Application seeking bankruptcy of Personal Guarantors dismissed for procedural non-compliance with Section 95.

The Tribunal disposed of the application seeking initiation of bankruptcy process against the Personal Guarantors, emphasizing compliance with Section 95 of the Insolvency and Bankruptcy Code. The application was not admitted due to failure to meet procedural requirements, specifically the necessity of proper filing under Section 95, including a 14-day notice to the debtor.

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Issues Involved:
1. Initiation of bankruptcy process against Personal Guarantors under Section 60(2) of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Default in repayment of debt by the Corporate Debtor and invocation of personal guarantees.
3. Compliance with Section 95 of IBC for initiating insolvency resolution process against the Guarantors.

Issue-wise Detailed Analysis:

1. Initiation of Bankruptcy Process Against Personal Guarantors:
The Applicant sought orders to initiate the bankruptcy process against the Respondents, who are the personal guarantors for the credit facilities granted to the Corporate Debtor. The Respondents defaulted in repaying the debt under the Contract of Guarantee, making them liable under Section 60(2) of the Insolvency and Bankruptcy Code, 2016. The Applicant, a scheduled commercial bank, sanctioned credit facilities of INR 10.33 crores to the Corporate Debtor, which were revised and extended until 2016. The Corporate Debtor failed to complete a hotel project due to an earthquake, leading to a revised project cost and subsequent defaults in repayment.

2. Default in Repayment of Debt by the Corporate Debtor and Invocation of Personal Guarantees:
The Corporate Debtor defaulted in operating the accounts as per the terms and conditions of the credit facilities, leading to the account being classified as a Non-Performing Asset on November 30, 2016. The Corporate Debtor suffered huge losses and was unable to pay the debts, resulting in the initiation of Corporate Insolvency Resolution Process (CIRP) on 21.12.2018. After failing to reach a resolution, the Corporate Debtor went into liquidation on 06.09.2019. The Applicant invoked the personal guarantees furnished by the Respondents on 08.09.2020, but the Respondents failed to make the payments. Consequently, the Applicant claimed an aggregate sum of Rs. 38,63,02,841/- from the Corporate Debtor and the Respondents, jointly and severally.

3. Compliance with Section 95 of IBC for Initiating Insolvency Resolution Process Against the Guarantors:
The Tribunal highlighted the necessity of complying with Section 95 of IBC for initiating insolvency resolution against the Guarantors. Section 95 outlines the procedure for a creditor to apply for initiating an insolvency resolution process, including submitting details and documents related to the debt, evidence of default, and providing a copy of the application to the debtor. The Tribunal emphasized that the Financial Creditor (FC) must file a proper application under Section 95, including a 14-day notice and servicing of the application to the debtor.

Order:
The Tribunal disposed of the application with observations that the Financial Creditor must comply with the provisions of Section 95 of IBC to initiate insolvency proceedings against the Guarantors. The application was not admitted as it did not meet the necessary procedural requirements under Section 95 of IBC.

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