Resolution Professional recommends admitting Air Deccan’s Captain Gopinath to personal insolvency

Air Deccan founder Captain GR Gopinath’s Resolution Professional (RP) on Monday recommended to the National Company Law Tribunal (NCLT), Bengaluru that he be admitted to personal insolvency under the Insolvency and Bankruptcy Code (IBC) 2016 [State Bank of India Vs Capitan G.R.Gopinath Iyengar]..The recommendation has been made in the wake of a default in the repayment of a loan of over ₹400 crore granted to the now-defunct Deccan Cargo by the State Bank of India (SBI). Gopinath had given a personal guarantee for this loan. Deccan Cargo has been defunct since 2011..A coram comprising Judicial Member AK Biswal and Technical Member Manoj Kumar Dubey today deferred further hearing in the matter till January 7, 2025 to take a final call on the same. During the hearing today, RP Ramanathan Bhuvaneshwari said, “The petition needs to be admitted. I filed my report in December 2023. However, no objections have been filed till now.”She further informed the NCLT that Gopinath’s lawyers were given multiple opportunities to respond and file objections but have not done so till date. The NCLT observed that Gopinath’s right to file objections to the RP report was earlier closed but that he had later filed an appeal to reopen this right. Yet no objection was filed thereafter, the NCLT noted. The tribunal thus decided to take a call on this aspect on January 7. .SBI had moved the plea to initiate insolvency proceedings against Gopinath in 2022, when NCLT issued notice and appointed Bhuvaneshwari as Gopinath’s RP. The case has progressed at a snail’s pace since then, owing to pendency of challenges to provisions relating to personal guarantors under the IBC before the Supreme Court. The apex court ultimately upheld the validity of the provisions in November 2023. A personal guarantor is an individual who provides a written commitment to a lender, assuring repayment of a loan or credit facility taken by a company. If the company defaults on its obligations, the guarantor’s personal assets may be seized by the lender to recover the outstanding amount.In 2019, the government introduced amendments to the IBC allowing creditors or the RP of a company to file applications under the IBC to enforce personal guarantees. For example, if a company undergoing insolvency resolution has a promoter who provided a personal guarantee to its lenders, the creditors, either independently or through the RP, can initiate insolvency proceedings against the promoter.The NCLT will then appoint a separate RP to manage the personal guarantor’s case. This RP will gather detailed information about the loan, the amount defaulted, and the guarantor’s involvement. Based on the RP’s findings, the NCLT will decide whether the personal guarantor should enter the insolvency process. If admitted, the guarantor’s assets can be attached and used for recovering the outstanding debt..Captain GR Gopinath founded Air Deccan in 2003, India's first low-cost carrier, which revolutionised air travel in the country by making it affordable for the masses. Under his leadership, Air Deccan expanded rapidly, connecting smaller cities and towns with affordable fares, often referred to as "the common man's airline." However, intense competition and financial pressures led to its merger with Kingfisher Airlines in 2007.Deccan Cargo & Express Logistics, operating under the brand Deccan 360, was founded by Captain Gopinath as an express logistics venture aiming to provide comprehensive cargo services across India and internationally. It began operations in 2009 with plans to connect smaller cities and reduce logistics costs using a hub-and-spoke model, with Nagpur as the central hub. Despite initial optimism, including a $25 million investment and ambitious growth plans, the company struggled with operational and financial challenges.By 2011, Deccan 360 ceased operations due to mounting losses, poor market conditions, and operational inefficiencies. The cargo airline faced tough competition from established players like Blue Dart and DHL, as well as challenges in raising sufficient capital to scale its services. Attempts to revive the business were unsuccessful, and it remained grounded.