P Rajamani vs Indian Overseas Bank & Anr.

This Application has been filed u/s. 94(1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016") r/w Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 by Mrs. P. Rajamani (“Personal Guarantor”) to initiate the Insolvency Resolution Process in respect of the Applicant, being the Personal Guarantor for M/s. KMP Spinners Private Limited. ('Corporate Debtor"). In Part-III of the application, the Applicant has given the particulars of debt pertaining to the 1^st Respondent as Rs.24,31,81,344/- (Rupees Twenty-Four Crores Thirty-One Lakhs Eighty-One Thousand Three Hundred and Forty-Four only), and the amount of default as Rs.24,31,81,344/- (Rupees Twenty-Four Crores Thirty-One Lakhs Eighty-One Thousand Three Hundred and Forty-Four only), the date of default as 30.06.2019 and the particulars of debt pertaining to the 2^nd Respondent as Rs. 6,94,34,457/- (Rupees Six Crores Ninety Fourt Lakhs Thirty-Four Thousand Four Hundred and Forty-Seven Only), the amount of default as Rs. 6,94,34,457/- (Rupees Six Crores Ninety Fourt Lakhs Thirty-Four Thousand Four Hundred and Forty-Seven Only), the date of default as 28.08.2019, also being the date when the debt was due. The instant application has been filed on 24.05.2023.

Part – I of the Application sets out the details of the Applicant / Personal Guarantor. The address of the Applicant is mentioned 9/6, Thillai Nagar, Near IOB, Erode 638001. The Applicant stood as a personal guarantor in respect of the loans availed by M/s. KMP Spinners Private Limited, the Corporate Debtor. It is stated that the guarantees were invoked by the 1^st Respondent vide notice of Demand dated 23.07.2019 issued u/s 13(2) of The SARFAESI Act, 2002 and by the 2^nd Respondent vide notice of Demand dated 04.09.2019 issued u/s 13(2) of The SARFAESI Act, 2002.

It is stated that the Applicant is the guarantor to the Respondent to secure the borrowings of M/s. KMP Spinners Private Limited. The Corporate Debtor committed default in repayment of debt and subsequently, the Respondents invoked the guarantee executed by the Applicant. Hence, the instant application has been filed for initiating insolvency resolution process under Section 94 of the IBC, 2016.

The Applicant has placed copy of sale notice dated 11.05.2023 issued under Section 13(2) of The SARFAESI Act, 2002 by the 1^st Respondent as Annexure 1 (i) (a) and copy of demand notice dated 04.09.2019 issued under Section 13(2) of The SARFAESI Act, 2002 by the 2^nd Respondent as Annexure 1 (i) (b). The Applicant has also filed the statement of affairs as on 20.05.2023 at Page 38 as Annexure 10.

As per Rule 6(2) of the Insolvency and Bankruptcy (Applicationto Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019, the Guarantor has served the copy of the application to every Financial Creditor and the Corporate Debtor for whom the Applicant is the personal guarantor. The Guarantor has also annexed proof of service to the creditors and Corporate Debtor. The same is annexed as Annexure 14 of the Application Typeset.

On presentation of the Application by the Personal Guarantor, under section 94(1) of the IBC, 2016 for initiating Insolvency Resolution Process, this tribunal vide Order dated 26.04.2024 appointed Mr. Madhu Desikan as the Interim Resolution Professional (“IRP”) and directed him to exercise all the powers as enumerated u/s. 99 of the Code, r/w rules made thereunder. In accordance with the said Order, the IRP filed his report vide S.R. No. 1476 dated 24.05.2024 in IA/(IBC)1401(CHE)/2024 before this Tribunal seeking to take on record the Report filed as a separate typeset as mandated under Section 99 of the IBC, 2016.

The 1^st Respondent filed counter affidavit vide S.R. No. 3823 dated 29.07.2024. It is stated that the loan account of the Corporate Debtor slipped into NPA on 29.06.2019 as per RBI guidelines. It is averred that the application has been filed by the applicant/guarantor to thwart the 1^st Respondent from confirming the sale and taking physical possession of secured asset in terms of SARFAESI Act, 2002. It is stated that the possession notice was issued by the 1^st Respondent on 27.12.2019 and symbolic possession of secured asset was taken. Thereafter, 12 e-auction notices were issued and 3 out of the total 7 properties have been sold. It is also stated that the associate concern of the Corporate Debtor, M/s. Rakshitha Textiles availed credit facilities from the 1^st Respondent and four Loans-against-property (LAP) were availed in the name of directors/guarantors of the Associate Company.

The 1^st Respondent filed IA/(IBC)1771(CHE)/2024 under Section 98 of IBC, 2016 vide S.R. No. 2222 dated 30.08.2024, praying that the present IRP, Mr. Madhu Desikan may be replaced and in his place, Mr. Mahalingam Suresh Kumar, having IBBI Registration No: IBBI/IPA-001/IP-P00110/2017-2018/10217 may be appointed. The reason for the same is that the present IRP is placed at Chennai whereas the 1^st Respondent and the Personal Guarantor are placed outside of Chennai. Hence, it is stated that change of IRP is necessary to conduct the proceedings in an expedient manner.

On the hearing dated 24.10.2024, representative for the Guarantor submits that the he has no objection if Shri. Mahalingam Suresh is appointed as the IRP.

The IRP in his Report, after due examination of the application, documents filed along with the application, in addition to the requirements as mandated under clauses (1), (2), (3), (4), (5), (6), (7), (8), (9) and (10) of Section 99 of the IBC, 2016, has recommended for the admission of the present Application by the Financial Creditor u/s. 95 of IBC, 2016.

Heard the submissions made by the Learned Counsel for the Applicant and perused the report of the IRP.

The IRP in his report has observed that the Applicant satisfies the requirement as set out in Section 94 of IBC, 2016. He has accordingly recommended for admission of the present Application. The report of the IRP filed in IA/IBC/1401/CHE/2024 is taken on record.

Section 128 of the Indian Contract Act, 1872, provides that when a default is committed, the Principal Borrower and Surety are jointly and severally liable to the Creditor and the Creditor has right to recover its dues from either of them or from both of them simultaneously. Section 128 of the Indian Contract Act, 1872 is reproduced hereunder:

The Applicant is the Personal Guarantor of the Corporate Debtor. The Corporate Debtor / Guarantor failed to repay the debt due after the issuance of Demand Notice. The IRP has recommended for initiation of Insolvency Resolution Process against the Applicant. The date of default as mentioned in the application is 30.06.2019 for the 1^st Respondent and 28.08.2019 for the 2^nd Respondent. The instant application has been filed on 24.05.2023. The Applicant is entitled to a benefit of limitation from 15.03.2020 to 28.02.2022 as extended by Hon’ble Supreme Court in Suo Moto W.P. (Civil) No. 3 of 2020. Thus, considering the date of default and the date on which the Application has been filed, we are of the opinion that this Application is within the period of limitation.

In light of the aforesaid discussions, the present Application i.e. CP(IB)/129(CHE)/2023 is admitted and the Insolvency Resolution Process stands initiated against Mrs. P. Rajamani viz. the Respondent herein. We hereby direct as follows;

a. Any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed, and

b. The creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt; and

c. The debtor shall not transfer, alienate, encumber, or dispose of any of his assets or his legal rights or beneficial interest therein:

d. 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.

a. details of the order admitting the petition; b. particulars of the resolution professional with whom the claims are to be registered; and

c. the last date for submission of claims.

a. the information disclosed in the petition filed by the debtor under Sections 94 or 95 as the case may be, and

b. claims received by the Resolution Professional under Section 102 within 30 days from the date of the notice. The debtor shall prepare a repayment plan under Section 105, in consultation with the Resolution Professional, containing a proposal to the Creditors for restructuring of his debts or affairs.

The repayment plan may authorize or require the Resolution Professional to:

a. carry on the debtor, business or trade on his behalf or in his name: or

b. realise the assets of the debtor; or c. administers or dispose of any funds of the debtor.

The repayment plan shall include the following, namely;

a. justification for preparation of such repayment plan and reasons based on which the creditors may agree upon the plan;

b. provision for payment of fee to the Resolution Professional; c. such other matters as may be specified.

Accordingly, CP/IB/129/CHE/2023 stands admitted. The Applications in IA/(IBC)1771(CHE)/2024 and IA/IBC/1401/CHE/2024 stands disposed of.