# In the matter of Union Bank of India vs. K.Sridevi

> NCLT judgment dated 2024-08-13. Citation: TCN-2024-NCLT-00815. The Union Bank of India filed a petition under Section 95(1) of the Insolvency and Bankruptcy…

- **Court:** NCLT
- **Order date:** 13 Aug 2024
- **Citation:** TCN-2024-NCLT-00815
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/union-bank-of-india-vs-ksridevi-b2564242

## Summary

### Background

The Union Bank of India filed a petition 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 Debtors) Rules, 2019, seeking initiation of the Insolvency Resolution Process against Smt. K. Sridevi, the personal guarantor of M/s. Thexa Pharma Private Limited (Corporate Debtor). The Corporate Debtor had approached the Financial Creditor for a term loan of Rs. 6.45 Crores and an OCC Limit of 18 Crores. The Corporate Debtor failed to service interest and/or principal, leading to the account being classified as NPA. The Financial Creditor filed an Original Application before the Debt Recovery Tribunal

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## Facts

The Corporate Debtor, M/s. Thexa Pharma Private Limited, approached the Union Bank of India for financial assistance, including a term loan of Rs. 6.45 Crores for setting up a pellet manufacturing plant and an OCC Limit of 18 Crores for working capital. The Board of Directors of the Corporate Debtor passed a resolution on 02.05.2015 to take loans. In 2016, the working capital was enhanced to 31 Crores, and an additional term loan of Rs. 2 Crores was sanctioned for setting up a capsule plant. On 02.08.2016, loan documents were executed by the Corporate Debtor and Personal Guarantors in favor of the Financial Creditor. In 2017, Unit II (capsule plant) of the Corporate Debtor was sold, and the proceeds were adjusted towards the closure of term loan 2 (Rs. 2.00 cr). The

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## Issues and analysis

### Issue 1: Whether an application under Section 95 of Insolvency and Bankruptcy Code, 2016 can be rejected …

**Ratio:** The 'due invocation' of the personal guarantee is a 'sine qua non' for initiating

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**Reasoning:** The NCLT reasoned that Section 95(4) of the IBC mandates that an application under

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**Interpretation:** Section 95 of the IBC requires strict compliance with the procedural

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**Application:** In this case, the creditor failed to provide proof of service of the demand

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## Parties

- **Judges:** Venkata Ramakrishn…; SH. CHARAN…
- **Appellants:** Union Bank of…
- **Respondents:** M/s.Thexa Pharma…; K Sri…

## Timeline

- **2015-05-02 — Board Reso…**: Board of Directors of the Corporate…
- **2016-08-02 — Loan Documents…**: Loan documents were executed by the Corporate Debtor and Personal Guarantors in favor of…

## 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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