2026 (1) TMI 431 - HC - IBC

Section 95 IBC insolvency action against personal guarantor challenged for no borrower CIRP and territorial jurisdiction; writ withdrawn

Proceedings under s.95 IBC against a personal guarantor were challenged on maintainability and NCLT's territorial jurisdiction, principally on the ground ... Maintainability of Section 95 proceedings and the territorial jurisdiction of the National Company Law Tribunal (NCLT) - No Corporate Insolvency Resolution (CIRP) Process u/s 7 of the IBC has been initiated against the Principal Borrower - HELD THAT:- It appears that credit facilities were availed by the borrower from the erstwhile Allahabad Bank, which later merged into Indian Bank in the year 2020. The petitioner that time was a Director and had provided personal guarantee for earlier loans. However, as claimed by the petitioner, for subsequent sanctions by the Bank in the years 2020 and 2021, which was after major restructuring of the loan facility, the petitioner explicitly refused to execute a fresh personal guarantee. A separate recovery proceeding under the Recovery of Debts and Bankruptcy Act, 1993, before the Debts Recovery Tribunal, Guwahati was initiated, arraigning the petitioner as a guarantor, which is pending consideration before the Court. The Indian Bank has also initiated proceedings against the petitioner under Section 95 of the IBC before the NCLT, Guwahati in his capacity as a personal guarantor for the borrower’s debts. The conclusions formulated in Dilip B. Jiwrajka Vs Union of India [2024 (1) TMI 33 - SUPREME COURT] explicitly declare that at the stage of Section 95 of IBC, there is no judicial adjudication; rather the appointment of Resolution Professional only serves the purpose for collating all facts relevant to examination of the application for the commencement of insolvency resolution process. Petitioner, realizing that the hearing on the maintainability/jurisdictional objection has been deferred to a later date, seeks permission to withdraw this writ petition in order to approach this Court again, should such necessity arise. Allowing such a prayer, we permit to withdraw this petition, with the liberty as aforesaid and with a request to the NCLT to decide the jurisdictional issue at the earliest. The writ petition stands dismissed as withdrawn, with liberty and observation as aforesaid. Issues: Whether the appointment of a Resolution Professional under Section 97 of the Insolvency and Bankruptcy Code, 2016 at the stage of proceedings under Section 95 is impermissible prior to adjudication of preliminary objections on maintainability and territorial jurisdiction.Analysis: The Court examined the scope and purpose of Sections 95 to 100 of the Insolvency and Bankruptcy Code, 2016 and followed the principles laid down by the Supreme Court regarding the role of the resolution professional at the Section 95 stage. The resolution professional's role is facilitative and limited to collating facts and information relevant to the examination of the application; no judicial adjudication of the merits or jurisdictional facts is undertaken at the stage of appointment. The report submitted by the resolution professional is recommendatory and does not bind the adjudicating authority when it ultimately exercises jurisdiction under Section 100. The provisions permit parallel proceedings against a personal guarantor independent of initiation of a CIRP against the principal borrower. Having regard to these principles, the Court considered the petitioner's challenge to the appointment as premature in light of the statutory scheme.Conclusion: The appointment of the Resolution Professional at the Section 95 stage is permissible and not impermissibly premature; the petitioner's challenge on that ground is not sustained (decision adverse to the petitioner).