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

> NCLT judgment dated 2022-02-23. Citation: TCN-2022-NCLT-03999. 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-03999
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/kondala-chenchaiah-cp-ib-no-2194amr2022-9352e855

## 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, 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 as the

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## Facts

Kondala Chenchaiah, the applicant, is the director and key person of M/s. Kommu Rakesh Builders Private Limited, the corporate debtor. Chenchaiah 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 Chenchaiah as the guarantor. The financial creditor tried to sell the assets of the applicant 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,

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## Issues and analysis

### Issue 1: Whether the application under Section 94(1) of the IBC, 2016, for initiating the insolvency …

**Ratio:** Section 94(1) of the IBC, 2016, allows a debtor to apply for initiating an insolvency

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**Reasoning:** The tribunal considered the facts presented and found that the application met the

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**Interpretation:** Section 94(1) of the IBC, 2016, provides a mechanism for individuals who have

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**Application:** The tribunal applied Section 94(1) of the IBC, 2016, to the facts of the case,

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## Parties

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

## Timeline

- **2020-11-30 — Accounts beco…**: The accounts of the Corporate Debtor became Non-Performing Assets (NPAs) in the books of…
- **2022-02-23 — Order Da…**: The tribunal passed an order to appoint an…

## 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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