NCLT Kochi Initiates Insolvency Process Against Personal Guarantor Of Trivandrum International Health Services Ltd.

Background Facts

Dhanalaxmi Bank Ltd. (“Financial Creditor”) sanctioned credit facilities amounting to Rs. 16 Crores to M/s. Trivandrum International Health Services Ltd (“Corporate Debtor”) on 30.03.2015. The directors of the Corporate Debtor namely, Dr. Ashalatha Nair, Dr. Bharath Chandran and Shri. P A. Ahamed, had executed personal guarantees.

The accounts of the Corporate Debtor were declared Non Performing Asset (NPA) on 30.05.2016. Hence, the Financial Creditor issued demand notices to the Corporate Debtor and Personal Guarantors by invoking the personal guarantees.

Subsequently, the Financial Creditor filed a petition under Section 7 of the Insolvency and Bankruptcy Act, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor. The Adjudicating Authority initiated CIRP against the Corporate Debtor.

On 09.11.2021, the Financial Creditor also issued a Demand Notice under Section 95(4)(b) of IBC to Dr. Bharath Chandran (“Personal Guarantor/Respondent”), who is also the Promoter and Ex-Director of the Corporate Debtor. The Personal Guarantor neither paid the due amount nor responded to the notice. Therefore, the Financial Creditor filed an application under Section 95(1) of IBC, seeking initiation of Insolvency Resolution Process against the Personal Guarantors of the Corporate Debtor. The amount in default was Rs. 14,24,90,488/- pertaining to the credit facility availed by Corporate Debtor from Financial Creditor.

The Adjudicating Authority vide an order dated 05.05.2022 appointed Mr. Raj Mohan R. as the Resolution Professional and directed him to file report under Section 99 of IBC. The Resolution Professional submitted the Report u/s 99 of IBC, recommending the admission of the application filed under Section 95 of IBC.

Contentions Of Personal Guarantor

The Personal Guarantor argued that the Deed of Guarantee was executed under a loan agreement for a total amount of Rs. 16 Crores. However, the Financial Creditor disbursed only Rs. 8,76,12,971/- including Over Draft to the Corporate Debtor, as against the sanctioned facility of Rs. 16 Crores. Due to insufficiency of funds, the Corporate Debtor’s project to set up an Oncology Division could not be completed. The Corporate Debtor suffered loss of anticipated revenue and profit; was pushed into insolvency. Therefore, non-fulfillment of the consideration for which the guarantee was provided makes the Deed of Guarantee unenforceable. The liability of the Personal Guarantor, if any, shall be crystallized upon receipt from the liquidation proceedings of the Corporate Debtor.

The NCLT Bench observed that the Guarantor admitted the Deed of Guarantee, agreed to the terms therein unconditionally and also gave consent to the Creditor and the Borrower to vary the terms of the contract and securities.

The Bench held that the case is fit for admission and thus initiated Insolvency Resolution Process against Dr. Bharath Chandran (Personal Guarantor).

Case Title: Dhanalaxmi Bank Ltd. v Dr. Bharath Chandran

Case No.: CP (IBC)/24/KOB/2022

Counsel for Applicant: M/s. Indialaw LLP, Advocates

Counsel for Resolution Professional: Mr. Sankar P. Panicker, Adv.

Counsel for Respondent: Mr. Raghunath Sarangapani, PCS, Mrs. Shiny A., Advocate.

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