# In the matter of Kondala Chenchaiah, CP (IB) No. 21/94/AMR/2022

> NCLT judgment dated 2022-02-23. Citation: TCN-2022-NCLT-03994. The case involves an application filed under Section 94(1) of the Insolvency and Bankruptcy…

- **Court:** NCLT
- **Order date:** 23 Feb 2022
- **Citation:** TCN-2022-NCLT-03994
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/kondala-chenchaiah-cp-ib-no-2194amr2022-5ba1ee07

## Summary

### Background

The case involves an application filed under Section 94(1) of the Insolvency and Bankruptcy Code (IBC), 2016, read with Rule 6 of the Insolvency and Bankruptcy Rules, 2019, seeking initiation of an insolvency resolution process for personal guarantors to corporate debtors. The applicant, Kondala Chenchaiah, is the director and key person of M/s. Kommu Rakesh Builders Private Limited, which is also the corporate debtor. The applicant provided a guarantee of Rs. 9,00,00,000/- for the corporate debtor's debts. The corporate debtor defaulted on payments, leading to its accounts becoming Non-Performing Assets (NPAs) in the books of the financial creditor, City Union Bank, as of 2020-11-30. The bank initiated actions under the SARFAESI Act and issued notices to the applicant

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## Facts

Mr. Kondala Chenchaiah, the applicant, is the director and key person of M/s. Kommu Rakesh Builders Private Limited, the corporate debtor. He provided a guarantee of Rs. 9,00,00,000/- for the corporate debtor's debts. The corporate debtor defaulted on payments, leading to its accounts becoming NPAs as of 2020-11-30. City Union Bank, the financial creditor, initiated actions under the SARFAESI Act and issued notices to Mr. Chenchaiah as the guarantor. The financial creditor tried to sell the applicant's assets, which were mortgaged against the loans availed by the corporate debtor. The debts for which the bankruptcy process application was filed did not include liabilities such as fines, damages for negligence, maintenance, student loans, or other debts prescribed under

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## Issues and analysis

### Issue 1: Whether the application filed under Section 94(1) of the IBC, 2016, read with Rule 6 of the …

**Ratio:** Section 94(1) of the IBC, 2016, allows for the initiation of an insolvency resolution

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**Reasoning:** The tribunal considered the facts presented by the applicant and the counsel, noting that

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**Interpretation:** Section 94(1) of the IBC provides a mechanism for personal guarantors to

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**Application:** The tribunal applied Section 94(1) of the IBC and Rule 6 of the Insolvency and

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## Parties

- **Judges:** TELAPROLU…
- **Appellants:** Kondala Che…
- **Respondents:** Kommu Rakesh…; City Unio…

## Timeline

- **2020-11-30 — Accounts decl…**: The accounts of the Corporate Debtor became Non-Performing Assets (NPAs) in the books of…
- **2022-02-23 — Order Da…**: Order passed by the…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 94(1) — Application by debtor to initiate insolvency…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-94)

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