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Judgment
PER: BENCH
This petition is filed by Avasarala Venkateswara Rao (Personal Guarantor) under Section 94 of Insolvency of Bankruptcy Code, 2016 (herein after referred as Code) read with Rule 6 (1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019 (herein after referred to as Personal Guarantors Insolvency Rules, 2019), seeking an order for initiation of the Insolvency Resolution Process (“IR Process”) against him who is the Personal Guarantor of M/s Servomax India Private Limited.
Averments in brief:
a. The Petitioner is one of the main promoter and also one of the Directors of Servomax India Private Limited ie. Respondent No.2. The Corporate debtors have availed loans from the financial creditor from time to time from 1982 till 2013 and had defaulted in repayment of loans to the banks and consequently declared as NPA by Respondent No.1 and Respondent No.3 banks.
b. It is averred that this Tribunal has initiated CIRP against Respondent No.2 on 22.02.2018. Since no viable successful resolution plan was received, the Company was ordered to be liquidated.
c. It is averred that Respondent No.1/SBI and Respondent No.3/Indian Overseas Bank invoked the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(SARFEASI, Act) and issued notices to the Applicant for payment of dues. Due to default of payment, Respondent No.1 has enforced the security extended by the Applicant and sold the immovable properties of the Applicant.
d. It is averred that after sale proceeds of the immovable properties still there is liability left to the financial creditors.
e. The Applicant/Debtor has clearly brought it out in his petition that he has extended his personal property for securing the debt to the Respondents 2 & 5 Banks for which he has given the personal guarantee on behalf of the Company and therefore it will in the interest of the creditors of the Petitioner/Debtor to initiate the Insolvency Resolution Process under Chapter III of Part III of the IBC. 2016.
f. Hence, this Tribunal vide order dated 15.07.2021 has granted interim-moratorium and has appointed Mr. Ramachander Rao Bikumalla, as Interim Resolution Professional, directing him to file his report within 10 days of his appointment, in terms of Section 99 of the Code, which has been filed by him on 24.07.2021, recommending the admission of the petition filed under Section 94 of the Code.
Therefore, in the above backdrop, the point that emerges for consideration of the Tribunal is, Whether Insolvency Resolution Process can be ordered against the Petitioner?
We have heard Shri K. Purnachandra Rao, Learned Counsel for the Personal Guarantor and the RP and perused the material on record.
POINT
Whether Insolvency Resolution Process can be ordered against the Personal Guarantor?
The Petitioner has admitted the default in repayments of debt who has given personal guarantee to the Respondent No.2 &5. It is stated that, as per the petition, the outstanding debt payable by the Corporate Debtor is Rs. 735.01 crores. In this backdrop the RP recommended for admission of the petition in terms of provisions of the Code.
Section 94 (1) is as under:-
94.(1) A debtor who commits a default may apply, either personally or through a resolution professional, to the Adjudicating Authority for initiating the insolvency resolution process, by submitting an application.
(2)Where the debtor is a partner of a firm, such debtor shall not apply under this Chapter to the Adjudicating Authority in respect of the firm unless all or a majority of the partners of the firm file the application jointly.
(3)An application under sub-section (1) shall be submitted only in respect of debts which are not excluded debts. Discharge order. Standard of conduct. Application by debtor to initiate insolvency resolution process.
(4)A debtor shall not be entitled to make an application under sub-section (1) if he is—
(a)an undischarged bankrupt;
(b)undergoing a fresh start process;
(c)undergoing an insolvency resolution process ; or
(d)undergoing a bankruptcy process.
(5)A debtor shall not be eligible to apply under sub-section (1) if an application under this Chapter has been admitted in respect of the debtor during the period of twelve months preceding the date of submission of the application under this section.
(6)The application referred to in sub-section (1) shall be in such form and manner and accompanied with such fee as may be prescribed.
Section 100 of IBC says as follows:-
*100. (1) The Adjudicating Authority shall, within fourteen days from the date of submission of the report under section 99 pass an order either admitting or rejecting the application referred to in section 94 or 95, as the case may be.
(2)Where the Adjudicating Authority admits an application under sub-section (1), it may, on the request of the resolution professional, issue instructions for the purpose of conducting negotiations between the debtor and creditors and for arriving at a repayment plan.
(3)The Adjudicating Authority shall provide a copy of the order passed under sub-section (1) along with the report of the resolution professional and the application referred to in section 94 or 95, as the case may be, to the creditors within seven days from the date of the said order.
(4)If the application referred to in section 94 or 95, as the case may be, is rejected by the Adjudicating Authority on the basis of report submitted by the resolution professional that the application was made with the intention to defraud his creditors or the resolution professional, the order under sub-section (1) shall record that the creditor is entitled to file for a bankruptcy order under Chapter IV.
We have carefully perused the report of RP. The Resolution Professional, therefore recommended to accept the application filed under Section 94 of the IBC, 2016 for initiation of Insolvency Resolution Process in respect of Avasarala Venkateswara Rao, Personal Guarantor to the Corporate Debtor. Despite of opportunity counter not filed by the respondents. Thus the contentions as made in the application remain unrebutted. The report of the Resolution Professional also has been neither questioned nor complied with. In this backdrop, we have carefully perused the record and find that the petition filed by the personal guarantor for initiation of Insolvency resolution process against her, prima facie, not collusive
We, therefore, find no reasons to dismiss the Petition. The Petitioner/Debtor herein has proposed the name of Shri Ramachander Rao Bikumalla, Insolvency Professional to act as Resolution Professional, who has given his consent in Form-A. Therefore, by exercising powers under Section 100 of the Code, we pass the following orders:
The petition i.e. CP (IB) No. 51/94 (1) of IBC/HDB/2021 filed under the provisions of Section 94 of IBC, 2016 is hereby admitted.
Consequently, the Insolvency Resolution Process is hereby initiated against the Personal Guarantor Ramachander Rao Bikumalla and the moratorium is declared, which begins with effect from the date of admission of the petition and shall cease to have effect at the end of the period of 180 days, as provided under Section 101 of IBC, 2016. During the moratorium period;
Any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed;
The creditors shall not initiate any legal action or legal proceedings in respect of any debt; and
the debtor shall not transfer, alienate, encumber or dispose of any of her assets or her legal rights or beneficial interest therein;
The provisions of this Section shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
The Resolution Professional i.e. Shri Ramachander Rao Bikumalla, having IBBI registration no. IBBI/IPA-001/IP-P00740/2017-2018/11261, #Door No.8-2-401/S/2, No.2, Sheetal Enclave, Road No.5, Banjara Hills, Hyderabad- 500 034, who was appointed vide order dated 15.07.2021 is directed to cause public notice published on behalf of the Adjudicating Authority within 7 days of uploading of this order on the website of NCLT, Hyderabad, inviting claims from all creditors, who shall register their claims as provided under Section 103 of the Code within 21 days of such issuance. The notice shall contain the necessary information as provided under Section 102 (2) of IBC, 2016. The publication of notice shall be made in newspapers, one in English and other in vernacular (Telugu) which have wide circulation in the State where the Debtor resides. The Resolution Professional shall furnish two spare copies of the notice to the Registry. One shall be placed on our website by the Registry and the other shall be affixed in the premises of this Adjudicating Authority.
The Resolution Professional in exercise of the powers conferred under 104 shall prepare a list of creditors within 30 days from the date of the notice. The debtor shall prepare, in consultation with the resolution professional, a repayment plan containing a proposal to the creditors for restructuring of her debts or affairs as provided under Section 105 which shall include the provisions for payment of fee to the Resolution Professional. The Resolution Professional shall submit the repayment plan along with his report on the plan to this Adjudicating Authority within a period of 21 days from the last date of submission of claims as provided under Section 106.
In case the Resolution Professional recommends that a meeting of the creditors is not required to be summoned, he shall record the reasons thereof. If the Resolution Professional is of the opinion that the meeting of creditors should be summoned, he shall specify the details as provided under Section 106 (3). The date of meeting shall not be less than fourteen days or more than 28 days from the date of submission of the Report under Sub-Section (1) of Section 106, for which at least 14 days’ notice to the creditors (as per the list prepared) shall be issued by all modes. Such notice must contain the details as provided under the provisions of Section 107.
The meeting of the creditors shall be conducted in accordance with the provisions sections 109, 110 and 111. The Resolution Professional shall prepare a report of the meeting of the creditors on repayment plan with all details as provided under Section 112 and submit the same to the Authority, copies of which shall be provided to the guarantor and the creditors. It is made clear that the Resolution Professional shall perform his functions and duties in compliance with the Code of Conduct provided under Section 208 of IBC, 2016.