcy proceedings under Section 121 permissible post-rejection of repayment plan within limitation; prior admissions under Section 95 estop denial of debt/default; guarantee liability enforceable irrespective of objections to selective enforcement or coercion where deed executed and invoked.
Result: Petition allowed.
| Table of Content |
|---|
| 1. petition initiates bankruptcy against personal guarantor. (Para 1 , 2) |
| 2. guarantor contests authorization and selective targeting. (Para 3) |
| 3. rejoinder affirms authorization and timeliness. (Para 4) |
| 4. bankruptcy warranted absent repayment plan. (Para 5) |
O R D E R
1. The Bank of Baroda (“FC/Financial Creditor”) has filed this Petition under Section 121 R/W 60(2) of the Insolvency and Bankruptcy Code, 2016 r/w Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy for Bankruptcy Process for Personal Guarantors to Corporate Debtor) Rules, 2019 to initiate Bankruptcy Process against Mr. R. Srikanth Reddy, Personal Guarantor of M/s.VNR Infrastructure Limited (“Corporate Debtor/CD”).
2. The Corporate Debtor, M/s. VNR Infrastructure Limited is engaged in the business of purchase raw materials of Iron & Steel for converting into various items of Iron and Steel etc. On request of the Corporate Debtor, the Financial Creditor sanctioned credit facilities amounting Rs.75,00,00,000/- (Rupees Seventy-Five Crore only) on fund basis and non-fund basis under consortium arrangement vide its sanction letter CFSHYD/ADV/21/303 DATED 18.03.2023.
2.1. It is submitted that subsequent to the issue of said sanction letter, the Corporate Debtor availed the loan facilities by executing loan agreements with the Consortium of Bankers led by State Bank of India including the Financial Creditor.
2.2. On 30.01.2024, the Respondent No.1 along with others executed a Deed of Personal Guarantee in favour of the Consortium Bankers including the Financial Creditor guaranteeing payment of Rs.720,00,00,000/- to pay, on demand, to the lenders, all the amounts due, in case of any default committed by the Corporate Debtor. The relevant para is of the Deed of Guarantee dated 30.01.2014 is reproduced below:
“If at any time default shall be made by the Borrower in payment of the principal sum (not exceeding Rs.720.00 Crore) together with interests, costs, charges, expenses and/or other money for the time being due to the Lead Bank in respect of or under the above mentioned credit facilities or an of them the Guarantors shall forthwith (on) demand pay to the lead bank the whole of such principal sum (not exceeding Rs.720.00 Crore) together interests, costs, charges, expenses and/or other money for the time being due to the lead bank in respect of or under the above mentioned credit facilities and shall indemnify and keep indemnified the lead bank against all loses of the said principal sum, interest or other money due and all costs, charges and expenses whatsoever which the lead bank may incur by reason of any default on the part of the Borrower.”
2.3 It is submitted that the Corporate Debtor availed the said credit facilities but failed to comply with the terms and conditions of the loan agreement and defaulted in repayment of loan amount. As per the guidelines issued by the Reserve Bank of India on 29.07.2015, the accounts of the Corporate Debtor were categorized as a non-performing asset (NPA).
(Copies of Sanction Letter dated 18.03.2013, Demand Promissory Note dated 26.03.2013, Memorandum of Entry dated 26.03.2013, Composite Hypothecation Agreement dated 26.03.2013, Interse Agreement dated 30.01.2014, Working Capital Consortium Agreement dated 30.01.2014, Deed of Personal Guarantee dated 30.01.2014 and Letter of Hypothecation dated 30.01.2014 is annexed as Annexures 1 to 9 of the Application).
2.4 After the accounts of the Corporate Debtor was declared as NPA, the Corporate Finance Branch transferred the loan accounts of the Corporate Debtor to the Stressed Assets Management Branch for focused efforts to achieve the repayment of the outstanding loan amount and also the accounts were being dealt with at the said branch. Hence, the present Petition is filed by Bank of Baroda, Financial Creditor.
(Copies of the statements of accounts certified as per the Bankers Books evidence Act, loan documentation etc., are being filed along with the ma
