DRT Directs to Admit Application filed by Financial Creditor u/s 126 (1) of IBC [Read Order]

The Chennai bench of the Debts Recovery Tribunal(DRT) directed to admit application filed by financial creditor under section 126 (1) of the Insolvency and Bankruptcy Code, 2016 (IBC) on observing that Tribunal being the Adjudicating Authority had rejected the repayment plan under Section 114, the debtor and the creditors are entitled to file an application for bankruptcy under Chapter IV.

KEB Hana Bank, the applicant filed application under Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 to initiate Insolvency Resolution Processas against the personal guarantor to the Corporate Debtor “Alectrona Energy Private Ltd” in regard to the unsecured part of debt as envisaged u/s 115(2) of the Insolvency and Bankruptcy Code, 2016.

The applicant had set out the list of documents attached to the application in order to prove the existence of debt and the amount of default. The statement by the secured creditor under Section 123(2) of the Code and Statement by creditor in respect of excluded debts. Part –IV which pertains to the Particulars and Declaration by Insolvency Professional (if proposed to act as Bankruptcy Trustee) is blank as no specific proposal is made by the applicant.

The application is accompanied by Affidavit Verifying Application and Affidavit on Insolvency Resolution / Liquidation Process against the Corporate Debtor, wherein it is stated that the application has been filed for bankruptcy process of the defendant, who is the personal guarantor to the principal borrower / corporate debtor viz., Alectrona Energy Private Limited and further that as on date no Corporate Insolvency Resolution Process or Liquidation proceedings pending before NCLT, Chennai under Insolvency and Bankruptcy Code, 2016 against the said corporate debtor, to the best of information, knowledge and

belief.

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The applicant had earlier initiated an Insolvency Resolution Process against the guarantor to the Corporate Debtor vide application SR No.2643 of 2020, before the Tribunal, wherein a Resolution Professional was appointed and pursuant to his Report the Tribunal by its order dated 22.10.2020 admitted the application under Section 95 of the Act. The IRP had filed a report dated 11.2021, and the Tribunal by its order dated 24.11.2021 rejected the Resolution Plan as submitted by the Resolution Professional u/s 114(1) of the Insolvency and Bankruptcy Code, 2016 and sequel to the above facts, the present proceedings are initiated.

On filing of the instant application by the secured creditor, as a memo was filed on behalf of the Respondent (‘the personal guarantor’) to the effect that an application for Bankruptcy Process against the Personal Guarantor to the Corporate Debtor would not be maintainable before this Tribunal. The Tribunal after hearing the parties passed a detailed order on 08.07.2022 and rejected the objection as raised by the respondent and found that the proceeding for bankruptcy in respect of personal guarantor is maintainable before the Tribunal.

It is clear that an application for bankruptcy of a debtor may be made by a creditor individually or jointly with other creditors or by a debtor, to the Adjudicating Authority under certain circumstances. In the case on hand the secured creditor has filed the application for bankruptcy under Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 to initiate Insolvency Resolution Process as against the Persona guarantor to the Corporate debtors.

It was observed that Tribunal being the Adjudicating Authority had rejected the repayment plan under Section 114, the debtor and the creditors are entitled to file an application for bankruptcy under Chapter IV and the present application of the applicant is maintainable and the secured creditor is entitled to file the application for bankruptcy under Section 123 of the Code.

The tribunal of Shri T. Rajesh , Presiding Officer viewed that the application as filed by the Financial Creditor is required to be admitted under Section 126 (1) of the Insolvency and Bankruptcy Code, 2016. Ms. S. Yashoda is hereby appointed as the bankruptcy trustee. The Bankruptcy Trustee shall convey her written consent as per Regulation 3(3) of the Insolvency and Bankruptcy Board of India (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 and shall be governed by the said Regulations.

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The Bankruptcy Trustee is directed to take forward the process of Bankruptcy and shall take in this regard such other and further steps are required under the Statute, more particularly, in terms of Section 129, 130, 136, and 137 of the Insolvency and Bankruptcy Code.

The Bankruptcy Trustee shall proceed further in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 and shall perform the following functions in accordance with the provisions of Chapter V – Administration and Distribution of the Estate of the Bankrupt i.e., investigate the affairs of the bankrupt, realise the estate of the bankrupt and distribute the estate of the bankrupt.

The bankruptcy Trustee shall submit a preliminary report within ninety days of the bankruptcy commencement date and further reports as stipulated in Regulations 7 and 8 of the IBBI (Bankruptcy Process) Regulations, 2019. Post this matter on 07.11.2022 for the preliminary report of the Bankruptcy Trustee.

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