NCLT admits plea under Section 94(1) IBC for initiation of insolvency process against personal guarantor

In one of the firsts, the National Company Law Tribunal, Delhi recently admitted a petition under Section 94(1) of Insolvency & Bankruptcy Code for initiation of insolvency process against a personal guarantor. .A two-member Bench of Member (Judicial) Mohd Sharief Tariq and Member (Technical) Narendra Kumar Bhola passed the admission order in a section 94 plea by the debtor, one Anil Syal (Debtor)..The Debtor was the personal guarantor to Union Bank of India for an amount of Rs 40 crore in relation to the credit facility extended in favour of FLPL Logistics PVT LTD..On the presentation of the application, the NCLT appointed a Resolution Professional and sought a report from him under Section 99 IBC..In its report, the Resolution Professional recommended the admission of the insolvency application on the several grounds including that:- Debtor had committed a default in repayment of his debts.- Debtor was not an undisputed bankrupt, not undergoing a fresh start process, not undergoing an insolvency resolution process or bankruptcy process.- No application under Chapter III IBC had been admitted in the respect of the debtor during the period of 12 months preceding the date of submission of this application under Section 94.- Besides the default of Rs 40 crore to Bank of India, the Debtor also defaulted in making payment of several other debts ranging from Rs 1.07 lakh to Rs 128 lakh..Since there was no request of the Resolution Professional for issuance of the instructions for the purpose of conducting negotiations between the debtor and creditors for arriving at the repayment plan, the NCLT/ Adjudicating Authority ordered,.“..the application..filed under the provisions of Section 94 of IBC, is hereby admitted under Section 11 of IBC, 2016. The Insolvency Resolution Process is initiated against the Applicant/Debtor and the moratorium is declared, which begins with the date of admission of the application and shall cease to have effect at the end of the period of 180 days, as provided under Section 101 of IBC of 2016..”.The NCLT further directed the Resolution Professional to publish a public notice on behalf of the NCLT within 7 days, inviting claims from all creditors..As per the order, the Resolution Professional will thereafter prepare a list of creditors and the Debtor shall prepare a repayment plan in consultation with the Resolution Professional in terms of Section 105 IBC..The Repayment plan shall be submitted by the Resolution Professional to the NCLT within 21 days from the last date of submission of claims in terms of Section 106 IBC..In case the Resolution Professional recommends that a meeting of the creditors is not required to be summoned, he shall record the reasons. However, in case a meeting is called, it must be in terms of Section 106(3), 108, 109 110 and 111 IBC, NCLT has clarified. .Advocate Kajal Bhatia appeared for the Debtor. .Last week, the Supreme Court had transferred to itself a batch of petitions challenging IBC provisions relating to insolvency of personal guarantors. .Breaking: Supreme Court transfers to itself petitions challenging IBC provisions on personal guarantors.While transferring the writ petitions to itself, the Supreme Court had remarked that since IBC was at a nascent stage, it was better if interpretation of the provisions of the Code was taken up by the Supreme Court itself..Read the Order: