Proceedings U/S 95 of the IBC Shall Abate On Death Of The Personal Guarantor: NCLT, New Delhi

In the case of Alchemist Asset Reconstruction Company v. Mr. Deepak Puri, the NCLT, New Delhi bench of Justice Ramalingam Sudhakar and Sh. Hemant Kumar Sarangi rejected an application filed by the; Financial Creditor u/s 95 of the IBC, 2016 against the Personal Guarantor of the Corporate Debtor on the grounds that; the proceedings against him would cease after the Personal Guarantor’s death.

The Financial Creditor submitted an application under section 95 of the IBC to begin CIRP against the Personal Guarantor of the Corporate Debtor, Moser Baer India Limited, through the Resolution Professional. On this application, a notice later issued.

The RP learned about the death of the Corporate Debtor’s Personal Guarantor during an investigation under section 99 of the IBC. The RP suggested that; the application be denied on the grounds that; the proceedings against the Personal Guarantor must be terminated because they; will cease due to the Personal Guarantor’s death.

The RP cited Section 5(22) of the Code, stating that; because the Personal Guarantor is an individual who acted as a guarantee to the Corporate Debtor, the proceedings against him would cease if he died. He further stated that; because the IBC process is not in the nature of a recovery, the proceedings should be closed upon the death of the Personal Guarantor.

The Tribunal agreed with the RP’s rationale and dismissed the application for the start of an IRP against the Personal Guarantor under Section 95 of the Code. It  held that; if the Personal Guarantor died, the question of whether to continue the proceedings against such a deceased person would not arise, and the proceedings under Section 95 would cease.

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