Notice not mandatory for Personal Guarantor at the stage of appointment of IRP: NCLT rules in favour of Central Bank of India

In the case of the Central Bank of India, the National Company Law Tribunal (NCLT) of Amaravati Bench held that notice is not mandatory for a Personal Guarantor at the stage of appointment of IRP.

Central Bank of India, the financial creditor filed the petition against the Personal Guarantor/Respondent No.1 & Corporate Debtor/Respondent No.2 seeking to initiate Corporate Insolvency Resolution Process (CIRP). The application is filed under Section 95 of IBC, 2016 and the prayer is also against the Personal Guarantor of the Corporate Debtor.

The Corporate Debtor/Respondent No.2 has availed various credit facilities for a total sum of INR 33,18,09,761.02/- from the Petitioner/Financial Creditor from time to time. Respondent No.1 stood as a Personal Guarantor to the credit facilities availed by the Corporate Debtor/Respondent No.2. Respondent No.1 executed Form Guarantees for advances and credits dated 13.03.2013, 29.03.2014, September-2016 & 01.11.2016 in favour of the Petitioner/Financial Creditor.             

The DRT vide order dated 04.04.2022 directed the Corporate Debtor/Respondent No.2 to pay a sum of INR 33,93,23,650.15/- as on 03.08.2020 at applicable contractual rates of interest and the Corporate Debtor failed to repay the debt.

It was observed that Section 98 itself shows that the section could be resorted to even at stages like the implementation of a repayment plan which would be a stage beyond Section 116, where implementation and supervision of a repayment plan are provided for.

Justice Telaprolu Rajani, Member Judicial held that it is only after the Resolution Professional is appointed by the Adjudicating Authority under Section 97(5), that the step under Section 98 is contemplated and no notice is required for the Respondent at the stage of appointment of IRP.

The Tribunal observed that there is no hurdle to entertain this application under Section 95 of IBC, 2016 since the application is found to be complete. The Tribunal appointed Mr Madasa Kumar as Insolvency Resolution Professional (IRP). Mr V. V. S. N. Raju, Advocate appeared for the financial creditor.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to TaxscanPremium. Follow us on Telegram for quick updates.