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2021 (10) TMI 1086 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHIMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Personal Guarantor of the Principal Borrower - existence of debt and dispute or not - service of demand notice - Whether the ‘EECPL’ is the Corporate Guarantor and therefore ‘Corporate Debtor’ of the ‘Eastern Overseas, in terms of Sub-section (7) and (8) of Sec 3 of I&B Code and the applicable Rules will be ‘Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016’? HELD THAT:- The Adjudicating Authority has held that the Insolvency and Bankruptcy (Application to Adjudicating Authorities for Bankruptcy Process for Personal Guarantors to Corporate Debtors” Rules, 2019 will be applicable instead of “the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016. Under both the Rules, the conditions for the applicability of the Rules are provided. The learned Adjudicating Authority had failed to notice that the Financial Creditor had taken Personal Guarantee of Mr Mahendra Singh Narang and Mrs Manjit Kaur in addition to the Corporate Guarantee given by the Corporate Debtor - on the occurrence of default, it was the sole prerogative of the Financial Creditor to initiate action against the Principal Borrower or the Personal Guarantor of the Corporate Guarantor. Since the Appellant Financial Creditor had initiated action under the Insolvency and Bankruptcy Code against the Corporate Guarantor, the Application could not have been dismissed on the erroneous assumption that the Application should have been filed against the Personal Guarantor under Section 95 of the Code. It is clear that Respondent ‘Eastern Embroidery Collections Private Limited’ was the Corporate Guarantor of the Principal Borrower ‘Eastern Overseas’, and not a Personal Guarantor. Therefore, in terms of Sub-section (7) and (8) of Sec 3 of I&B Code, 2016 is a Corporate Debtor. Further, the applicable Rules would be ‘Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016’. The Adjudicating Authority committed an error in holding that action should have been initiated against the Personal Guarantor of the Corporate Debtor under Section 95 of the Code instead of proceeding against the Corporate Debtor - Appeal allowed.
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