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2022 (7) TMI 200 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Personal Guarantor of the Corporate Debtor - existence of debt and dispute or not - Service of demand notice - HELD THAT - Under Section 99, such Resolution Professional shall submit his report and based on that report, under Section 100, the Adjudicating Authority, shall pass an order either admitting or rejecting the Application. It is only under Section 100(3) that the Adjudicating Authority shall provide a copy of the order passed under Sub-section (1) to the Creditors. Hence, in terms of Section 97 100 of IBC, 2016 no right of audience can be given to the Respondents at a stage before appointing the IRP - Though time-lines have been prescribed at each stage of the proceeding, leading to acceptance or rejection of the application under section 100, no such time-line has been prescribed for submission of report by the resolution professional, though section 100 provides that the adjudicating authority shall take a decision either admitting or rejecting the application within 14 days from the date of submission of the report. That apart, on a careful examination of section 100, before the adjudicating authority takes a decision to either admit or reject the application upon receipt of report from the resolution professional, the parties to the insolvency resolution process are required to be heard. It was further held that though the legislature itself has provided in Section 99 (10) that a copy of the report of the Resolution Professional should be furnished to the debtor or creditor, thus complying with the requirement of the principles of natural justice, it would be in the fitness of things and in furtherance of principles of natural justice that the parties are also heard before the decision is taken by the Adjudicating Authority one way or the other under Sub-section (1) of Section 100 of IBC, 2016 - it is evident from a reading of the Section along with the Rule, that what the Creditor has to serve is the copy of the application made under sub-section (1) to the Debtor. Reading Rule 7(2) with Rule 3 shows that the application filed under sub-section (1) of Section 95 shall be submitted in Form -C and the Creditor will serve forthwith a copy of the application to the Guarantor and the Corporate Debtor for whom the Guarantor is a Personal Guarantor. Thus, what has to be served is the copy of application which has been submitted . What is contemplated is that the application in Form C should be submitted and then the Creditor should serve forthwith a copy of the application to the Guarantor and the Corporate Debtor for whom the Guarantor is a Personal Guarantor. The procedure thus prescribed will give the Personal Guarantor, notice of the application already filed before the Adjudicating Authority. Section 95(5) requires the Creditor to provide a copy of the application made under sub-section (1) , to the Debtor. Thus, serving advance copy is not contemplated. The argument that Section 98 provides for replacement of the Resolution Professional and hence the Guarantor should have an opportunity to seek replacement of Resolution Professional and hence he should be heard before appointment of IRP was also considered and held that going through Section 98 of IBC, 2016, it is found that Section 98 is not stage specific. Section 98 itself shows that the section could be resorted to even at stages like implementation of repayment plan which would be a stage beyond Section 116, where implementation and supervision of repayment plan is provided for. It was held that the argument, that before report of Resolution Professional the Debtor must get a chance to seek replacement of Resolution Professional and thus notice was required to be given, has no substance. It is clearly held that, it is only after the Resolution Professional is appointed by the Adjudicating Authority under Section 97(5), that the step under Section 98 is contemplated. From the judgement of the NCLAT, it clear that notice before appointment of IRP is not required to be given to the Respondent. Considering the said facts, this Tribunal is of the considered opinion that there is no hurdle to entertain this application under Section 95 of IBC, 2016, since the application is found to be complete - Petition admitted - moratorium declared.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) against the Personal Guarantor. 2. Compliance with procedural requirements under Sections 95, 97, and 99 of the Insolvency and Bankruptcy Code (IBC), 2016. 3. Right of audience for the Respondents before the appointment of the Interim Resolution Professional (IRP). 4. Appointment of the Interim Resolution Professional (IRP). Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP) against the Personal Guarantor: The petition was filed by the State Bank of India (Financial Creditor) against the Personal Guarantor and the Corporate Debtor, seeking to initiate CIRP. The application was filed under Section 95 of IBC, 2016, and the prayer was against the Personal Guarantor of the Corporate Debtor. Thus, the application was treated as filed only against the Personal Guarantor, with the Corporate Debtor being formally added. 2. Compliance with Procedural Requirements under Sections 95, 97, and 99 of IBC, 2016: The Corporate Debtor availed various credit facilities from the Financial Creditor, with the Personal Guarantor executing Guarantee Deeds. The outstanding debt and default as of 31.03.2021 amounted to Rs. 63,20,75,944.67. The Corporate Debtor's account was declared as NPA on 30.04.2019. Notices under Section 13(2) of the SARFAESI Act and demand notices were issued but the Respondents did not repay the outstanding amounts. The Tribunal noted that under Section 97, the Adjudicating Authority must direct the Board to confirm the absence of disciplinary proceedings against the Resolution Professional within seven days. The Board must then confirm or reject the appointment of the Resolution Professional within another seven days. The Resolution Professional must submit a report under Section 99, based on which the Adjudicating Authority will admit or reject the application under Section 100. 3. Right of Audience for the Respondents Before the Appointment of the IRP: The Tribunal highlighted that no right of audience is provided under Sections 95 or 97 before appointing the IRP. The Tribunal referenced the Bombay High Court judgment in Surendra B. Jiwrajka vs Omkara Assets Reconstruction, which emphasized that while the principles of natural justice are important, the legislature has not mandated a notice before the appointment of the IRP. The NCLAT judgment in Mr. Ravi Ajit Kulkarni's case also supported the view that no notice is required to be given to the Personal Guarantor at the stage of appointing the IRP. The Supreme Court's judgment in Lalit Kumar Jain vs. Union of India was also considered, affirming the legislative intent behind the procedural requirements. 4. Appointment of the Interim Resolution Professional (IRP): The Tribunal concluded that the application under Section 95 of IBC, 2016, was complete and there was no hurdle to entertain it. The Petitioner suggested Mr. Kurapati Singarayya Chowdary as the IRP, and the Tribunal appointed him as the IRP, confirming that no disciplinary proceedings were pending against him. The IRP was directed to submit his report within 10 days as per Section 99 of IBC, 2016. Order: A. Mr. Kurapati Singarayya Chowdary was appointed as the IRP and directed to file his written consent in Form No. 2. B. The IRP was instructed to submit his report within 10 days. C. The Registry was directed to communicate the order to the Petitioner and the Financial Creditor. D. The Petitioner and the Registry were to send a copy of the order to the IRP for necessary compliance.
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