RIGHTS OF INDIVIDUAL PERSONAL GUARANTOR UNDER INSOLVENCY RESOLUTION PROCESS

The Part III of the Insolvency and Bankruptcy Code, 2016 which deals with bankruptcy and insolvency of individuals and partnership firms is not yet enforceable, however, with the advent of The Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, hereinafter referred as IRP PGCD rules ; and The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019, hereinafter referred as IRP PGCD regulations the Personal Guarantors have rights to apply for an Insolvency Resolution Process and Bankruptcy Process.

The steps involved in initiation of Insolvency Resolution Process:

1. The guarantor may file an application along with Form A prescribed under the IPR PGCD Rules and a fees of Rs. 2000.
2. A creditor may also file an application by way of submitting the Form C given under the IRP PG Rules, 2019. This application shall be accompanied with:
3. Fees of Rs 2000 under Rule 7 of the IRP PG Rules, 2019.
4. the debts owed by the debtor to the creditor or creditors submitting the application for insolvency resolution process as on the date of application;
5. the failure by the debtor to pay the debt within a period of fourteen days of the service of the notice of demand; and
6. relevant evidence of such default or non-repayment of debt.
7. The Insolvency Professional is then appointed either by nomination by nyhe board or by the applicant themselves.
8. This is followed by Public Notice calling for claim of creditors. 
9. The creditors may in this case stake their claims which are accompanied by Form B of the IRP PG CD Rules. 
10. The Resolution Professional shall issue a notice summoning of meeting of creditors fourteen days before organisation of such meeting. The notice shall contain:
11. a copy of the repayment plan;
12. a copy of the statement of affairs of the debtor;
13. a copy of the said report of the resolution professional; and
14. forms for proxy voting. Form C of IRP PG Regulations.
15. The debtor shall prepare, in consultation with the resolution professional, a repayment plan containing a proposal to the creditors for restructuring of his debts or affairs. The repayment plan may authorise or require the resolution professional to—
16. carry on the debtor's business or trade on his behalf or in his name; or
17. realise the assets of the debtor; or
18. administer or dispose of any funds of the debtor.

 The repayment plan shall include the following, namely:

1. justification for preparation of such repayment plan and reasons on the basis of which the creditors may agree upon the plan;
2. provision for payment of fee to the resolution professional;
3. such other matters as may be specified.
4. The Resolution Professional shall discuss the repayment planning at the meeting of creditor wherein the repayment plan is either accepted or rejected by the creditors. The report and decision of the meeting of creditors is to be provided to the debtor, creditor and the Adjudicating Authority.
5. The Adjudicating Authority shall by order approve or reject the repayment plan after examining the report submitted by the Resolution Professional. Once, the repayment plan is accept it will take effect immediately and shall be binding on the creditors
6. On the basis of the Plan, the Resolution Professional may apply to the Adjudicating Authority for passing an order in relation to the same and upon the successful implementation of the Repayment Plan, the Adjudicating Authority shall pass a discharge order. Such discharge order shall only be applicable to debts that have been successfully discharged in terms of the Plan and shall not discharge any other person from any liability in respect of his debt.

We should also note that there is a provision for the withdrawal of application has been provided under the IRP PGCD Rules, 2019. This application shall be done in way of providing Form D of the IRP PGCD Rules, 2019.

Regards,

Adv (Dr.)Rajkumar Adukia

International Legal Counsel, Motivational speaker and Growth Coach

Author of 300 plus books, 

B.Com (Hons.), FCA, FCS, FCMA, LL.B, MBA, M.Com, IP, MBF, DipIFRS (UK), DLL&LW, DIPR, Dip in Criminology, Ph.D.

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