Tummala Sri Ganesh Vs State Bank of India (NCLAT Chennai)
NCLAT Chennai held that failure to make payment as per repayment plan grants liberty to the creditor to initiate action under section 121 of the Insolvency and Bankruptcy Code. Thus, action of creditors cannot be faulted.
Facts- The appellants happen to be the personal guarantors as per the Guarantee Agreement and consequential Supplemental Guarantee Deed that were executed by them in favour of the Respondent No. 1(the bank in question) in order to honour the obligations of the principal borrower i.e., Chadalvada Infratech Limited. The principal borrower/debtor, owing to the default committed in remittance of its financial dues payable, was admitted into the Corporate Insolvency Resolution Process
When despite of the demand raised by Respondent No.2, when the amount was not remitted, the 1st Respondent (i.e., Bank) / the financial creditor filed Company Petitions against the respective Personal Guarantors / Appellants herein.
NCLT approved the repayment plan. However, appellants failed to comply with the conditions of the approved repayment plan within the time schedule.
Conclusion- It goes without saying that Section 118 of the Code has a self-contained deeming clause that, when there is a failure to make the payment as per the repayment plan, the said plan which earlier stood approved by the Learned Adjudicating Authority on 13.09.2023 under section 114(1), will cease to have its life and consequentially owing to the deeming clause, the grant of liberty to the creditor to initiate action under Section 121 cannot be faulted in any manner.
