Tribunal initiates Insolvency Resolution Process under Section 94 of Insolvency and Bankruptcy Code

The Tribunal admitted the petition under Section 94 of the Insolvency and Bankruptcy Code, 2016, initiating the Insolvency Resolution Process against the Personal Guarantor. A moratorium was declared, and the Resolution Professional was tasked with creditor notifications and developing a repayment plan. The Tribunal stressed compliance with the Code of Conduct, finding merit in the petition and ordering the commencement of the process for creditor participation and adherence to the legal framework.

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Issues:
Initiation of Insolvency Resolution Process against Personal Guarantor under Section 94 of Insolvency and Bankruptcy Code, 2016.

Analysis:

Issue 1: Initiation of Insolvency Resolution Process

The petition was filed under Section 94 of the Insolvency and Bankruptcy Code, 2016 seeking the initiation of the Insolvency Resolution Process against the Personal Guarantor of a company who had defaulted on loans. The Corporate Debtor had defaulted on loan repayments, leading to its liquidation. The financial creditors had invoked the SARFEASI Act and enforced the security interest extended by the Personal Guarantor. The Personal Guarantor, in his petition, admitted to extending personal property as security for the debt and requested the initiation of the Insolvency Resolution Process. The Tribunal granted interim-moratorium and appointed an Interim Resolution Professional, who recommended the admission of the petition.

Issue 2: Consideration of Insolvency Resolution Process

The main issue before the Tribunal was whether the Insolvency Resolution Process could be ordered against the Personal Guarantor. The Petitioner admitted the default in repayments and had given a personal guarantee for the outstanding debt of the Corporate Debtor. The Resolution Professional recommended accepting the application for initiating the Insolvency Resolution Process. The Tribunal carefully examined the report of the Resolution Professional, finding it unrebutted and not collusive. Despite the absence of a counter from the respondents, the Tribunal found no reason to dismiss the petition.

Issue 3: Tribunal's Decision and Orders

After considering the facts and the recommendations, the Tribunal admitted the petition filed under Section 94 of the Insolvency and Bankruptcy Code, 2016. Consequently, the Insolvency Resolution Process was initiated against the Personal Guarantor, and a moratorium was declared. The Resolution Professional was directed to publish a public notice inviting claims from creditors. The Resolution Professional was tasked with preparing a list of creditors, developing a repayment plan, and convening a meeting of creditors if necessary. The Tribunal emphasized compliance with the Code of Conduct provided under Section 208 of the IBC, 2016.

In conclusion, the Tribunal found merit in the petition for initiating the Insolvency Resolution Process against the Personal Guarantor, and accordingly, issued orders for the commencement of the process, ensuring creditor participation and adherence to the legal framework outlined in the Insolvency and Bankruptcy Code, 2016.

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