# In the matter of State Bank of India vs. Thota Subbarayudu

> NCLT judgment dated 2024-03-01. Citation: TCN-2024-NCLT-02251. The State Bank of India, as the Financial Creditor, filed an application under Section 95(1) of…

- **Court:** NCLT
- **Order date:** 1 Mar 2024
- **Citation:** TCN-2024-NCLT-02251
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/state-bank-of-india-vs-thota-subbarayudu-99d9d451

## Summary

### Background

The State Bank of India, as the Financial Creditor, filed an application under Section 95(1) of the Insolvency and Bankruptcy Code, 2016, read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019, to initiate the Insolvency Resolution Process against the Personal Guarantor, Mr. Thota Subbarayudu, of M/s. Turbo Machinery Engineering Industries Limited, the Corporate Debtor. The Corporate Debtor had availed credit facilities of Rs. 40,36,00,000/- from the Financial Creditor. The Respondent No.1 stood as guarantor for the repayment of the loan, and Guarantee Deeds were executed between the Financial Creditor and Respondent No.1.

## Facts

The State Bank of India (Financial Creditor) filed an application to initiate the Insolvency Resolution Process against Mr. Thota Subbarayudu (Personal Guarantor/Respondent No.1) of M/s. Turbo Machinery Engineering Industries Limited (Corporate Debtor). The Corporate Debtor availed credit facilities of Rs. 40,36,00,000/- from the Financial Creditor. The default in payment occurred on 30.06.2013. The Financial Creditor received a part payment of the loan amount by auction, leaving Rs. 8,17,18,639.87/- as the principal outstanding amount. A demand notice dated 11.08.2021 was issued to the Respondent No.1, but the amount was not paid. The Financial Creditor also approached the Debts Recovery Tribunal, Hyderabad, by filing OA No.9734 of 2017. The Respondent No.1 contended

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## Issues and analysis

### Issue 1: Whether the application filed by the State Bank of India under Section 95(1) of the Insolvency and …

**Ratio:** The obligation of the guarantor is coextensive and coterminous with that of the principal

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**Reasoning:** The court considered the arguments presented by both parties and the recommendations of

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**Interpretation:** The court interpreted Section 128 of the Contract Act to mean that the

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**Application:** The court applied the principles of Section 128 of the Contract Act and the

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## Parties

- **Judges:** Rajeev Bh…; Sanjay…
- **Appellants:** State Bank of…
- **Respondents:** Turbo Machinery…; Thota Subba…
- **Advocates:** Sarvani De…; Mohammed Hayatulla…; +1 more

## Timeline

- **2012-01-31 — Sanction Lett…**: Date of the sanction letter for credit…
- **2012-02-29 — Extension of Sanction…**: Date of the letter…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 95(1) — Application by creditor to initiate insolvency…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-95)

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