2022 (2) TMI 414 - Tri - Insolvency and Bankruptcy

Tribunal closes proceedings against deceased Personal Guarantor under IBC Section 95

The Tribunal accepted the Resolution Professional's recommendation to close the proceedings against the deceased Personal Guarantor under Section 95 of ... Proceedings against the Personal Guarantor - abatement of proceedings, consequent to the death of the Personal Guarantor - HELD THAT:- We concur with the reasoning given by the RP that the Personal Guarantor in this case is an individual, who stood guarantee to the Corporate Debtor and proceedings against him will have to be closed since on the death of the Persona Guarantor, proceedings will abate. It has been rightly pointed out that in a case of proceedings under Section 95 of the IBC, 2016, it is case for initiating Insolvency Resolution Process against the Personal Guarantor and it is not a case for recovery of any amount because that will go contrary to the scheme of IBC, 2016, in such situation on the demise of the Personal Guarantor, an individual who has given his guarantee in the favour of the Corporate Debtor, the question of continuing the proceedings against such a dead person will not arise. Since the proceedings abate, the Section 95 application also has to be closed. Taking the report filed by the RP under Section 95 of the IBC, 2016, we are inclined to accept his recommendation and the proceedings stand closed. The Ld. Counsel for the Creditor has also received the copy of the report and has given his consent for closure of the proceedings - application under Section 95 of the IBC, 2016 is therefore rejected. Issues:1. Application under Section 95 of the IBC, 2016 for initiating Insolvency Resolution Process against a Personal Guarantor who passed away.Analysis:The Tribunal considered an application filed under Section 95 of the IBC, 2016 by a Financial Creditor through the Resolution Professional against a Personal Guarantor who had provided a guarantee to a Corporate Debtor. The Personal Guarantor had passed away, as confirmed by a death certificate from the State of California, USA. The Resolution Professional recommended closing the proceedings against the Personal Guarantor due to his demise, stating that the proceedings would abate as per the definition of a 'personal guarantor' under Section 5(22) of the IBC, 2016. The Tribunal agreed with the Resolution Professional's reasoning that since the Personal Guarantor was an individual who guaranteed the Corporate Debtor, the proceedings had to be closed upon his death. The Tribunal emphasized that the purpose of the proceedings under Section 95 of the IBC, 2016 was to initiate the Insolvency Resolution Process against the Personal Guarantor, not for recovery, and continuing the proceedings after the guarantor's death would be contrary to the IBC scheme.The Tribunal, after considering the report and legal provisions presented by the Resolution Professional, concurred with the recommendation to close the proceedings against the deceased Personal Guarantor. The Tribunal acknowledged that in such cases, where the guarantor has passed away, the proceedings abate, and continuing them would not be appropriate. The Financial Creditor's counsel also consented to the closure of the proceedings. Consequently, the Tribunal accepted the Resolution Professional's recommendation, rejected the application under Section 95 of the IBC, 2016, and closed the proceedings accordingly.