State Bank Of India vs Satyan Kasturi & Anr.

PER: BENCH

This petition is filed by the State Bank of India (Financial Creditor) under Section 95 of Insolvency of Bankruptcy Code, 2016 (herein after referred as Code) read with Rule 7 (2) 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 Shri Satyan Kasturi who is the Personal Guarantor of PPS Enviro Power Private Limited/ Respondent.1 herein.

The gist apropos to the case of the Petitioner is that the following credit facilities amounting to Rs. 225.94 crores were availed by the Corporate Debtor i.e. PPS Enviro Power Private Limited from time to time from the Financial Creditor/SBI and its associate Banks i.e. erstwhile State Bank of Travancore.

It is stated that the Corporate Debtor is the Principal Borrower and Personal Guarantor, stood as guarantors in order to secure the repayment of the financial assistance availed by the Corporate Debtor. The outstanding debt as on 06.12.2017 is Rs. 237,84,44,380.77 together with interest at contract rate and other costs. The Corporate Debtor in order to avail the financial assistance has executed various loan documents and the Guarantors of the Corporate Debtor in order to secure the repayment of the financial assistance availed by the Corporate Debtor, has executed Guarantee Agreements in favour of financial Creditor.

The Financial Creditor annexed the following documents to prove the existence of debt and amount in default:-

The accounts of the Corporate Debtor were classified as Non-Performing Asset (NPA) on 26.12.2015. A recall notice dated 11.10.2017 was issued to the Personal Guarantor and other parties recalling and demanding payment of outstanding amounts mentioned therein within 7 days of receipt of the notice, which has been served on the Personal Guarantor on 15.10.2017 demanding payment of outstanding amounts by 21.10.2017. As such the date of default of the Personal Guarantor is 22.10.2017.

The Financial Creditor has exercised its rights and remedies against the Corporate Debtor under SARFAESI Act, 2002 vide OA No. 41 of 2018 before the Debt Recovery Tribunal-1, Chennai for recovery of the outstanding amounts from Corporate Debtor and Guarantors.

Later, the Financial Creditor also filed a company petition before this Tribunal under Section 7 of the Code to initiate CIRP against the Corporate Debtor vide CP (IB) No. 407/7/HDB/2018. The petition was admitted by this Tribunal on 13.08.2019.

Pursuant to framing of I & B (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019 which came into effect from 01.12.2019, permitting the Financial Creditor to institute insolvency resolution process against personal guarantors, the Financial Creditor had issued demand notice dated 23.09.2020 through registered post on 26.09.2020 on the Personal Guarantor i.e. Mr. Satyan Kasturi demanding payment of the amount in default, but the postal cover was returned on 28.09.2020 as “no such person”, after making two attempts to deliver the same by the postal department which according to the Petitioner has been done intentionally. It is further stated that, as per the terms and conditions under the Guarantee Agreements, the personal guarantor has agreed that any notice despatched by the Financial Creditor by registered post to the address of the Personal Guarantor shall be deemed to have been duly served on the personal guarantor, four days after the date of posting thereof.

On presentation of the petition, this Tribunal on 28.07.2021 granted interim-moratorium and has appointed Shri Krishnasamy Vasudevan as Interim Resolution Professional, directing him to file his report within 10 days of his appointment, in terms of Section 99 of the Code. The IRP vide his memo dated 07.08.2021 has detailed therein the reasons for not filing his report within 10 days and informed that he would be filing the same by 15.08.2021. Accordingly, he has filed his report on 15.08.2021, recommending the admission of the petition filed under Section 95 of the Code. The grounds for admission of the petition recorded in the report are that, the Personal Guarantor failed to respond to the notices sent to the mail id of the Personal Guarantor as well as through speed post acknowledgement due, demanding repayment of debt as claimed by the Financial Creditor. It is further stated that, out of the two letters sent, the one sent to the address of the Corporate Debtor was delivered and the other letter sent to address of Personal Guarantor was returned with endorsement “no such person” after making two attempts to deliver by the postal department. The IRP further stated in his report that, since the Personal Guarantor has not responded to the Demand Notice served by SBI, it is presumed that Personal Guarantor has admitted to the debt and non-existence of dispute. To substantiate the contention of the IRP, the IRP has filed details of the debt registered with the Information Utility.

In the light of the aforesaid factual matrix the point that arises for our consideration is,  Whether Insolvency Resolution Process can be ordered against respondent no.1/ Personal Guarantor?

We have heard the learned counsel Shri G.P. Yash Vardahan for the Financial Creditor and Shri R.S. Sravan Kumar, learned counsel for the respondent and perused the material on record

At the outset it may be stated that the Financial Creditor has initiated Corporate Insolvency Resolution Process against respondent no.2 in CP IB No.407 of 2018 which has been admitted by the Adjudicating Authority vide order dated 13.08.2019. The present petition is filed against respondent no.1, who is Personal Guarantor to the Corporate Debtor. Despite service of notice and opportunity afforded, respondent no.1 did not choose to contest the matter. Thus, the claim of the applicant as against respondent no.1 stands unrebutted.

It has been stated that respondent no.2 is now under liquidation as resolution failed. The report of the Resolution Professional discloses that respondent no.1 has neither made any request for holding negotiations with the creditor for arriving at repayment plan nor any repayment plan has been submitted. Therefore, under the circumstances, the liability of respondent no.1 herein being coextensive with that of respondent no.2 and as the debt which has been guaranteed by respondent no.1 since defaulted, the prayer of the applicant to order Insolvency Resolution Process against respondent no.1, since finds merit, the same is hereby allowed.

The Financial Creditor/Petitioner herein has proposed the name of Shri Krishnasamy Vasudevan, (IBBI/IPA-001/IP-P00155/2017-18/10324) Insolvency Professional to act as Resolution Professional, who has given his consent in Form-A. However, it is observed from the IBBI website that his Authorization for Assignment (AFA) has expired. Hence, the Tribunal appoints Shri P.V.B. Sudhakara Rao, having IBBI Registration No. IBBI/IPA-002/IP-N00795/2019-2020/12547, email id: [email protected] from the panel of Insolvency Professionals available in IBBI Website. He shall file his consent along with AFA within two days of receipt of the copy of this order.