The NCLAT, Chennai Bench ruled that when an insolvency resolution process commences against the Personal Guarantors, all the creditors of the Personal Guarantors are taken care of in the proceedings under Chapter III of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”).
The IBC does not envisage a multiplicity of proceedings against the same Personal Guarantors.
Hence, the NCLAT refused to set the clock back and reverse the order of the NCLT vide which the Application of the Appellant under Section 95 of the IBC was dismissed.
Brief Facts:
The present appeal has been preferred against the order of the NCLT vide which the application preferred by the Financial Creditor under Section 95 of the IBC was dismissed.
Contentions of the Appellant:
The Appellant’s case was that the application was filed against the Personal Guarantor of the Corporate Debtor (“CD”) for the insolvency resolution process for the Personal Guarantors. A similar application was filed by Respondent No.2 against the same Personal Guarantor.
It was contended that the NCLT ignored the fact that the Appellant preferred the application before Respondent No.2. Further, it was asserted that the delay was caused by the Registry.
Contentions of the Respondent No.2 (State Bank of India):
It was argued that the application preferred by the Appellant was defective and hence, pending. Further, there is no such date of application as prescribed in the Code. Hence, it cannot be said that the interim moratorium should have commenced from the date of filing of the defective application of the Appellant.
Observations of the Tribunal:
It was noted that an Insolvency Resolution Professional was appointed and a report was called to recommend whether to accept or reject the Application. The Application filed by the Respondent No.2 had not been yet admitted.
It was further noted that the Appellant has the right to file their claim under Section 103 of the Code. Therefore, there was possibly no prejudice that could have been caused to the Appellant.
The Bench ruled that when an insolvency resolution process commences against the Personal Guarantors, all the creditors of the Personal Guarantors are taken care of in the proceedings under Chapter III. The IBC does not envisage a multiplicity of proceedings against the same Personal Guarantors.
The decision of Tribunal:
Based on the aforementioned findings, the order of the NCLT was upheld and accordingly, the application was dismissed.
Case Title: Union Bank of India v. Mr. P.K. Balasubramanian
Coram: Justice M. Venugopal (Judicial Member), Ms. Shreesha Merla (Technical Member)
Case No.: Comp. App. (AT) (CH) (INS.) No. 293 OF 2022
Advocate for Appellant: Adv. Mr. N. Somasundaar
Advocates for Respondent: Advs. Mr. Kaushik N. Sharma, Mr. K. Chandrasekaran
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