The travails of India's first personal insolvency petitioner

Aggrieved by an inordinate delay of more than 18 months, India's first personal insolvency petitioner Omkaram Venkata Ramana, Tirupati-based promoter of five companies under Nithin group, has moved the National Company Law Tribunal's (NCLT) Amaravati Bench, seeking justice. The latest development is touted to be a rare plea in the India's insolvency history.

Ramana had filed the India's first personal insolvency petition on December 2, 2019, the day the amended Insolvency and Bankruptcy Code (IBC) bringing personal guarantor under its purview came into effect.

Pointing out the objectives of the IBC to find timely resolution to failed businesses and various judgments of the apex court directing the tribunals to ensure timely completion of the corporate insolvency resolution process, Ramana filed the rare plea seeking resolution. In a petition filed before NCLT's Amaravati Bench on July 22 (a copy of the petition is with Bizz Buzz), the personal guarantor appealed to the tribunal that inordinate delays and non-compliance with the timelines specified under IBC would defeat the very objective of the Code.

Ramana urged the tribunal to dispose of the company petition pending before it for nearly two years without appointment of resolution professional and further process prescribed by the law, which was against the timelines prescribed under IBC.

Invoking the provisions under Section 64 of IBC, Ramana said the adjudicating authority or the appellate authority should record the reasons for not disposing of the application or passing the orders when the timelines prescribed under IBC could not be met.

The personal guarantor submitted to the tribunal that he was "suffering irreparable loss and injury and injustice" due to delay in disposing of his application or passing orders and the lender's attempts to auction the properties he provided as guarantees.

The Tirupati-based entrepreneur, whose Nithin Group firms once enjoyed a sizeable share in South India's edible oil and wheat flour markets under the Varshi brand, had stood as personal guarantor to the group firms that defaulted on Rs 38.66 crore of bank loans.

The firms that Ramana offered personal guarantees to include Nithin Grains & Mills, Nithin Proteins, Nithin Nutritions, Ramanasree Consumer Products and Ramana Sri Logistics, all promoted by him.

In December 2019, India had notified the amended IBC guidelines that enabled creditors as well as personal guarantors to move the tribunals seeking to initiate insolvency proceedings against personal guarantors. Prior to the amendment, the lenders had the option of moving the debt recovery tribunals against the personal guarantors.

Ramana claimed that he had voluntarily moved the tribunal in December 2019 finding the amended IBC as the most modern law aimed at reviving the failed businesses and providing a quick resolution as well as a dignified exit for promoters who stood as personal guarantors.

Bank of India (BoI), the sole banker to five of the Nithin Group of companies, had attempted auctioning the personal assets of the promoter offered as guarantee but could not succeed. The accounts of Nithin Group of companies had turned into non-performing assets in June 2016.

Ramana urged the tribunal to either dispose of his application or pass orders appointing the Resolution Professional (RP) for initiating further process of insolvency resolution and order interim moratorium.