TaxTMI 
TaxTMI 
2026 (6) TMI 803
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....s of now under the changed set of circumstances, the Appeal proceedings would amount to beating around of the dead wood, owing to the fact that, as against the present Appellants, the bankruptcy proceedings as contemplated under Section 126 of the I & B Code, have already been directed to be commenced, and the order of bankruptcy is already under challenge before this Appellate Tribunal. 2. The Appellants are personal guarantors to the loan facilities extended by the financial creditor (FC), State Bank of India, the Respondent-1 herein, to the Corporate Debtor (CD), M/s YKM Entertainment & Hotels Private Limited, under 3 sets of loan agreements and Guarantee Deeds executed by the personal guarantors. 3. Before we embark upon to deal with the arguments that has been extended by the Learned Counsel for the Appellant, as of today, a few precise facts are required to be referred herein. 3. The records reveal that the Corporate Debtor had availed financial assistance from the aforesaid Financial Creditor and its associate banks, i.e., State Bank of Hyderabad, i.e., erstwhile State Bank of Patiala, erstwhile State Bank of Mysore, erstwhile State Bank of Travancore and erstwhile ....
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....d be an automatic implication that, offer of such One-Time Settlement by the Corporate Debtor would amount to be an admission of debt and default, and admission of the liability to pay the amount covered by the notice under Section 13(2) of the SARFAESI Act, as it was issued on 09.08.2018. 7. During the pendency of the aforesaid proceedings under the SARFAESI Act, the Corporate Debtor entered into a compromise with the financial creditor on 30.08.2019 before the Debt Recovery Tribunal (DRT), wherein it was agreed that the Appellants herein and the Corporate Debtor in the proceedings of DRT would repay the settled amount of Rs. 112 crores under the terms of the Compromise Agreement dated 30.08.2019 as against the total debt payable under the One-Time Settlement. This further strengthens the stand of the Financial Creditor that the offer of the OTS proposal, the acceptance of the OTS proposal, and thereafter the settlement arrived before the DRT will amount to be an explicit admission by the Corporate Debtor about the liability, more particularly when the Settlement Agreement was signed by the present Appellants. 8. It's based upon the compromise of 30.08.2019, where the liabil....
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....e Corporate Debtor) Rules 2019. It is stated that since the Appellants has failed to pay the amount within the time prescribed under the notice of demand issued, the Financial Creditor filed applications under section 95 of I&B Code against the Appellants in CP(IB) No.224/95/HDB/2022, CP(IB) No.228/95/HDB/2022 and CP(IB) No.222/95/HDB/2022 and the same were allowed by Ld. NCLT, admitting the Appellants into Personal Insolvency Resolution Process. Challenging the said orders passed by Ld. NCLT, the instant Company Appeals have been filed. 12. Though for the purposes of the instant Company Appeals, it only requires the judicial scrutiny of the impugned orders of 27.02.2024 admitting the Appellants to face the personal insolvency proceedings, certain additional facts are required to be referred to, owing to subsequent developments that have taken place. The said facts are that the Appellants have since preferred the Company Appeals being CA(AT) (CH) (Ins) No. 627, 628 & 631 of 2025, challenging the order of Ld. NCLT, directing the commencement of bankruptcy proceedings against them and appointing the Bankruptcy Trustee to supervise the bankruptcy process. We are not venturing into ....
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....the application for initiation of the Insolvency Resolution Process. What has been attempted to be argued by the Learned Counsel, is that until or unless the aspect of the debt owed by the debtor to a creditor or creditors is established and is detailed in the application itself that has been preferred under Sub-Section (1) of Section 95 of the I & B Code, the parameters required under Sub-Section (4) of Section 95 of the I & B Code will not be satisfied and therefore, the application itself would not be maintainable. He has stated that the applications preferred under section 95 of the Code, as against the Appellants, did not carry the full details of the debt owed by them, and hence the impugned orders passed allowing the said applications will be bad in law. This is the limited argument which has been attempted to be raised by the Learned Counsel for the Appellant for pressing upon the instant Company Appeal. No other point has been pressed, though in the Appeal memo, the Appellants had raised a few grounds to challenge the impugned orders. 16. On a plain reading, section 95(4) stipulates that the debt owed by the debtor has to be prima facie reflected in the application to b....
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....on which is cast upon an applicant to provide certain details when he or she is preferring the application for initiation of the proceedings under Section 95 so as to help the Adjudicating Authority to take a decision on initiation of the Personal Insolvency Process under Section 95. Thus, Section 95(4)(a) in itself does not provide that in case stipulations made therein are not satisfied to the full, the application preferred under Section 95 is liable to be dismissed. The obligation to provide the details is only a facilitating provision to continue with the process under Section 95, but that provision, in itself since being procedural in nature, will not act as a bar for initiation of proceedings under section 95 of the Code because all the facts that are contained therein, are required to be established by way of an evidence to be adduced by the parties in accordance with rules during the course of the proceedings to be conducted by the Learned Adjudicating Authority for the purpose of initiation of the CIRP process. 18. The question as to whether the detailed reference of the debts allegedly owed by the debtor is required to be made in the application to be preferred under ....
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....4. date on which default occurred, 5. nature of the debt, 6. secured debt, including particulars of security held, the date of its creation, its estimated value as per the creditor (as applicable), 7. unsecured debt (as applicable), 8. details of retention of title arrangement (if any) in respect of goods to which the debt refer, 9. details of any mutual credit, mutual debts, or other mutual dealings between the guarantor and the creditor, which may be set-off against the claim, 10. particulars of an order of a court, tribunal, or arbitral panel adjudicating on the default (if any) 11. record of default with the information utility, if any, 12. details of succession, certificate, or probate, or a will or letter of administration, or a court decree under the Indian succession act, 1925 (10 of 1925), 13. provision, law, contract, or other document under which the debt has become due, 14. statement of bank account where deposits are held or credit received normally by the creditor in respect of the debt of the corporate debtor, from the date on which the debt was incurred, 15. list of do....
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....st the Corporate Debtor by way of an OA No.767/2018, in which the Appellants were participating. (v) Admission of the fact of extension of an OTS proposal on 02.04.2019. (vi) An undertaking given by Appellants as a personal guarantor by way of joint compromise on 30.08.2019, in which the Appellants and the Corporate Debtor had agreed to pay the settled amount of admitted liability, as given in the settlement, of which the Appellant was a signatory, which is not denied. (vii) Filing of an IA No.4620/2019 by the Corporate Debtor before the DRT, praying to accept the terms of the settlement which Appellant had agreed to pay. (viii) The order of the DRT itself, closing the proceedings under Section 19 by an order of 19.09.2019, based on terms of settlement admitted by Appellants as personal guarantors. (ix) And more importantly, the initiation of the Section 7 proceedings against the Corporate Debtor and its admission into the CIRP process are all the facts which are on record, established by documents, because it's only upon a default in complying with the terms of the compromise by the Appellants (x) that the necessity arose t....
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.... shape in which it was presented was satisfying of all the particulars of the financial liability due to be paid by the Appellants due to non-fulfilment of the terms of the admitted compromise of which they were the signatories. We are of the view that no other particulars would have been required to facilitate the determination of the liability of the Personal Guarantor by the Adjudicating Authority once the Guarantee Agreements and the admitted compromise were not disputed. 24. Admission of facts is the best evidence under law. The legislative purpose of Section 95(4)(a) of the I & B Code was intended to provide with the sufficient material, details and documents to the Adjudicating Authority to justify the initiation of proceedings, about the existence of the liability. But when the fact of the existence of liability is accepted by the personal guarantors, and has been determined in the judicial proceedings before the DRT, we are of the view that the purpose of Section 95(4)(a) of the I & B Code already stood satisfied, when all the previous procedural backdrop was already explained in the application preferred under Section 95(1) of the I & B Code against the personal guaran....