Central Bank initiates insolvency against guarantor for loan default. Procedural fairness and timelines stressed.

The Central Bank of India filed a Company Petition to initiate Corporate Insolvency Resolution Process (CIRP) against a Personal Guarantor for non-repayment of a Term Loan, leading to the loan account being declared as NPA. The Respondent's attempt to file a counter was rejected due to lack of specified rights. The judgment emphasized procedural aspects under relevant sections of the Insolvency and Bankruptcy Code, stressing the importance of timelines and principles of natural justice. The Tribunal appointed a Resolution Professional, directing compliance within 10 days. The decision clarified notice requirements for various stages of the process, ensuring adherence to procedural fairness.

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Issues:
Initiation of Corporate Insolvency Resolution Process (CIRP) against a Personal Guarantor by a Financial Creditor.

Analysis:
1. The Company Petition was filed by the Central Bank of India seeking to initiate CIRP against the Personal Guarantor due to non-repayment of a Term Loan, resulting in the loan account being declared as NPA.
2. The Respondent sought to file a counter, but it was rejected as no right of audience is provided under relevant provisions such as Sections 95 or 97 of the Insolvency and Bankruptcy Code (IBC).
3. The judgment highlighted the procedural aspects under Sections 95, 97, 99, and 100 of the IBC, emphasizing the timeline provided at each stage of the proceeding and the absence of a specific timeline for the submission of the Resolution Professional's report.
4. The judgment discussed the need for principles of natural justice, suggesting that parties should be heard before the Adjudicating Authority takes a decision under Section 100 of the IBC.
5. It was clarified that notice before admission under Section 100(1) would serve the principles of natural justice, even though not mandated, as per the Bombay High Court's decision and relevant case laws.
6. The arguments regarding the replacement of the Resolution Professional under Section 98 were considered, concluding that notice before the appointment of the Interim Resolution Professional (IRP) is not required for the Respondent.
7. The Tribunal appointed Mr. Madasa Kumar as the Resolution Professional, directing him to file his consent and submit a report within 10 days as per Section 99 of the IBC, 2016.

This detailed analysis of the judgment provides insights into the legal aspects, procedural requirements, and considerations regarding the initiation of CIRP against a Personal Guarantor by a Financial Creditor under the Insolvency and Bankruptcy Code.

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