NCLT Amaravati Dismisses SBI’s Petition For Insolvency Resolution Process Against Personal Guarantor Due To Address Discrepancies

NCLT Amaravati Dismisses SBI’s Petition For Insolvency Resolution Process Against Personal Guarantor Due To Address Discrepancies

The National Company Law Tribunal (NCLT), Amaravati special bench of Dr. Venkata Ramakrishna Badarinath Nandula (Judicial Member), has dismissed a petition filed by the State Bank of India (SBI) under Section 95(1) of the Insolvency and Bankruptcy Code, 2016. The dismissal was based on discrepancies found in the addresses used for the demand notice served to the personal guarantor, Dr. Renuka Rani Mahanti, and SBI's failure to adhere to proper service procedures as per the guarantee agreement.

Dr. Renuka Mahanti served as a personal guarantor for the financial assistance provided to M/s Seven Hills Health Care Private Limited (Seven Hills), which defaulted on its repayment obligations. Following Seven Hills' default, SBI invoked the personal guarantee and issued a demand notice to Dr. Mahanti on September 3, 2021. The notice was delivered on September 8, 2021.

The NCLT had appointed Interim Resolution Professional (IRP) Mr. Chillale Rajesh, who recommended admitting the application under Section 95 of the IBC. The IRP's report confirmed the application met the criteria of Section 95 and noted the absence of any repayment evidence from Dr. Mahanti or any document cancelling the personal guarantee agreement.

Dr. Mahanti contended that the demand notice was not served to the correct address and denied having provided any guarantee. She argued that the petition was not maintainable due to lack of evidence of the guarantee being invoked, the guarantee not being invoked within the period of limitation, and SBI's lack of authorization to prosecute the petition as a member of the consortium.

In response, SBI argued that Dr. Mahanti’s claims were an attempt to divert the Tribunal's attention. SBI maintained that the application was valid under Section 95 of the IBC, asserting that the demand notice was sent and delivered, and the claim was supported by a track report. SBI also argued that each consortium member had the right to independently initiate proceedings.

The NCLT found that SBI had established a lawful financial debt due from Seven Hills and Dr. Mahanti. However, the primary issue was whether the demand notice was properly served. The Tribunal observed discrepancies in the addresses used for the demand notice, leading to doubts about the notice’s authenticity. The NCLT noted that SBI's documentation failed to consistently support its claim of proper service.

Additionally, the NCLT criticized the Resolution Professional's handling of the case, highlighting inconsistencies in the dispatch and coverage period of the demand notice. SBI’s approach of presenting proof of service directly to the Adjudicating Authority without submitting it to the RP was deemed improper.

The NCLT concluded that SBI failed to comply with the necessary requirements under Section 95 of the IBC, resulting in the dismissal of the application for initiating the insolvency resolution process. SBI was advised to initiate a new process in accordance with the law.