The Principal Bench of National Company Law Tribunal ( NCLT ) has held that Insolvency Resolution Process against Personal Guarantor after his demise will not continue.
Mr. Deepak Puri who stood as a Personal Guarantor to the Corporate Debtor, namely Moser Baer India Limited. The Financial Creditor, through Resolution Professional, earlier filed an application under Section 95 of the IBC, 2016 initiating Insolvency Resolution Process against the Personal Guarantor, Mr. Deepak Puri. Notice under Section 95 of the IBC, 2016 application was issued. Notice of the application was made over to the Personal Guarantor by the RP. Thereafter at that time it appears that the Personal Guarantor was residing in the United States of America. At the time of enquiryin terms of Section 99 of the IBC, 2016, it came to the notice of the RP that the Personal Guarantor of the Corporate Debtor expired on 02.10.2021 at State of California, County of Santa Clara (USA). The proof of death is supported by death certificate at page no. 6 of the Section 99 report, issued by the Competent Authority in the State of California, County of Santa Clara and therefore, the RP has recommended the rejection of the application on the ground that the proceedings against the Personal Guarantor has to be closed as the proceedings will abate, consequent to the death of the Personal Guarantor.
The Coram of Justice Sri Ramalingam Sudhakar Honorable President and Sri Hemant Kumar Sarangi Honorable Member (Technical) while rejecting the application under section 95 of the IBC, 2016 has held that “Personal Guarantor in this case is an individual, who stood guarantee to the Corporate Debtor and proceedings against him will have to be closed since on the death of the Personal Guarantor, proceedings will abate. It has been rightly pointed out that in a case of proceedings under Section 95 of the IBC, 2016, it is case for initiating Insolvency Resolution Process against the Personal Guarantor and it is not a case for recovery of any amount because that will go contrary to the scheme of IBC, 2016, in such situation on the demise of the Personal Guarantor, an individual who has given his guarantee in the favor of the Corporate Debtor, the question of continuing the proceedings against such a dead person will not arise. Since the proceedings abate, the Section 95 application also has to be closed”.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.
