In the matter of Shripal Choudhari - In the fitness of things and in the interest of justice, it is not preferable for appointing the same counsel/Authorized Representative /IP, as the Resolution Professional.

NCLT Jaipur (01.09.2021) ) In the matter of Shripal Choudhari [CP (IB) No. 150/ 94/ JPR/ 2020] held that;

• Though the above referred Regulations, specifically does not bar the appointment of an Advocate/Authorized Representative who appears for the Applicant in the CP under Section 94/95 of the IBC for appointment as Resolution Professional in the same case, if he is eligible to be appointed as such, however, in the fitness of things and in the interest of justice, it is not preferable for appointing the same counsel/Authorized Representative as the Resolution Professional.

Excerpts of the order;

The instant Application is filed by Mr. Shripal Chaudhari (for brevity ‘Guarantor’/‘Applicant’) in Form-A under Section 94 of the Insolvency and Bankruptcy Code, 2016 (for brevity ‘IBC’ / ‘Code’) read with Rule 6(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantor to Corporate Debtors) Rules, 2019 (‘Rules’). The prayer made is to initiate insolvency resolution process in respect of the Applicant-Mr. Shripal Choudhari, himself being the Personal Guarantor for Emgee Cable & Communications Limited (‘Corporate Debtor’).

# 2. It is submitted that the Corporate Debtor is undergoing liquidation proceedings. It is also submitted that an amount of Rs. 23,11,42,466/- as on 31.03.2017 is total secured debt by financial institutions namely, Dena Bank, SIDBI, Edelweiss Retail Finance Ltd. against personal guarantor.

# 3. In this regard on perusal of Form No. CHG-1 dated 22.08.2016, it is noted that the Applicant along with two others have given personal guarantee against the financial facility of Rs. 46,28,00,000/- provided by Dena Bank to the Corporate Debtor. It is apparent from Form No. CHG -1 dated 04.09.2015 and 31.10.2015, no personal guarantee has been provided against the loan given by Small Industrial Bank of India and Edelweiss Retail finance Limited respectively to the Corporate Debtor. Form CHG -1 is annexed as Annexure-1 to the Application.

# 4. The Applicant has annexed notice dated 28.05.2018 issued under Section 13(2) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) by the Dena Bank. It is also seen that vide letter dated 02.06.2018 Dena Bank has exercised the bank's right of set off and transferred the credit balance of Rs. 3,29,464.75 from Applicant’s saving account towards overdue sum of Rs. 40.66 crore in account of the Corporate Debtor. In view thereof instant Application is filed by the Applicant for initiation of insolvency resolution process of itself.

# 5. The Application has been filed in respect of debts which are not excluded debts as enumerated under Section 79(15) of the Code. It is noted that no application under chapter III of Part II of the Code has been admitted before this Adjudicating Authority in respect of the Applicant/ Debtor during the period of twelve months preceding the date of submission of the instant Application.

# 6. As stipulated under Section 96 (1) of the Code interim moratorium commences from the date of filling of the Application under Section 94 or 95. Accordingly in the instant matter interim moratorium commences from 21.07.2020 i.e., from the date of filing of the instant Application, in relation to all the debts and interim moratorium shall cease to have effect on the date of admission of the Application. During the interim-moratorium period- 

• (i) any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed; and 

• (ii) the creditors of the Applicant/debtor shall not initiate any legal action or proceedings in respect of any debt. As per Section 96(3) of the Code, the provisions of sub-section 96(1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

# 7. The Applicant has proposed the name of Insolvency Professional, Mr. Vijendra Bangar for appointment as Resolution Professional. The written consent to act as resolution professional in Form-A provided under Regulation 4(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulation, 2019 is annexed with the Application. The IP has submitted that he is eligible to be appointed as Resolution Professional and no disciplinary proceedings are pending against him, and does not suffer from any disability to act as Resolution Professional. However, it is noticed that Mr. Vijendra Bangar who is proposed to be appointed as the Resolution Professional in the instant case is also the Authorized Representative of the applicant-Guarantor and who argued the matter on behalf of the applicant-Guarantor before this Tribunal. Regulation No. 4 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 reads as under:-

• “4. Eligibility of resolution professional.

• (1) An insolvency professional shall be eligible to be appointed as a resolution professional for a resolution process, if-

• (a) he, the insolvency professional entity of which he is a partner or a director, and all the partners and directors of the said insolvency professional entity are independent of the guarantor;

• (b) he is not subject to any ongoing disciplinary proceeding or a restraint order of the Board or of the insolvency professional agency of which he is a professional member; and 

• (c) the insolvency professional entity of which he is a partner or a director, or any other partner or director of such insolvency professional entity does not represent any party in the resolution process.

• Explanation.- For the purposes of this sub-regulation, - 

• (i) a person shall be considered independent of the guarantor, if he-

• (a) is not an associate of the guarantor;

• (b) is not a related party of the corporate debtor; and

• (c) has not acted or is not acting as interim resolution professional, resolution professional or liquidator in respect of the corporate debtor;

• (ii) the expression “related party” shall have the meaning assigned to it in sub-section (24) of section 5.

• (2) An insolvency professional, other than who has filed an application under section 94 or 95 on behalf of a guarantor or a creditor, as the case may be, shall provide a written consent in Form A to the Adjudicating Authority before his appointment as resolution professional in a resolution process.”

# 8. Regulation 3(a) of the same Regulations defines the word “associate” as under:-

• “(a) “associate” in relation to a creditor, a resolution professional or professionals engaged by resolution professional, as the case may be, shall have the same meaning as assigned to it in relation to a debtor in sub-section (2) of section 79;”

# 9. Though the above referred Regulations, specifically does not bar the appointment of an Advocate/Authorized Representative who appears for the Applicant in the CP under Section 94/95 of the IBC for appointment as Resolution Professional in the same case, if he is eligible to be appointed as such, however, in the fitness of things and in the interest of justice, it is not preferable for appointing the same counsel/Authorized Representative as the

Resolution Professional.

# 10. In this view of the matter, we select Mr. Jai Prakash Rawat, bearing Registration No. IBBI/IPA-001/IP-P-01969/2020-2021/13039, e-mail ID: ipjprawat@gmail.com, Mobile No. 9785842000, appearing at Sr. No. 3 of the panel of IPs for NCLT Jaipur Bench valid from 01.07.2021 to 31.12.2021 which has been prepared and recommended by IBBI, to be appointed as Resolution Professional in this matter. The said Resolution Professional is directed to file his written consent with this Tribunal, within three days of receipt of this order.

# 11. In this matter, the Resolution Professional, Mr. Jai Prakash Rawat, shall exercise all the powers as enumerated under Section 99 of the Code read with Rules made thereunder. He is directed to make the recommendations with reasons in writing for acceptance or rejection of this Application within the stipulated time as envisaged under the provisions of Section 99 of the Code. The Resolution Professional shall provide a copy of the report under subsection 7 of Section 99 to the Creditor as soon as the same is filed before this Adjudicating Authority. The Applicant shall provide a copy of application along with this order to IBBI for its records.

# 12. The Applicant is directed to serve the copy of this order along with copy of the Application and documents on the Resolution Professional by all modes for information.

# 13. List the CP on 07.10.2021.

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Bank of Maharashtra Vs. Gajendra Singh Singhvi - Personal Guarantor, Insolvency Application under section 95.

NCLT Jaipur (01.09.2021) ) In Bank of Maharashtra Vs. Gajendra Singh Singhvi [CP (IB) No. 36/95/JPR/2021] held that;

• from the date of filing this application i.e. 12.07.2021 by the Applicant, Interim Moratorium commences as stipulated under Section 96(1) of the Code in relation to all the debts of the Personal Guarantor

• Since the present application has been filed through the Resolution Professional, Mr. Anil Kumar Mittal, bearing Registration No. IBBI/IPA-002/IP-N00742/2018-19/12263, this Bench confirms the appointment of the Resolution Professional in the matter.

• The Applicant is directed to serve the copy of this order along with copy of the Application and documents immediately on the Resolution Professional by all modes.

• The Resolution Professional is directed to exercise all the powers as enumerated under Section 99 of the Code read with Rules made thereunder. He is directed to make the recommendations with reasons in writing for acceptance or rejection of this application within the stipulated time as envisaged under the provisions of Section 99 of the Code. The Resolution Professional shall provide a copy of the report under sub-Section 7 of Section 99 to the Creditor as soon as the same is filed before this Authority. 

Excerpts of the order;

The present application is filed by Bank of Maharashtra (for brevity ‘Creditor’/ ‘Applicant’) (Form-C) with a prayer to initiate Insolvency Resolution Process against Mr. Gajendra Singh Singhvi (hereinafter called as “Personal Guarantor/Respondent”), through Mr. Anil Kumar Mittal, Insolvency Resolution Professional, under Section 95 of the Insolvency and Bankruptcy Code, 2016 (for brevity ‘IBC’ / ‘Code’) read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors), Rules, 2019. The Respondent/ Personal Guarantor has stood as the Guarantor in respect of the loans availed by the Principal borrower viz. M/s Hindustan Fibres Limited (Corporate Debtor).

# 2. It is stated that various credit facilities were obtained by the Corporate Debtor from Bank of Maharashtra, but the Corporate Debtor was unable to abide by the financial discipline and thus neglected to regularize its credit facility by failing to make payment of the outstanding amount. It is contended that the proceedings under Section 7 of the Code are still pending against the Corporate Debtor being titled as Bank of Maharashtra Vs. Hindustan Fibres Ltd., bearing CP No. 190/7/JPR/2019.

# 3. It could be seen that a Demand Notice dated 15.01.2021 was issued by the Creditor to the Personal Guarantor in respect of the unpaid debt due from the Corporate Debtor under rule 7(1) of the of the IBC Rules, 2019. It is stated that the Demand Notice was sent by speed post to the respondent. Copy of the speed post receipts dated 18.01.2021 are attached at Page 38 of the application. It is stated that the respondent has replied to the above said demand notice on 15.02.2021 wherein the respondent did not deny or refuted the amount due as claimed in the demand notice. Copy of the demand notice along with the reply of the respondent are annexed as Annexure A-6 and A-7 of the application. The advance copy of this application is also stated to be served upon the respondent via e-mail dated 09.07.2021. Copy of the sent email is attached at Page A2 of the application.

# 4. In Part III of Form C, the total debt from the Personal Guarantor by way of personal guarantee given to the corporate debtor is shown as Rs.20,06,65,102/-.

# 5. We have heard the learned counsel for the Applicant and perused the pleadings on record.

# 6. It is submitted that there is a default on the part of the personal guarantor by not fulfilling the debt owed by the corporate debtor as per the deeds of guarantee entered between the parties, which are a part of the present application and attached as Annexure-13 & 14.7. Hence, the application by Mr. Anil Kumar Mittal, Insolvency Resolution Professional on behalf of Bank of Maharashtra, under Section 95 of the Code read with Rule 7 of the IBC Rules, 2019 against Mr. Gajendra Singh Singhvi, the personal guarantor of the corporate debtor.

# 8. It is clarified that from the date of filing this application i.e. 12.07.2021 by the Applicant, Interim Moratorium commences as stipulated under Section 96(1) of the Code in relation to all the debts of the Personal Guarantor. During the Interim Moratorium period: 

• (i) any pending legal action or proceedings in respect of any debt shall be deemed to have been stayed; and 

• (ii) the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt. As per Section 96(3) of the Code, the provisions of sub-section 96(1) shall not apply to such transactions as may be  notified by the Central Government in consultation with any financial sector regulator.

# 9. It shall be noted that the appointment of the Resolution Professional under Section 97 of the Code is critical and essential for the Applicant but also to safeguard the assets of the personal guarantor in terms of the provisions of the Code. Since the present application has been filed through the Resolution Professional, Mr. Anil Kumar Mittal, bearing Registration No. IBBI/IPA-002/IP-N00742/2018-19/12263, this Bench confirms the appointment of the Resolution Professional in the matter.

# 10. The Applicant is directed to serve the copy of this order along with copy of the Application and documents immediately on the Resolution Professional by all modes.

# 11. The Resolution Professional is directed to exercise all the powers as enumerated under Section 99 of the Code read with Rules made thereunder. He is directed to make the recommendations with reasons in writing for acceptance or rejection of this application within the stipulated time as envisaged under the provisions of Section 99 of the Code. The Resolution Professional shall provide a copy of the report under sub-Section 7 of Section 99 to the Creditor as soon as the same is filed before this Authority. 

# 12. List the matter for further proceedings in this case on 05.10.2021.

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Vinod Sehwag vs Siemens Financial Services Pvt. Ltd. & Anr. - The stage for considering default would arrive when the matter is taken up under Section 100 of IBC.

NCLAT (27.08.2021) ) in Vinod Sehwag vs  Siemens Financial Services Pvt. Ltd. & Anr. [Comp. App. (AT) (Ins) No. 464 & 465 of 2021] held that; 

• According to us, as mentioned, the stage for considering default would arrive when the matter is taken up under Section 100 of IBC. The Appellant is right when the Appellant submits that if the Adjudicating Authority gives such finding in advance, the report under Section 99 could not be in the negative. Again the Adjudicating Authority mentioned in Para 11 of the impugned order that it was “allowing” the application under Section 95. At the stage of Section 95 Adjudicating Authority is to act upon the application to take further steps. The stage for “allowing” Application to admit or reject the application would be under Section 100. At the stage of appointment of Resolution Professional, such allowing is not contemplated. In Section 97 no adjudication as such is involved.” 

Excerpts of the order;

27.08.2021: This Appeal has been filed by the Appellant- Personal Guarantor of the Corporate Debtor- ‘Xalta Foods & Beverages Pvt. Ltd.’ against impugned orders dated 22nd March, 2021 and 9th June, 2021 passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi Bench, Court-II) in CP No. (IB)-116(ND)2021. By the impugned order dated 22nd March, 2021, the Adjudicating Authority in a motion under Section 95 of the Insolvency and Bankruptcy Code, 2016 (“IBC” for short) appointed Respondent No.2 as the Resolution Professional and directed the Resolution Professional to make recommendations along with the reasons in writing for acceptance or rejection of the Application filed under Section 95(1) of the IBC r/w Rule 7(2) of the “Insolvency and Bankruptcy (Application to Adjudicating Authority for IRP for Personal Guarantors to Corporate Debtor) Rules, 2019” (“Rules” for short). The Adjudicating Authority sought Report under Section 99 by the impugned order. 

# 2. The second impugned order dated 9th June, 2021 has been passed in I.A 1774/2021 in the same Company Petition by which order, Application of the Appellant to set aside the earlier order on the basis that notice was not given to the Appellant was rejected. 

# 3. Learned Counsel for the Appellant submits that in the matter, action was initiated under Section 95 of the IBC. The Appellant did not get any notice from the Tribunal which violated the principles of natural justice with regard to the Appellant and that the Resolution Professional was appointed by the Adjudicating Authority on Application being moved by the Respondent No.1- Financial Creditor. It is stated that the Adjudicating Authority while passing the first impugned order in Para 12 has already concluded that there is a default in repayment of the loan for which the personal guarantee has been given. It is stated that in view of that, Report which was sought from the Resolution Professional under Section 99 of the IBC could not be different. The Learned Counsel submits that in the second impugned order the Adjudicating Authority in Para 33 of the order declined to recall the first impugned order on the basis that the provisions did not warrant issuance of notice. 

# 4. We have heard Counsel for Respondent Nos.1 & 2 also. There is no dispute that CIRP was initiated against the Corporate Debtor and that the said matter is at the stage of liquidation. The Learned Counsel for the Respondents as well as the Learned Counsel for the Appellant have referred to judgment of this Tribunal dated 12th August, 2021 in Company Appeal (AT) (Insolvency) No. 316 of 2021- “Mr. Ravi Ajit Kulkarni vs. State Bank of India” and the Learned Counsel for both sides agree that the Personal Guarantor of Corporate Debtor may be given the opportunity before the Resolution Professional and orders on similar lines as in the matter of “Mr. Ravi Ajit Kulkarni vs. State Bank of India” could be passed. 

# 5. In Judgment in the matter of “Mr. Ravi Ajit Kulkarni vs. State Bank of India”, this Tribunal had in para 47 observed as under:- 

• “47. We also find that it was an error on the part of Adjudicating Authority to observe in Para 10 as reproduced above and hold that there is a “default” when matter was at the stage of acting on the application under Section 95 read with Section 96. According to us, as mentioned, the stage for considering default would arrive when the matter is taken up under Section 100 of IBC. The Appellant is right when the Appellant submits that if the Adjudicating Authority gives such finding in advance, the report under Section 99 could not be in the negative. Again the Adjudicating Authority mentioned in Para 11 of the impugned order that it was “allowing” the application under Section 95. At the stage of Section 95 Adjudicating Authority is to act upon the application to take further steps. The stage for “allowing” Application to admit or reject the application would be under Section 100. At the stage of appointment of Resolution Professional, such allowing is not contemplated. In Section 97 no adjudication as such is involved.” 

# 6. In the present matter, the Adjudicating Authority has in para 12 of first impugned order held as under:- 

• 12. The Applicant has clearly brought out in its application annexed with documents that the Personal guarantor/ Debtor has committed default in making repayment of the loan along with the interest to the Applicant, for which he has given the personal guarantee to the Applicant on behalf of the Corporate Debtor.” 

# 7. In our view, at the stage at which the matter stood such finding in advance should not have been recorded as the said stage would be after receipt of Report under Section 99 of the IBC when the matter is taken up under Section 100 of the IBC. In para 42 of judgment in the matter of “Mr. Ravi Ajit Kulkarni vs. State Bank of India” we have held as follows:- 

• “42. However, considering the judgment of the Hon’ble Supreme Court in the matter of ‘Swiss Ribbons’, it appears to us that keeping principles of natural justice in view, limited notice of the application should be given to the Personal Guarantors of the Corporate Debtors. The limited notice has to be only to secure presence of the Personal Guarantor referring to the Interim Moratorium which has commenced. Before appointment of the Resolution Professional no hearing as such is contemplated and before appointment of the Resolution Professional the Debtor cannot be allowed to raise disputes for which the stage would be Section 100. Under NCLT Rule 11, Adjudicating Authority is duty bound to pass orders to prevent abuse of process. As such, limited notice to appear may be given to the Personal Guarantors so that when Resolution Professional is appointed, he may provide material as per Section 99(2) of IBC. Till the stage of Section 100, the process is of collecting necessary evidence.” 

# 8. We have held as above that there has to be limited notice to be sent by the Adjudicating Authority so that the Personal Guarantor can appear and when the Resolution Professional is appointed can respond to the Resolution Professional for compliance to be done under Section 99 of the IBC. In para 39 of judgment in the matter of “Mr. Ravi Ajit Kulkarni vs. State Bank of India”, we have observed:- 

• “39. ………………What the Resolution Professional under Section 99 would be doing was requiring the Debtor to furnish proof of repayment as per Section 99(2) and after doing the necessary spade work Resolution Professional has to recommend acceptance or rejection of the application with reasons……………” 

# 9. In the present matter, now the Personal Guarantor is already available and did appear before the Adjudicating Authority to submit that the impugned order should be recalled. As such, the requirement of serving formal notice would not be necessary but the matter needs to be sent back to the Adjudicating Authority so that the procedure is duly followed as indicated by us in the matter of “Mr. Ravi Ajit Kulkarni vs. State Bank of India”. 

# 10. For the above reasons, the Appeal is partly allowed. 6 Comp. App. (AT) (Ins) No. 464 & 465 of 2021 The findings and observations made by the Adjudicating Authority in para 12 of the first impugned order dated 22.03.2021 and the observations in the second impugned order dated 09.06.2021 that the notice is not necessary are set aside. The appointment of Respondent No.2 as the Resolution Professional is not disturbed. It is stated that he has already given report. As we have set aside the premature observations made, with regard to default, by the Adjudicating Authority, we set aside the report given in consequence to such order. We remit back the matter to the Adjudicating Authority. Parties to appear before the Adjudicating Authority on 7th September, 2021. The Resolution Professional will give opportunity to the Appellant in terms of Section 99 and complying provisions give fresh report. The Adjudicating Authority will then proceed further with the matter as per law in the light of our observations and findings in the judgment in the matter of “Mr. Ravi Ajit Kulkarni vs. State Bank of India”. With these observations, the present Appeal is disposed of. No order as to costs. 

# 11. The 10 days for compliance by the Resolution Professional as prescribed in Section 99(1) shall commence from 7th September, 2021.

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