Personal guarantor insolvency application found premature where no notice invoked the guarantee or targeted personal assets.
An application under Section 94(1) of the Insolvency and Bankruptcy Code by a personal guarantor was found premature because the record did not show invocation of the personal guarantee. The notices relied upon related only to enforcement of the corporate debtor's security interest, and there was no separate step by the bank to proceed against the applicant as personal guarantor or to recover dues from her personal assets. Recovery proceedings against the principal borrower and other guarantors were treated as insufficient to amount to invocation of the guarantee. The application was therefore held not maintainable at that stage and dismissed as premature.
Issues: Whether an application under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 filed by a personal guarantor was maintainable when there was no material showing invocation of the personal guarantee and the available notices were only for enforcement of the corporate debtor's security interest.
Analysis: The application was examined on the basis of the record, including the SARFAESI notices and the additional material produced by the applicant. The notices relied upon were issued for enforcement of security interest against the corporate debtor and did not show any separate notice invoking the applicant's personal guarantee. The record also did not show any step taken by the bank to proceed against the applicant in the capacity of personal guarantor or to recover dues from her personal assets. The filing of recovery proceedings against the principal borrower and other guarantors under Section 19 of the recovery legislation was held not to amount to invocation of the guarantee. On these facts, the application was found to have been filed without a sufficient cause and before the necessary foundation for initiation of proceedings against the personal guarantor had been laid.
Conclusion: The application under Section 94(1) was not maintainable at that stage and was dismissed as premature.
TaxTMI 
AI Drafter ✕
TaxTMI 
