Indian Bank vs Mr. Vinod Agarwal

Per: Satya Ranjan Prasad, Member (Technical)

Under consideration is an Application CP (IB) No.22/CB/2023 filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016”) read with rule 7 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019 (hereinafter referred to as “IB Rules, 2019”) and regulation 4(2) of IBBI (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 (hereinafter referred to as “IB Regulations, 2019”) for initiating the Insolvency Resolution Process (hereinafter referred to as “IR Process”) against Mr. Vinod Agarwal (hereinafter called as “Personal Guarantor”). The Respondent /Personal Guarantor, herein has stood as a Guarantor in respect of the loans availed by the Principal Borrower/Corporate Debtor viz. KVR Steels Orissa Limited.

So far, as the Personal Guarantor to the Corporate Debtors is concerned, the Apex Court in Lalit Kumar Jain Vs. Union of India & Ors in Transferred case (Civil) No. 245/2020 has upheld the vires of the notification issued by the Central Government vide S.O.4126 (E) dated 15.11.2019, in so far as it is related to coming into force on Insolvency and Bankruptcy Process of Personal Guarantors to the Corporate Debtor. Thus, when a Corporate Insolvency Resolution Process in relation to Corporate Debtor is pending before this Adjudication Authority, then as per Section 60(2) of IBC, 2016 the NCLT would be the competent forum to file an Application for Personal Guarantor in relation to such Corporate Debtor. The factual matrix of the case is that the Financial Creditor is a Banking Company. The principal borrower company, i.e., KVR Steels Orissa Limited requested the applicant for sanction of credit limits and on being so approached the Financial Creditor. At the request of KVR Steels Orissa Limited the Financial Creditor sanctioned the credit facilities from time to time firstly on 13.08.2009 for Cash Credit limit of Rs. 250.00 lakh, BG/LC limit of Rs. 100.00 lakh and IBD limit of Rs. 500.00 lakh, renewed on 31.12.2010 for the aggregate limit in respect of Cash Limit of Rs. 300.00, BG/LC limit of Rs.300.00 lakh and IBD of Rs. 200.00 lakh, further renewed on 31.08.2012 for the credit facilities in respect of Cash Credit Rs. 300.00 lakh, BG/LC limit of Rs. 200.00 lakh and IBD (against LC of Prime banks only) limit of Rs. 300.00 lakh, and further sanctioned/renewed on 17.03.2014 for the credit facilities in respect of Cash Credit limit of Rs. 3.00 Crore and BG/LC limit of Rs. 1.00 crore, and further sanctioned/renewed on 09.05.2016 for the credit facilities in respect of Cash Credit Limit of Rs. 300.00 Lakh (Renewal), BG/LC limit of Rs. 100.00 lakh, on the basis of which the corporate debtor KVR Steels Orissa Limited at the time availing the said Credit Facilities, the Guarantor of the Corporate debtor executed various banking and guarantee documents.

It is stated in the petition that the Guarantor being the respondent herein thereby guaranteed due repayment and discharge of all the dues payable by the corporate debtor with interest, costs, charges, expenses and/or other money due to the applicant in respect of or under the said credit facilities or any of them, forth with on demand by the applicant bank and for that purpose Mr. Vinod Agarwal being the guarantor in the instant matter executed Deed of Guarantee and Several documents. The guarantee document executed by the guarantor on 21.08.2009 and 31.12.2010. Along with the Finance Agreements several other documents (viz. Acceptance Notes, Promissory Notes and Repayment Schedules) were also executed by the borrowers and guarantor (individually/jointly/severally) in favour of the Applicant for availing the said Credit facilities.

It is alleged that to secure the overall limit sanctioned as enhanced by the Financial Creditor from time to time to the principal borrower company, the guarantor herein has executed the guarantee documents to secure the said limits including the enhancement thereof, as security for due re-payment of the loans and advancement guaranteed to the principal borrower company along with the interest costs and expenses. The KVR Steels Orissa Private Limited and the guarantor had allegedly failed and/or neglected to make payment as per terms of the said Facility Agreements.

Thereafter, the borrower and the guarantor failed to adhere to the financial discipline and failed to repay the said loan amount on its due dated and, therefore, the account was accordingly declared as NPA on 26.09.2018. After that despite follow up by the applicant for many months, no payment was made by the borrower and/or the guarantor and, therefore, the applicant was constrained to issue Demand Notice under Section 13(2) of SARFESI Act, 2002 on 05.10.2018 thereby calling upon the borrower and guarantor to pay the total outstanding amount of Rs. 305,00,282.54 due as on 05.10.2018. Accordingly, the applicant bank has filed an application being OA No.507/2019 under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 before the Debts Recovery Tribunal-III, Kolkata for recovery of the outstanding dues for a sum of Rs. 3,31,02,423.06 as on 30.06.2019 with further interest and costs and expenses from the corporate debtor.

The applicant further submits that the financial creditor filed an application under Section 7 of IBC, 2016 being CP (IB) No. 01/CTB/2023 to initiate Corporate Insolvency Resolution Process (CIRP) the same is pending. The applicant has stated that a Demand Notice dated 31.08.2022 in Form-B under rule 7(1) of the Insolvency and Bankruptcy (Application to adjudicating authority for Insolvency Resolution Process of Personal Guarantors to the Corporate Debtors) Rules, 2019 has been sent to the respondent for payment of amount of alleged default i.e., Rs. 3,70,25,405.15 However, the Respondent/Guarantor neither cleared the dues nor replied to the said demand notice of the Applicant. The Demand notice dated 31. 08.2022 is annexed with the petition and marked as Annexure-K. In the aforesaid circumstances, the applicant submits that, there is a legitimate recoverable outstanding amount due and payable by the Respondent/guarantor to the applicant a sum of Rs. 3,70,25,405.15.

Thereafter, the Personal Guarantor has Committed default in making repayment of the Loan amount to the applicant for which he has given a personal guarantee to the applicant on behalf of the Corporate Debtor.

In this factual conspectus, the applicant prays for initiation of insolvency resolution process.

The applicant has averred in its application coupled with documents that the personal guarantor stands as guarantor to the principal debtor for the loan availed by him, and the applicant failed to make the payment despite receipt of statutory notice.

It is made known to everyone that on filing of this Application by the Applicant/Creditor the interim-moratorium commences under section 96(1)(a) of IBC, 2016 in relation to all the debts of the personal guarantor and shall cease to have effect on the date of admission of this Application and during the interim-moratorium period the following is prohibited:

The Applicant/Creditor has proposed the name of Mr. Sushanta Kumar Choudhury for appointment as Resolution Professional. Therefore, as proposed by the Financial Creditor, Mr. Sushanta Kumar Choudhury, [E-mail: skchoudhury123@gmail.com], having his address at 168, CA Block, Salt Lake City, Kolkata – 700 064 , having Reg. No. IBBI/IPA-003/IP-N00292/2020-21/13238, is hereby appointed as Resolution Professional, in exercise of the powers conferred on this Adjudicating Authority under section 97 of the IBC, 2016 read with regulation 4(1) and (2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019. The resolution professional has filed the required declaration in Part IV of the Petition

The Resolution Professional shall exercise all the powers as enumerated under section 99 of the IBC, 2016 w/w the Rules made thereunder. He is directed to make recommendations with reasons in writing for acceptance or rejection of this Application within stipulated time as envisaged under the provisions of section 99 of the IBC, 2016. The RP shall give a copy of the report under sub-section (7) of section 99 of IBC, 2016 to the Applicant/Creditor, as soon as the same is filed before this Adjudicating Authority.

The Applicant/Creditor and its Counsel are hereby directed to serve the copy of this Order along with copy of the Application and documents on the Resolution Professional by all modes for information and compliance.

For taking further course of action on the receipt of Resolution Professional report list the matter on 26.06.2023.

The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.

Certified Copy of this order be issued, if applied for, upon compliance of all requisite formalities.