NCLT Bengaluru Replaces Resolution Professional in Personal Guarantor Insolvency

Authority: National Company Law Tribunal, Bengaluru Bench (Shri Sunil Kumar Aggarwal, Member (Judicial) and Shri Radhakrishna Sreepada, Member (Technical))

Order Date: 22 June 2026

Case Overview

The application (IA No. 212/2026) was filed by Mr. Vasant V Patil, a personal guarantor to corporate debtor Soubhagya Laxmi Sugars Limited, seeking recall of the order dated 19 December 2023 that appointed Mr. Ratnakar Shetty as Resolution Professional. The proceedings were initiated under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 by Karnataka State Co-operative Apex Bank Limited, the lead member of a consortium of co-operative banks.

The corporate debtor had availed various credit facilities from the consortium between 2013 and 2017, for which the applicant along with other guarantors had executed personal guarantees. Following defaults, the financial creditor invoked the personal guarantees and issued a demand notice dated 30 June 2022 for ₹382,83,73,000 (Three Hundred and Eighty-Two Crores Eighty-Three Lakh Seventy-Three Thousand). A statutory demand notice under Section 95(4)(b) was also issued on 22 July 2022.

The applicant contended that the appointment of the Resolution Professional solely on the recommendation of the financial creditor was contrary to the procedure contemplated under Sections 97(3), 97(4) and 97(5) of the Code. He argued that where an application under Section 95 is filed directly by a creditor, the Adjudicating Authority must seek nomination of a Resolution Professional from IBBI. The applicant had previously approached the Karnataka High Court (W.P. No. 6112/2026), which permitted him to approach the NCLT.

The Tribunal analyzed the statutory framework and judicial precedents, including the Supreme Court judgment in Dilip B. Jiwrajka v. Union of India & Ors. and the NCLAT decision in L. Ramalakshmamma v. State Bank of India. It noted that Rule 8 of the Personal Guarantor Rules enables IBBI to share a database and panel of Insolvency Professionals with the Adjudicating Authority, and that appointment from such panel cannot be treated as contrary to Section 97.

Final Outcome

The Tribunal disposed of the application and appointed Mr. Syam Prabhad TP (IBBI/IPA-001/IP-P-02628/2021-2022/14039) as the new Resolution Professional from the current IBBI panel for Bengaluru Bench to ensure impartiality and avoid further controversy. The RP must file his consent letter within one week. The petitioner/financial creditor was directed to initially deposit ₹35,000 with the RP, adjustable against future remuneration. The interim moratorium under Section 96 continues to apply, staying all legal actions and proceedings in respect of the subject debt. The RP is directed to exercise all powers under Section 99 and submit his report with recommendations within the stipulated time, providing copies to both the financial creditor and personal guarantor within 10 days of filing.

Topics: Personal Guarantor Insolvency, Resolution Professional Appointment, Corporate Debt