M/s. Power Finance Corporation Limited vs Mr. Sreenivas Motupalli

[PER: BENCH]

This application is filed by the Petitioner M/s. Power Finance Corporation Limited, Financial Creditor (FC) against the Personal Guarantor (PG) Mr. Sreenivas Motupalli, seeking to initiate Insolvency Resolution Process (IR Process) against PG due to the default committed by the Corporate Debtor (CD) in discharging the debt due to it, for whom, the PG stood as Guarantor.

Briefly, the facts are as follows:

a. The FC extended a Term Loan to the CD vide Sanction Letter dated 27.04.2007 and a Common Rupee Loan Agreement was executed on 25.10.2007 with the FC whereas, security documents were consequently executed on various dates which include Personal Guarantee provided by the PG herein, in order to secure the loan granted to the CD by the FC.

b. The CD committed default in discharging the said debt and the account of the CD was declared as NPA with effect from 15.01.2014. The CD has acknowledged the debt vide its letter dated 08.10.2016.

c. On 11.01.2018, the CD issued balance confirmation letter as on 31.12.2017 and the period from 15.03.2020 to 28.02.2022 stands excluded from the limitation period by virtue of the judgement of the Hon’ble Supreme Court in Suo-Motu Writ Petition (Civil No.3 of 2020). Hence, the application stands to be within limitation.

After filing of this application, the IRP was appointed by virtue of the order of this Tribunal dated 16.09.2022. The RP submitted his report supporting the contents of the application and stating that the PG has committed default in repayment of loan availed by the CD for which the PG stood as Guarantor. He also failed to respond to the Demand Notice sent by the Applicant. The PG remained ex-parte.

The Counsel for the FC filed written submissions reiterating the contents of the application and further stating that a recall notice of loan was issued on 23.02.2018, but no payment was received from the CD. In accordance with Clause 3 of the Deed of Personal Guarantee, the PG becomes liable in the event of default on the part of the CD to discharge the debt.

A Notice of an invocation of Personal Guarantee was sent on 28.03.2018, but the PG failed to pay the amount, thus the default occurred on 12.04.2018.

Heard the counsel for the petitioner and perused the written submissions.

As regards limitation, the Supreme Court in the judgment relied upon by the petitioner held as follows:

Considering the above mentioned facts and considering that the said facts were not opposed by the PG and considering that by remaining ex-parte, PG stands to agree with the contents of the Application, we hereby allow this application.

The Company Petition is admitted. The initiation of Individual Insolvency Resolution Process shall commence from this date and shall be completed within 180 days hence.

Therefore, by exercising powers under Section 100 of the Code, we pass the following orders:

The petition i.e. CP (IB) No. 182/95/HDB/2022 filed under the provisions of Section 95 of IBC, 2016 is hereby admitted.

Consequently, the Insolvency Resolution Process is hereby initiated against the Personal Guarantor, Mr. Sreenivas Motupalli 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 his assets or his 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. Ms. T.K. Sharada, having Registration No. IBBI/IPA-001/IPA-003/N00380/2021-2022/ 13931, R/o. 5/A, Siri Priya Residency, S-2, 2^nd Floor, PS Nagar, Vijayanagar Colony, Backside of St. Ann’s Girls High School, Hyderabad – 500 057, Mobile No.9963018230, E-mail : [email protected] who was appointed vide order dated 16.09.2022 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 Section 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 his 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 of 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.