2022 (3) TMI 819 - Tri - Insolvency and Bankruptcy

Resolution Professional appointed in Insolvency case despite objections

The tribunal appointed Mr. Gautam Mittal as the Resolution Professional in a case involving the initiation of the Insolvency Resolution Process against a ... Maintainability of application - initiation of CIRP - failure on the part of Personal Guarantor of the Corporate Debtor - constitutional validity of Section 95 of I&B Code - HELD THAT:- The conjoint reading of the provisions shows that whenever an application under Section 94 or 95 is filed, the first stage is to appoint a Resolution Professional, who after enquiry is required to submit a report under Section 99 of IBC. It is further seen that the question of admission or rejection of the application can only arise, when the report is submitted by the Resolution Professional under Section 99 of IBC. And after submission of the report, the matter will be taken up under Section 100 of the IBC - Here admittedly the matter is pending for appointment of Resolution Professional under Section 97 of the Code and not on the point of the hearing under Section 100 of the IBC. The CIRP against principal borrower has already been initiated in an application filed by one M/s. Swastik Pipe Limited under Section 9 of the IBC, therefore, default in payment is admitted. Further it is observed that a demand notice has already been sent and the respondent had appeared, therefore, there was no occasion for issuance of notice. Further it is noticed that the applicant has also proposed the name of Resolution Professional at Page 41 Part-IV of the application; therefore, the applicant has fulfilled all the criteria, as laid down Under Section 95(4), hence, the matter is proceeded in accordance with law. Application allowed. Issues Involved:1. Initiation of Insolvency Resolution Process against the Personal Guarantor.2. Validity and enforceability of personal guarantees.3. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC).4. Objections raised by the Respondent regarding the maintainability of the application.5. Appointment of a Resolution Professional.Issue-wise Detailed Analysis:1. Initiation of Insolvency Resolution Process against the Personal Guarantor:The petition was filed under Section 95 of the Insolvency & Bankruptcy Code, 2016 (the 'Code'), by Yes Bank Ltd. seeking to initiate the Insolvency Resolution Process against Mr. Mahendra Kumar Jajoo, the Director and Personal Guarantor of Emkay Automobiles Industries Limited ('Corporate Debtor'). The Corporate Debtor had defaulted on various credit facilities sanctioned by the Applicant Bank, leading to the classification of the Corporate Debtor's account as a Non-Performing Asset (NPA) on 29.12.2020. Subsequently, a Demand cum Guarantee Invocation Notice was issued on 06.01.2021, followed by a Loan Recall cum Guarantee Invocation Notice on 27.05.2021, and a notice under Section 13(2) of the SARFAESI Act, 2002 on 09.06.2021.2. Validity and Enforceability of Personal Guarantees:To secure the repayment of the credit facilities, an unconditional and irrevocable Deed of Guarantee dated 05.11.2018 was executed by the Personal Guarantor, Mr. Mahendra Kumar Jajoo. The guarantees extended to cover the repayment of the Cash Credit Facility, Term Loan Facility, and FITL facilities. Additionally, primary and collateral securities were created, including first pari passu charges on current and movable fixed assets of the Borrower, and immovable fixed assets at various locations.3. Compliance with Procedural Requirements under the IBC:The tribunal examined the procedural compliance under Sections 97, 99, and 100 of the IBC. It was noted that the first stage involves the appointment of a Resolution Professional, who is required to submit a report under Section 99 of the IBC. The question of admission or rejection of the application arises only after the submission of this report. The tribunal observed that the matter was pending for the appointment of a Resolution Professional under Section 97 of the Code.4. Objections Raised by the Respondent Regarding the Maintainability of the Application:The Respondent raised several objections, including the failure of the Applicant to disclose the agreed release of Mrs. Brinda Jajoo's personal guarantee post-change in shareholding, the withholding of a No-Objection Certificate by the Applicant Bank, and the right of the personal guarantor of an MSME Corporate Debtor to become a resolution applicant under Section 240A read with Section 29A(h) of the Code. Additionally, a Writ Petition was filed before the Delhi High Court challenging the constitutional validity of Section 95 of the Code. The Hon'ble Delhi High Court issued notice to the Union of India and the IBBI, allowing the Personal Guarantors to file a Resolution Plan for the insolvency resolution of the Corporate Debtor.5. Appointment of a Resolution Professional:The tribunal considered the averments made in the application and observed that the Corporate Insolvency Resolution Process (CIRP) against the principal borrower had already been initiated. The applicant proposed the name of Mr. Gautam Mittal as the Resolution Professional, and the tribunal appointed him accordingly. The Resolution Professional was directed to examine the application, make recommendations for acceptance or rejection, and submit a report within the stipulated period as per Section 99 of the IBC. An interim moratorium commenced on the date of the application in relation to all debts of the personal guarantor, ceasing on the date of admission of the application.Conclusion:The tribunal, after considering all relevant issues and compliance with the procedural requirements of the IBC, appointed Mr. Gautam Mittal as the Resolution Professional. The matter was listed for further proceedings on 09.04.2022.