Tribunal sets aside findings on Guarantor, upholds Resolution Professional appointment, and remits matters for fresh report.

The Tribunal partly allowed the appeals, setting aside the findings and observations made by the Adjudicating Authority regarding default by the Personal Guarantor. The appointment of the Resolution Professional was upheld. The matters were remitted back to the Adjudicating Authority, instructing the Resolution Professional to allow the Appellant to present their case and submit a fresh report. The Adjudicating Authority was directed to proceed in accordance with the law based on the Tribunal's observations and findings.

---

---

Issues Involved:
1. Whether the Adjudicating Authority failed to issue notice to the Appellant, thus violating the Principles of Natural Justice.
2. Whether service of an advance copy of the petition can be deemed as service of notice of hearing.
3. Whether the Adjudicating Authority followed the correct procedure under the Insolvency and Bankruptcy Code (IBC) and National Company Law Tribunal (NCLT) Rules.
4. Whether the Adjudicating Authority made premature findings regarding the default by the Personal Guarantor.
5. Whether the appointment of the Resolution Professional was correctly handled.
6. Whether the Personal Guarantor was given an opportunity to seek the replacement of the Resolution Professional.

Detailed Analysis:

Issue 1: Principles of Natural Justice and Notice to Appellant
The Appellant argued that no notice of hearing was issued by the Adjudicating Authority or the Respondent's Advocate, thus violating the Principles of Natural Justice. The Tribunal noted that the application was listed for hearing but adjourned due to time constraints, and the impugned order was passed without the Appellant being given notice. The Tribunal emphasized that the Adjudicating Authority should have issued a limited notice to the Personal Guarantor to secure their presence, referring to the commencement of the Interim Moratorium.

Issue 2: Service of Advance Copy as Notice
The Appellant contended that the service of an advance copy of the application did not constitute proper notice. The Tribunal clarified that according to Section 95(5) of the IBC and Rule 3(1)(g) of the Rules, the Creditor must serve a copy of the application made under sub-section (1) to the Debtor. The Tribunal concluded that serving an advance copy is not contemplated and that the application should be served after it is submitted to the Adjudicating Authority.

Issue 3: Procedure under IBC and NCLT Rules
The Tribunal examined the procedural requirements under Sections 95 to 100 of the IBC and the relevant Rules and Regulations. It was noted that the process involves filing the application, appointing a Resolution Professional, and the Resolution Professional examining the application and submitting a report. The Tribunal found that the Adjudicating Authority erred by not issuing a limited notice to the Personal Guarantor and by making premature findings on the default.

Issue 4: Premature Findings on Default
The Tribunal observed that the Adjudicating Authority prematurely recorded a finding of default by the Personal Guarantor at the stage of acting on the application under Section 95. The Tribunal emphasized that the stage for considering default would arrive under Section 100, after the Resolution Professional submits their report. The premature finding was set aside.

Issue 5: Appointment of Resolution Professional
The Tribunal discussed the appointment procedure of the Resolution Professional under Section 97. It was argued that the same Resolution Professional who filed the application for the Creditor could not propose rejection of the application. The Tribunal noted that the IBBI maintains a panel of Insolvency Professionals and that the Resolution Professional's role is to collect evidence and recommend acceptance or rejection of the application. The Tribunal found no bar under Section 97 against appointing the same Resolution Professional who filed the application.

Issue 6: Opportunity to Seek Replacement of Resolution Professional
The Appellant argued that they should have been given an opportunity to seek the replacement of the Resolution Professional before the report was submitted. The Tribunal clarified that Section 98, which deals with the replacement of the Resolution Professional, is not stage-specific and can be resorted to at various stages, including the implementation of the repayment plan. The Tribunal concluded that the opportunity to seek replacement arises only after the Resolution Professional is appointed.

Conclusion:
The Tribunal partly allowed the appeals, setting aside the findings and observations made by the Adjudicating Authority in paragraphs 9 to 11 of the impugned orders. The appointment of the Resolution Professional was not disturbed. The Tribunal remitted the matters back to the Adjudicating Authority, directing the Resolution Professional to give the Appellant an opportunity to present their case and submit a fresh report. The Adjudicating Authority was instructed to proceed further as per law in light of the Tribunal's observations and findings.

---