Case Law Details
Shapoorji Pallonji Finance Private Limited Vs Rekha Singh (NCLT Jaipur)
Facts- The Company Petition No. (IB)- 27/95/JPR/2021 has been filed by Shapoorji Pallonji Finance Private Limited, the Financial Creditor, under Section 95 of IBC, 2016 to initiate insolvency resolution process in the case of Shri Ajay Singh (Personal Guarantor / Applicant) under Section 60 & 95 of IBC read with Rule 7(2) of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019. The Personal Guarantor had through a personal guarantee secured repayment of a term loan of Rs. 25,00,00,000/- advanced by the petitioner to Jumbo Finvest (India) Limited, a Non-Banking Finance Company (`NBFC’), under facility agreement dated 27.03.2018. However, the Debtor had failed to make payment of interest amounts for the months of September 2020 & October 2020 and also failed to repay the principal amount instalment for the quarter ending in September 2020. The Petitioner was heard on 17.06.2021 when the following order was passed.
‘The Petitioner shall file a short affidavit with regard to the page reference of; the relevant demand notice, acknowledgement of the receipt of the said demand notice and the relevant emails within two weeks. The Petitioner shall also file copy of the master data of the Corporate Debtor for which the Respondent is a personal guarantor along with the affidavit. Order is reserved.’
Conclusion- Held that Personal Guarantors of Non-Banking Finance Company/ Financial Services Provider cannot be proceeded against unless the NBFC/ FSP satisfies the Rs. 500 crore threshold limit under the notification issued u/s 227.
The definition of Personal Guarantors under Section 5(22) of the IBC cogently implies that they can be recognised as Personal Guarantors under IBC, subject to the condition, and only if, that the person or entity for whom they have given guarantee is a Corporate Debtor. Therefore, as it is amply clear that Jumbo Finvest (India) Limited is not a Corporate Debtor, the guarantors of the aforesaid company cannot be considered as Personal Guarantors under provisions of IBC. Since consequences of CIRP are drastic and almost penal for any entity, whether corporate or individual, definitions must be strictly construed.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
