# In the matter of State Bank of India vs. Yarlagadda Madhu Mohan

> NCLT judgment dated 2024-02-27. Citation: TCN-2024-NCLT-02368. The case involves a petition filed by State Bank of India (SBI) as the Financial Creditor…

- **Court:** NCLT
- **Order date:** 27 Feb 2024
- **Citation:** TCN-2024-NCLT-02368
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/state-bank-of-india-vs-yarlagadda-madhu-mohan-27273d29

## Summary

### Background

The case involves a petition filed by State Bank of India (SBI) as the Financial Creditor against Shri. Yarlagadda Madhu Mohan, the Personal Guarantor, of M/s. YKM Entertainment and Hotels Private Limited, the Corporate Debtor. SBI sought to initiate the Insolvency Resolution Process against the Personal Guarantor under Section 95(1) of the Insolvency and Bankruptcy Code (IBC), 2016, read with Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019. The Corporate Debtor had availed various financial assistances from SBI and its associate banks. The loan account became NPA on 29.11.2016. SBI initiated recovery proceedings before the Debt Recovery

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## Facts

State Bank of India (SBI) extended financial assistance to M/s. YKM Entertainment and Hotels Private Limited (Corporate Debtor). Shri. Yarlagadda Madhu Mohan acted as the Personal Guarantor for the loan. The initial loan agreement was for Rs.78.00 Crores, later revised to Rs.113.70 Crores and then to Rs.138.70 Crores. The Corporate Debtor defaulted on payments, leading to the account being declared a Non-Performing Asset (NPA) on 29.11.2016. SBI initiated recovery proceedings before the Debt Recovery Tribunal (DRT), Hyderabad-II, filing Original Application No.767 of 2018. An OTS proposal and a joint compromise memo were filed, but the Corporate Debtor and Personal Guarantors failed to adhere to the settlement terms. SBI then filed Company Petition (IB)No.

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## Issues and analysis

### Issue 1: Whether the application filed by State Bank of India under Section 95 of the IBC, 2016 for …

**Ratio:** The liability of the surety is co-extensive with that of the principal debtor, unless it

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**Reasoning:** The court considered that the Respondent No.1 (Personal Guarantor) admitted to taking the

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**Interpretation:** The legal principle of co-extensive liability of a surety with the principal

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**Application:** Given that the Personal Guarantor admitted to taking the loan and a petition

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## Parties

- **Judges:** Rajeev Bh…; Sanjay…
- **Appellants:** State Bank of…
- **Respondents:** YKM Entertainment…; Yarlagadda Madhu…

## Timeline

- **2011-08-30 — First Loan Ag…**: The first loan agreement was executed between the Corporate Debtor and Financial Creditor…
- **2014-07-23 — Revised Credit…**: The credit agreement was…

## 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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