Tribunal Upholds Petition Despite Objections, Appoints IRP under Insolvency Code

The Tribunal found the petition maintainable under Section 95 of the Insolvency and Bankruptcy Code, 2016, despite objections from the Personal Guarantor. The Respondent was not granted a right of audience before the appointment of the Interim Resolution Professional (IRP), in line with established legal precedent. Mr. Chillale Rajesh was appointed as the IRP, with directions to submit a report within 10 days. The Tribunal determined that the principles of natural justice were not violated by the lack of notice to the Debtor at the IRP appointment stage.

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Issues Involved:
1. Maintainability of the Petition
2. Right of Audience for the Respondent
3. Appointment of Interim Resolution Professional (IRP)
4. Compliance with Principles of Natural Justice

Detailed Analysis:

1. Maintainability of the Petition:
The petition was filed by the Bank of Baroda (Financial Creditor) against the Personal Guarantor (Respondent No. 1) and Corporate Debtor (Respondent No. 2) under Section 95 of the Insolvency and Bankruptcy Code (IBC), 2016. The application was deemed to be filed only against Respondent No. 1, with Respondent No. 2 formally added. The Corporate Debtor had availed various credit facilities and defaulted on repayments, leading the Financial Creditor to issue a demand notice, which was not honored by the Respondents. The Financial Creditor had previously initiated the Corporate Insolvency Resolution Process (CIRP) against Respondent No. 2, which was admitted on 13.03.2018. The Respondent No. 1 objected to the petition's maintainability, arguing that the personal guarantee was in favor of a consortium of lenders, not individually in favor of the Financial Creditor. However, the Tribunal found no hurdle to entertain the application under Section 95 of IBC, 2016, as the application was complete.

2. Right of Audience for the Respondent:
The Respondent argued that they should be heard on the issue of the petition's maintainability. The Tribunal referred to the binding law, which does not provide a right of audience to the Respondent under Sections 95 or 97 of IBC before appointing the IRP. The Tribunal cited the judgment of the Bombay High Court in Surendra B. Jiwrajka vs Omkara Assets Reconstruction and the NCLAT judgment in Mr. Ravi Ajit Kulkarni's case, which held that no notice is required to be given to the Personal Guarantor at the stage of appointment of IRP. The Tribunal concluded that no notice is required for the Respondent at this stage, and hence, the question of hearing the Respondent on the maintainability of the petition does not arise.

3. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Chillale Rajesh as the IRP, as suggested by the Petitioner. The IRP was directed to file his written consent in Form No. 2 forthwith and to submit his report within 10 days of the date of the order, recommending the approval or rejection of the application.

4. Compliance with Principles of Natural Justice:
The Tribunal addressed the concern regarding the principles of natural justice, noting that the legislature has enacted unambiguous provisions regarding the issuance of notice and the right of audience to the Debtor at the stage of appointment of IRP. The Tribunal emphasized that the Debtor is provided with ample opportunity to be heard before the Resolution Professional submits a report, as outlined in Section 99 of IBC. The Tribunal found no violation of the principles of natural justice by not giving an opportunity to the Debtor for making submissions before the appointment of IRP. The Tribunal also noted that the constitutional vires of Sections 95, 96, 97, 99, and 100 of IBC have been challenged before the Supreme Court, but as of now, the law is settled, and no notice is required for the Respondent at the stage of appointment of IRP.

Order:
A. Mr. Chillale Rajesh is appointed as the Interim Resolution Professional.
B. The IRP is directed to submit his report within 10 days.
C. The Registry shall communicate the order to the Petitioner and the Financial Creditor forthwith.
D. The Petitioner and the Registry shall send a copy of this order to the IRP for necessary compliance.

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