Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019

In exercise of the powers conferred by sub-section (1), clauses (g), (h), (i), (m), (n) and (o) of sub-section (2) of Section 239 read with clause (e) of section 2 and sub-section (2), clauses (c) and (e) of sub-section (14) and clause (e) of sub-section (15) of Section 79 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby makes the following rules, namely:-

1. Short title and commencement– (1) These rules may be called the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019.

(2) They shall come into force from the 1st day of December, 2019.

2. Application–These rules shall apply to the insolvency resolution process for personal guarantors to corporate debtors.

3. Definitions — (1) In these rules, unless the context otherwise requires, –

 (a) “Adjudicating Authority” means-

(i) for the purpose of Section 60, the National Company Law Tribunal constituted under Section 408 of the Companies Act, 2013 (18 of 2013); or

(ii) in cases other than sub-clause (i), the Debt Recovery Tribunal established under sub-section (1A) of Section 3 of the Recovery of Debts and Bankruptcy Act, 1993 (51 of 1993);

(b) “Code” means the Insolvency and Bankruptcy Code, 2016 (31 of 2016);

(c) “electronic form” shall have the meaning assigned to it in clause (r) of Section 2 of the Information Technology Act, 2000 (21 of 2000);

(d) “form” means a form appended to these rules;

(e) “guarantor” means a debtor who is a personal guarantor to a corporate debtor and in respect of whom guarantee has been invoked by the creditor and remains unpaid in full or part;

(f) “section” means section of the Code;

(g) “serve” means sending any communication by any means, including registered post, speed post, courier or electronic form, which is capable of producing or generating an acknowledgment of receipt of such communication:

Provided that where a document cannot be served in any of the modes, it shall be affixed at the outer door or some other conspicuous part of the house or building in which the addressee ordinarily resides or carries on business or personally works for gain;

(2) Words and expressions used and not defined in these rules but defined in the Code shall have the meanings respectively assigned to them in the Code.

4. Relatives– For the purposes of clause (ii) of Explanation to sub-section (2) of Section 79, the manner of relationship shall mean the manner as provided in the Explanation to clause (24A) of Section 5.

5. Excluded assets– For the purposes of sub-section (14) of Section 79,?

(a) the value of unencumbered personal ornaments under clause (c) of the said sub-section shall not exceed one lakh rupees;

(b) the value of unencumbered single dwelling unit owned by the debtor under clause (e) of the said sub-section shall not exceed,-

(i) in the case of dwelling unit in an urban area, twenty lakh rupees;

(ii) in the case of dwelling unit in a rural area, ten lakh rupees.

Explanation.- For the purposes of this rule,-

(a)“rural area” shall have the same meaning as assigned to it in clause (o) of section 2 of the National Rural Employment Guarantee Act, 2005 (42 of 2005);

(b)“urban area” means any area other than rural area.

6. Application by guarantor– (1) The application under sub-section (1) of section 94 shall be submitted in Form A, along with an application fee of two thousand rupees.

(2) The guarantor shall serve forthwith a copy of the application referred to in sub-rule (1) to every financial creditor and the corporate debtor for whom the guarantor is a personal guarantor.

7. Application by creditor– (1) A demand notice under clause (b) of sub-section (4) of Section 95 shall be served on the guarantor demanding payment of the amount of default, in Form B.

(2) The application under sub-section (1) of Section 95 shall be submitted in Form C, along with a fee of two thousand rupees.

(3) The creditor shall serve forthwith a copy of the application referred to in sub-rule (2) to the guarantor and the corporate debtor for whom the guarantor is a personal guarantor.

(4) In case of a joint application, the creditors may nominate one amongst themselves to act on behalf of all the creditors.

8. Confirmation or nomination of insolvency professional– (1) For the purposes of subsection (2) of Section 97 and sub-section (5) of Section 98, the Board may share the database of the insolvency professionals, including information about disciplinary proceedings against them, with the Adjudicating Authority from time to time.

(2) For the purposes of sub-section (4) of Section 97 and sub-section (3) of Section 98, the Board may share a panel of insolvency professionals, who may be appointed as resolution professionals, with the Adjudicating Authority.

9. Copy of application– The applicant shall provide a copy of the application filed under sub-section (1) of Section 94 or sub-section (1) of Section 95, as the case may be, if not provided earlier, to the resolution professional within three days of his appointment under sub-section (5) of Section 97, and to the Board for its record.

10. Filing of application and documents– (1) Till such time, rules of procedure for the conduct of proceedings under the Code are notified, the applications under Rules 6 and 7 shall be filed and dealt with by the Adjudicating Authority in accordance with

(a) Rules 20, 21, 22, 23, 24 and 26 of Part III of the National Company Law Tribunal Rules, 2016 made under Section 469 of the Companies Act, 2013 (18 of 2013); or

(b) Rule 3 of the Debt Recovery Tribunal (Procedure) Rules, 1993 made under Section 36 of the Recovery of Debts and Bankruptcy Act, 1993 (51 of 1993) and Regulations 3, 4, 5 and 11 of the Debt Recovery Tribunal Regulations, 2015 made under Section 22 of the Recovery of Debts and Bankruptcy Act, 1993, as the case may be.

(2) The application and accompanying documents shall be filed in electronic form, as and when such facility is made available and as directed by the Adjudicating Authority:

Provided that till such facility is made available, the applicant may submit accompanying documents, and wherever they are bulky, in electronic form, in scanned, legible portable document format in a data storage device such as compact disc or a USB flash drive acceptable to the Adjudicating Authority.

11. Withdrawal of application– (1) The Adjudicating Authority may permit withdrawal of the application submitted under Rule 6 or Rule 7, as the case may be,-

(a)before its admission, on a request made by the applicant;

(b)after its admission, on the request made by the applicant, if ninety percent. of the creditors agree to such withdrawal.

(2) An application for withdrawal under clause (b) of sub-rule (1) shall be in Form D.

*Please refer to the MCA Website for detailed notification.

Ministry of Corporate Affairs

[Notification dt. 15-11-2019]