Personal Guarantor's Insolvency Resolution Process Approved with Interim Moratorium

The Tribunal granted the application for initiating the Insolvency Resolution Process against the Personal Guarantor who defaulted on repaying the loan guaranteed to the Corporate Debtor. The Tribunal appointed a Resolution Professional to manage the process during the interim moratorium, prohibiting legal actions against the Guarantor. Compliance with legal procedures and submission of recommendations within the specified timeframe were emphasized, ensuring adherence to the Insolvency and Bankruptcy Code, 2016.

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Issues involved:
Initiating the Insolvency Resolution Process against a Personal Guarantor to a Corporate Debtor under the Insolvency and Bankruptcy Code, 2016.

Analysis:

1. Application for Insolvency Resolution Process: The application was filed by the Financial Creditor under Section 95(1) of the Code, 2016 to initiate the Insolvency Resolution Process against the Personal Guarantor who had provided a guarantee for a loan facility extended to the Corporate Debtor. The Financial Creditor invoked the personal guarantee due to non-realization of the sanctioned facility by the Corporate Debtor.

2. Default by the Personal Guarantor: The Tribunal observed that the Personal Guarantor had committed default in repaying the loan amount for which the guarantee was provided. The demand notice issued to the Personal Guarantor was returned unserved, indicating a lack of response from the guarantor.

3. Legal Proceedings and Notice: The Tribunal noted that the demand notice had been served to the Personal Guarantor through registered post, which was returned with the remark 'none resides.' Subsequently, a notice was published in a newspaper for substituted service as per the Tribunal's order.

4. Interim Moratorium and Appointment of Resolution Professional: Referring to a judgment by the NCLAT, the Tribunal emphasized the need to give limited notice to the Personal Guarantor to secure their presence during the interim moratorium period. The Tribunal appointed a Resolution Professional to oversee the Insolvency Resolution Process and directed the professional to submit recommendations within the stipulated time frame.

5. Prohibited Actions during Interim Moratorium: The Tribunal highlighted that during the interim moratorium period, legal actions or proceedings related to the debts of the Personal Guarantor were stayed, and creditors were prohibited from initiating legal actions or proceedings.

6. Further Directions and Compliance: The Resolution Professional was directed to exercise all powers under Section 99 of the Code and submit a report to the Tribunal. The Applicant and their Counsel were instructed to serve copies of the Order to the Resolution Professional for compliance.

In conclusion, the Tribunal's judgment focused on initiating the Insolvency Resolution Process against the Personal Guarantor, ensuring compliance with legal procedures, and appointing a Resolution Professional to oversee the process in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.

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