Case Note & Summary
The appeals were filed by Vijay Pandey and Maya Pandey against the orders of the National Company Law Tribunal (NCLT) initiating Personal Insolvency Resolution Processes (PIRP) against them under the Insolvency and Bankruptcy Code, 2016. The NCLT had allowed the application of the Small Industries Development Bank of India (SIDBI) under Section 95(1) of the Code, which led to the initiation of PIRP based on a report from the Resolution Professional. Both appellants were personal guarantors for a corporate debtor, Bhartiya Micro Credit, which had defaulted on a loan of Rs. 2 Crores. The appellants contended that the invocation of their personal guarantees was invalid as no proper demand notice was issued prior to the initiation of insolvency proceedings. They argued that the demand notice dated 20.12.2022 was issued without fulfilling the requirements of the Deed of Guarantee, which stipulated that liability arose only upon demand. The respondents countered that the invocation letter dated 26.11.2021 was validly issued and served, establishing the liability of the guarantors. The court found that the invocation of the guarantee was indeed valid and that the appellants had been duly notified of their obligations. The appeals were dismissed, affirming the initiation of the PIRP against the appellants.
Headnote
A) Insolvency Law - Personal Guarantee - Validity of Invocation - Insolvency and Bankruptcy Code, 2016, Section 95 - The court examined whether the invocation of the personal guarantee was validly made prior to the initiation of insolvency proceedings. It held that the invocation letter dated 26.11.2021 constituted a valid demand, satisfying the contractual requirement, thus allowing the initiation of the Personal Insolvency Resolution Process (Paras 51-56).
Issue of Consideration
Whether the Personal Guarantee executed by the Appellants was validly invoked before the initiation of proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016.
Final Decision
The court dismissed the appeals, affirming the initiation of the Personal Insolvency Resolution Process against the appellants, finding that the invocation of the personal guarantee was validly made prior to the initiation of proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016.
Law Points
- Insolvency and Bankruptcy
- Personal Guarantee
- Demand Notice
- Non-Performing Asset
- Invocation of Guarantee
