NCLAT: When IRP Commences Against a Personal Guarantor, Claims of All Creditors, are taken care of under IBC 2016
NCLAT: When IRP Commences Against a Personal Guarantor, Claims of All Creditors, are taken care of under IBC 2016
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising of Justice M. Venugopal (Judicial Member) and Ms. Shreesha Merla (Technical Member), while adjudicating an appeal filed in Union Bank of India vs. Mr. P.K. Balasubramanian, has held that when an Insolvency Resolution Process (IRP), commences against the Personal Guarantor, all Creditors of the Personal Guarantor, are taken care of in the proceedings under Chapter-III of the Insolvency and Bankruptcy Code, 2016 (IBC).
In the present case an appeal was filed by the Financial Creditor/Appellant M/s. Union Bank of India (erstwhile Andhra Bank) against the order dated 7 June, 2022, passed by the Adjudicating Authority, (National Company Law Tribunal).
It was the case of the Appellant that an Application was filed against Mr. P.K. Balasubramanian- Personal Guarantor- of the Corporate Debtor- M/s. Tebma Shipyard Limited, under Section 95 of the IBC read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019.
On 31 December, 2021, while the Second Respondent/ State Bank of India (SBI), filed a similar Section 95 Application, against the same Personal Guarantor Mr. P.K. Balasubramanian, which got registered on 12 January, 2022, overlooking that the Appellant, had filed a similar Application, against the same Respondent, on an earlier date i.e., 31 December, 2021.
On 7 June, 2022, the NCLT appointed an Interim Resolution Professional (IRP) as per Section 97 of IBC in the proceedings filed by SBI. The IRP was directed to submit a report under Section 100 of IBC, based on which the NCLT would decide upon admission/dismissal of the application. However, on the same day, the NCLT dismissed the application of Union Bank of India while holding that an IRP has already been appointed in a similar application filed by SBI against the same Personal Guarantor.
Aggrieved by the same the Appellant approached the NCLAT.
The Appellant contended that as per Section 96 of IBC when an application under Section 95 is filed, an Interim Moratorium will commence and hence no application against the same Personal Guarantor can be filed before any forum. Therefore, the application of Union Bank of India being filed prior in time, ought to have been admitted first.
The main case of the Appellant was that the Section 95 Application was filed by them three days prior to the date when the State Bank of India, had filed their Application and therefore their Application, ought to have been admitted first.
The bench on perusal of the records noted that the Section 95 Application was not admitted against the said Personal Guarantor. Liberty was also given in accordance with law to the Appellant in the Impugned Order dated 7 June, 2022 in the event that the Section 95 Application filed by SBI was admitted, the Adjudicating Authority under Section 102 of the Code would issue a `Public Notice’ within 7 days of passing of the Order inviting `Claims from all the `Creditors’.
The NCLAT while referring to the decision passed by a three Judge Bench of NCLAT in the case of Dinesh Kumar Basia vs. State Bank of India and Anr., was of the view that the `Date of Filing’ of the Application, under Section 95 is, what is to be considered and not the date when the Application is numbered. Further, there was no appreciable evidence on record to state that the said Application was `defective.’
Further, the bench stated that Section 96(1)(a) of IBC provides that an interim-moratorium shall commence on the date of the Application, in relation to all the debts.
The bench observed, “Section 96(1)(b) of the Code, also specifies that during the Moratorium period (i) any legal action or proceeding pending in respect of any debt shall deemed to have been stayed; and (ii) the Creditors of the Debtor, shall not initiate any legal action or proceedings in respect of any debt. The use of expression Creditors of the Debtor, means that all other Creditors of the Debtor, apart from the Creditor, on whose application, interim Moratorium, has commenced.”
Correspondingly, the NCLAT observed that the IBC does not contemplate multiplicity of applications against the same Personal Guarantor. Therefore, when the Insolvency Resolution Process commences against a Personal Guarantor, the claims of all Creditors are taken care of under the scheme of IBC.
Consequently, the bench while keeping in view that the Order of Admission, had not been passed by the Adjudicating Authority, and held that no prejudice was caused to the Appellant, as they can file their Claim, with the Resolution Professional.
Accordingly, the appeal was dismissed.
