Amit Dineshchandra Patel Vs State Bank of India (NCLAT Delhi)
Conclusion: Where application under section 95 of Insolvency Bankruptcy Code (IBC), 2016 was filed, the same was permitted to be filed by a creditor in his individual capacity or jointly with other creditors or through a Professional (RP).
Held: Appellants challenged the impugned order admitting the Section 95(1) application filed by State Bank of India allowing initiation of insolvency resolution process of the Appellants-Personal Guarantors. SBI Bank along with two other consortium lenders i.e. Bank of Baroda and IDBI Bank entered into COR Common Loan Agreement (“CORLA”) with the principal borrower-Shirpur Power Private Limited for financing under COR Facility Agreement. In order to retain and handle the security, including the guarantee envisioned under the Guarantee Agreement, for the benefit of COR Lenders, the lenders designated SBI Cap as their Security Trustee through a Security Trustee Agreement. On February 9, 2016, appellants-personal guarantors and SBI Cap, the security trustee, signed a Personal Guarantee Agreement (“PGA”). The principal borrower was admitted into CIRP after respondent No. 1 Bank started proceedings under Section 7. In accordance with Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, Bank invoked the personal guarantees and sent the appellant a demand notice dated October 20, 2020. Later, in accordance with CP (IB) No. 76 of 2021, the respondent-Bank have applied to the adjudicating authority under Section 95 of the IB Code to begin the insolvency resolution process against the appellants. On September 12, 2021, RP presented its report to the Adjudicating Authority, suggesting that the Appellants be admitted into insolvency. Adjudicating Authority issued the contested order, admitting the Section 95 petition and starting the insolvency procedures against the appellant. Appellant argued that Respondent No. 1 Bank was not permitted to file for personal insolvency against the personal guarantor in their individual capacity after the COR lenders collectively designated SBI Cap as the Security Trustee. The guarantee was not a party to the CORLA, and there was no request made by the guarantor for the loan to be released in the borrower’s favor. Furthermore, section 95 application was unmaintainable since the PGA was not a tripartite agreement between the borrower, lender, and guarantor. The short issue for our determination was whether the Respondent No.1 Bank was entitled to invoke the personal guarantee in the facts of the present case and whether the Section 95 application was filed on behalf of Respondent 1 Bank by a person having valid authority to do so. It was held that Respondent No. 1 Bank had signed the CORLA, in which it was explicitly identified as the COR Lenders’ Agent. Furthermore, even though SBI Cap had been designated by the lenders as their Security Trustee, Clause 8.12 of the Security Trustee Agreement dated 21.09.2015 stated that the COR Lenders could fulfill any obligation or duty of the Security Trustee and that this would not be interpreted as a revocation of the trusts or agency established as a result. The court found that Section 95 of the IBC stipulated that a creditor may file an application under the same section, either alone, in concert with other creditors, or through a representative. Nowhere it specify that the Section 95 application must be submitted jointly if the credit facility had been extended by multiple financial creditors. Tribunal upheld the invocation of the personal guarantee by the Respondent No. 1 Bank and dismissed the appeal.
