SBI seeks insolvency for Guarantor linked to Corporate Debtor under IBC

The State Bank of India filed an application under the Insolvency and Bankruptcy Code against a Personal Guarantor for credit facilities extended to a Corporate Debtor. The Guarantor failed to clear outstanding liabilities, leading to the initiation of the Insolvency Resolution Process. The Tribunal admitted the application, declared a moratorium, and appointed a Resolution Professional. The process included creditor notifications, preparation of a repayment plan, and adherence to IBC guidelines.

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Issues:
1. Application filed by State Bank of India under IBC for Insolvency Resolution Process against Personal Guarantor.
2. Failure of Corporate Debtor to repay credit facilities.
3. Appointment of Resolution Professional and admission of application.
4. Moratorium declaration and initiation of Insolvency Resolution Process.
5. Directions for creditors and preparation of repayment plan.

Analysis:

1. The State Bank of India, as the Financial Creditor, filed an Application under Section 95(1) of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Insolvency Resolution Process against a Personal Guarantor for credit facilities extended to a Corporate Debtor. The Personal Guarantor failed to clear the outstanding liabilities, leading to the application before the Tribunal.

2. The Corporate Debtor, M/s. Sura Leathers Private Limited, defaulted on repayment, resulting in classification as a Non-Performing Asset. Subsequently, an Operational Creditor initiated insolvency proceedings against the Corporate Debtor, which led to liquidation. The Financial Creditor invoked the personal guarantee of the Guarantor through demand notices due to non-repayment by the Corporate Debtor.

3. Upon the presentation of the Application, the Tribunal appointed a Resolution Professional who recommended the admission of the application based on various grounds, including the default by the Personal Guarantor in repayment, registration of debt with an Information Utility, and satisfaction of the Code's requirements.

4. Following the Resolution Professional's report and the lack of response from the Personal Guarantor, the Tribunal admitted the application under Section 100 of the IBC, 2016, initiating the Insolvency Resolution Process against the Personal Guarantor. A moratorium was declared, effective for 180 days, during which legal actions on debts were stayed, and the debtor was restricted from disposing of assets.

5. The Resolution Professional was directed to publish a public notice inviting claims from creditors, prepare a list of creditors, and facilitate the preparation of a repayment plan by the debtor. The process included provisions for creditor meetings, compliance with the Code of Conduct, and periodic reporting to the Tribunal, ensuring adherence to the IBC guidelines throughout the Insolvency Resolution Process.

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