The National Company Law Tribunal, Mumbai (hereinafter referred as NCLT) vide order dated 20.08.2020 allowed an application filed by State Bank of India to initiate insolvency proceedings against Reliance Communications Chairman Mr. Anil Ambani with respect to personal guarantee to the extent of Rs. 12,00,00,00,000/- (Rupees One Thousand Two Hundred Crores Only).
The NCLT furthermore, appointed a Resolution Professional for initiation of insolvency resolution process against Mr. Anil Ambani.
The State Bank of India filed an application under section 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “Code”) to initiate personal insolvency proceedings against Mr. Anil Ambani in his capacity as a personal guarantor for certain facilities granted to Reliance Communications Limited (RCOM) and Reliance Infratel Limited (RITL) by SBI aggregating to Rs 12,00,00,00,000/- (Rupees One Thousand Two Hundred Crores Only).
Due to the reduced functioning of courts owing to the pandemic, the Adjudicating Authority could not issue directions as required under law. Meanwhile, Mr. Ambani suffered a decree in certain proceedings before the High Court of England and Wales wherein he was directed to repay approximately Rs. 54,50,00,00,000/- (Rupees Five Thousand Four hundred and Fifty Crore Only) to certain Chinese Banks.
In the same backdrop, SBI filed an Interlocutory Application seeking urgent directions from the Adjudicating Authority to the Insolvency and Bankruptcy Board of India to nominate a resolution professional under section 97 (3) of the Code on the apprehension that Chinese Banks may initiate execution proceedings against Mr. Anil Ambani in India.
In response to the application, Mr. Ambani informed the NCLT that while UV Asset Reconstruction Company Limited had submitted a Resolution Plan in the Corporate Insolvency Resolution Process of RCOM, Reliance Digital Platform & Project Services Limited had submitted a resolution plan for RITL.
It was thus submitted that in view of the existence of Resolution Plans for the two Corporate Debtors, it would be prudent not to proceed against the personal guarantor i.e. Mr. Anil Ambani at this point.
On the other hand, SBI, argued that section 60 (2) of the Code itself permits simultaneous proceedings against the Corporate Debtor and personal guarantor and therefore there is no impediment for the Adjudicating Authority to proceed with the hearing of SBI’s application. It argued that the approval of the resolution plans of RCOM and RITL at best discharged the liability of the companies from repaying SBI but not the debt itself. Further, it argued that the resolution plans specifically excluded enforcement of guarantees, personal or corporate, from extinguishment.
In view of the specific exception, SBI was well within its rights to invoke and enforce its rights under the personal guarantee. It was further argued that if Mr. Anil Ambani’s arguments were to be accepted, huge amounts of public money being written off, despite there being existence of guarantees but lack of recourse for enforcement. It wasalso argued that a discharge of the principal debtor by operation of law in bankruptcy or liquidation proceedings does not absolve the surety from his/her liability.
After hearing the merits of the present matter, the division bench comprising of Justice Janab Mohammad Ajmal and Ravikumar Duraisamy allowed SBI’s application and appointed an insolvency resolution professional to examine the application under section 95 of the Codeand submit a report recommending the admission or rejection of the said application.
The Hon’ble bench stated that a plain reading of Section 60(2) read with Sections 95 and 97(3) of the Code indicated that even while an application for Corporate Insolvency Resolution Process or liquidation proceedings of corporate debtors is pending, an application against the personal guarantor is also allowed to be filed.
Thus, in view of the fact that the furnishing of personal guarantee for the credit facilities by Mr. Anil Ambani was not in dispute, NCLT opined that it had no other option than to issue the direction under Section 97(3).
Accordingly, Mr. Jitender Kothari was thus appointed as the Resolution Professional under section 97 (4) IBC read with Rule 8 of the Insolvency and Bankruptcy Rules, 2019.