# In the matter of Bank of Baroda vs. V. Narayana Reddy, CP(IB) No.300/95/HDB/2022

> NCLT judgment dated 2023-06-12. Citation: TCN-2023-NCLT-02986. The case involves an application filed by Bank of Baroda, the Financial Creditor (FC), against…

- **Court:** NCLT
- **Order date:** 12 Jun 2023
- **Citation:** TCN-2023-NCLT-02986
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/bank-of-baroda-vs-v-narayana-reddy-cp-0d0e1f81

## Summary

### Background

The case involves an application filed by Bank of Baroda, the Financial Creditor (FC), against V. Narayana Reddy, the Personal Guarantor (PG), and VNR Infrastructure Limited, the Corporate Debtor (CD), seeking to initiate the Insolvency Resolution Process (IR Process) against the Personal Guarantor. The FC had sanctioned a loan to the CD, for which the PG stood as a guarantor. The CD defaulted, leading to its account being classified as a Non-Performing Asset (NPA). Recovery proceedings were initiated before the DRT, and a Recovery Certificate was issued. The CD was admitted into CIRP. The FC issued demand notices to the PG, but received no reply. The Resolution Professional (RP) was appointed and submitted a report recommending CIRP for the PG.

## Facts

Bank of Baroda sanctioned a loan to VNR Infrastructure Limited, with V. Narayana Reddy acting as the guarantor for Rs. 75.0 Crores. The loan agreement was formalized through a sanction letter dated March 18, 2013. A working capital facility of Rs. 56.0 Crores was part of this arrangement. The loan was under a Consortium Agreement led by SBI, with two term loans aggregating to Rs. 19.0 Crores. A Working Capital Consortium Agreement was entered on January 30, 2014, for Rs. 720.0 Crores. V. Narayana Reddy executed a Personal Guarantee on January 30, 2014, guaranteeing payment of Rs. 720.0 Crores. VNR Infrastructure Limited defaulted, leading to its account being classified as NPA on July 29, 2015. A reference was made to BIFR under Section 15(1) of the Sick Industrial

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## Issues and analysis

### Issue 1: Whether the application filed by the Financial Creditor for initiating Insolvency Resolution …

**Ratio:** Section 95 of the IBC, 2016 allows a creditor to initiate insolvency resolution process

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**Reasoning:** The court noted that the Personal Guarantor stood as guarantor for the loan sanctioned to

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**Interpretation:** Section 95 of IBC allows the financial creditor to initiate insolvency

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**Application:** The Financial Creditor's application is maintainable as the Personal Guarantor

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## Parties

- **Judges:** TELAPROLU…; Shri. Chara…
- **Appellants:** Bank of B…
- **Respondents:** V.N.R.Infrastructu…; VNR Infrastructure…; +1 more
- **Advocates:** Mr.V.V.S.…; Srikant…

## Timeline

- **2013-03-18 — Sanction…**: The FC sanctioned a loan of Rs.75.0 Crores to the Corporate Debtor, with the Personal…
- **2014-01-30 — Working Capital…**: A Working Capital Consortium Agreement was entered for sanctioning working capital credit…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 95 — Application by creditor to initiate insolvency…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-95)

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