JOINT REPAYMENT PLAN

In the insolvency resolution process for the personal guarantors to corporate debtor, the financial creditor may initiate insolvency resolution process against the personal guarantor under Section 95 of the Code or the Personal Guarantor himself file an application before the National Company Law Tribunal (‘NCLT’ for short) for initiation of insolvency resolution process under Section 94 of the Code. The NCLT, while admitting the application, appoints an Interim Resolution Professional and directs him to submit the report on analysing the documents obtained from Personal Guarantor and the Financial Creditor within 21 days of his appointment. The Interim Resolution Professional shall obtain the relevant documents from the parties, analyse the same and submit a report along with his recommendation as to whether the application may be admitted or rejected to the NCLT. The NCLT on the basis of the recommendations of the Interim Resolution Profession either admit or reject the application.

If the application is admitted the NCLT appointed the Interim Resolution Professional as Resolution Professional (‘RP’ for short). The NCLT will direct the RP to cause public announcement in two leading newspapers, one in English and the other in the vernacular language calling for the claims from the creditors of the Personal Guarantors within 7 days from the date of order of NCLT. 21 days shall be given to the creditors for filing their claims to the RP.  The RP will examine the claims and prepare a creditors’ list and the send the same to every creditor, personal guarantors and the corporate debtor.

Section 105 of the Code for the submission of the repayment plan, that shall be prepared in consultation with the RP.  The Personal Guarantor shall furnish the required information and documents as specified in the Code and the Regulations made thereunder.

Personal guarantors are generally jointly and severally liable unless the contract provides otherwise.

In some cases, there may be more than one Personal Guarantor for the loan obtained by the Corporate Debtor. In such cases, each personal guarantor is to file separate application under Section 94 of the Code and each application will be dealt separately. The Code contemplates insolvency proceedings against each personal guarantor independently. Each debtor is required to disclose his own assets, liabilities, income, expenses and repayment capacity.

When the personal guarantees given by the Personal Guarantor to the common corporate debtor for the loan taken from one financial creditor, then the guarantees given is for the common debt and for one financial creditor, then a plea may be raised. Instead of filing individual repayment plan, why a joint repayment plan cannot be submitted?

The provisions of the Code do not provide for filing the joint repayment plan by Personal Guarantors but at the same time the provisions of the Code do not bar the filing of repayment plan jointly by the Personal Guarantors.

The following are the benefits available to the stakeholders in submission of joint repayment plan-

• Separate repayment plans may result in inconsistent treatment of the same guaranteed debt.
• The combined assets and cash flows of both guarantors may enable a more viable repayment proposal than separate plans.
• A common plan promotes judicial economy and maximizes value for creditors.

Joint Repayment Plan the following conditions are to be fulfilled-

• All guarantors shall give their consent for the Joint Repayment Plan.
• The liabilities arise from the same corporate debtor.
• The creditors are substantially the same, and
• A common plan would facilitate efficient resolution.

To submit a Joint Resolution Plan the concerned Personal Guarantors shall file applications before the NCLT to permit them to file a Joint Repayment Plan, being personal guarantors of the same corporate debtor and facing claims arising out of the same financial facility, to submit a coordinated/common repayment plan through the Resolution Professional, while preserving the independent legal liability of each applicant under the Code.

Objections may be filed before the NCLT against the proposed Joint Repayment Plan as below, by the Financial Creditor-

• Proceedings under Sections 94 and 95 of the IBC are initiated against an individual debtor.
• Each personal guarantor is a distinct debtor with separate assets, liabilities, income, and creditors.
• The Code does not provide for filing a single repayment plan by two different debtors.
• A joint plan may obscure the individual financial capacity and obligations of each guarantor.

On receipt of joint repayment plan, the RP shall examine each debtor's assets, liabilities, income, expenses and repaying capacity of each personal guarantor. A joint repayment plan should not restrict or compromise this contractual and legal right.

Two personal guarantors gave guarantee to a Corporate Debtor. Both the personal guarantors filed applications under Section 94 of the Code for initiation of insolvency resolution process of personal guarantors to corporate debtor in CP 289/2025 and 291/2025. The NCLT admitted the applications and appointed one Insolvency Professional as Interim Resolution Professional and directed the IRP to submit its report as to the admissibility of the said application in each case. The IRP prepared the report and submitted the same to the NCLT with his recommendations to admit the application for which he certified that the Personal Guarantors complied with the provisions of the Code. The Financial Creditor raised objections to the recommendation of the IRP and contended that the applications were filed to evade the payment of outstanding dues to the financial creditor. However, the NCLT, Chennai Bench admitted the application.

The NCLT directed the RP to give public announcements calling the claims from the creditors of the Personal Guarantors. The RP complied with the same. Only one claim was received from the Financial Creditor. The RP verified the claim and forwarded the list of creditors to all concerned.

The RP requested the personal guarantors to submit the repayment plan. The Counsel of the Personal guarantors submitted to the RP that he is going to file a joint repayment plan. The RP replied that no provision under the code for filing a joint repayment plan and requested to file repayment plan individually.

During the course of hearing the Counsel of the Personal Guarantors made an enquiry with NCLT as to whether a joint repayment plan may be submitted in their cases. The Members answered positively but not reduced the same in writing. Therefore, the RP insisted to file repayment plan separately. If they want to file a joint repayment plan, they may file a petition before the NCLT and get the order of the same. The personal guarantor filed an interim application before NCLT with the prayer to allow them to file a joint repayment plan. The application was number and the date of hearing is fixed. In the hearing of taking Progress Report filed by the RP the NCLT directed the RP to accept the joint repayment plan from the personal guarantors.

Even though there is no express provision in the Code to submit a joint repayment plan, the personal guarantors may obtain an order from the NCLT and file a joint repayment plan before the RP.