NCLT Admits Insolvency Plea u/s 95 Against Personal Guarantor as Debts Were Fully Recoverable as Per Guarantee Deed
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- Last Updated on 25 November, 2024
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Case Details: State Bank of India (SBI) v. Abhishek Kumar Singh - [2024] 168 taxmann.com 428 (NCLT-Allahabad)
Judiciary and Counsel Details
- Praveen Gupta, Judicial Member & Ashish Verma, Technical Member
-
Ms Shruti Malviya, Anurup Dutta, Deepak Mittal & Tejas Singh, Advs. for the Appellant.
Facts of the Case
In the instant case, the corporate debtor was granted a credit facility by a financial creditor/petitioner bank. The Respondent executed and signed a guarantee agreement in favour of the financial creditor in respect of the said credit facilities. The corporate debtor failed to maintain financial discipline as per the terms and conditions of the loan agreement, due to which the loan became irregular, and the financial creditor sent a legal cum recall notice to the corporate debtor.
The financial creditor issued a notice to the respondent, but the respondent failed to repay the outstanding debt. The applicant filed an instant application under section 95 of the IBC seeking to initiate the Personal Insolvency Resolution Process against the respondent.
The RP was appointed to examine the petition and file his report as per section 99 of the IBC. The RP submitted a report under section 99(1) of the IBC recommending for admission of the instant application under section 100 of the IBC to start the insolvency resolution process against the respondent.
However, the Respondent objected to the said report on the grounds that instead of recovering assets from the corporate debtor, the financial creditor directly initiated insolvency proceedings against the respondent.
NCLT Held
The NCLT noted that the personal guarantor’s liability was established through an independent contract, i.e., a Guarantee Agreement, and hence, the financial creditor might initiate legal proceedings against both the corporate debtor and its personal guarantor simultaneously.
The NCLT held that the respondent, after being duly served with a demand notice, had committed default in not paying the debt. Therefore, the requirement set out under section 95(4) of the IBC was satisfied.
Further, the NCLT held that the debts mentioned in the application were fully recoverable from the personal guarantor as per the guarantee deed, and it was not excluded debt. Therefore, the instant petition filed under section 95 of the IBC was to be admitted.
List of Cases Reviewed
- Dilip B. Jiwrajka v. Union of India & Ors. 2023 SCC OnLine SC 1530, (para 30), followed
List of Cases Referred to
- Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhunwala (2009) 9 SCC 478 (para 26).
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