India’s first personal insolvency proceeding begins against first gen entrepreneur Anil Syal
Anil Syal, the chief executive officer and promoter of Flywheel Logistics Private Limited (FLPL), has become the first personal guarantor against whom personal insolvency proceedings have been initiated. The New Delhi bench of the National Company Law Tribunal (NCLT) admitted an insolvency application against Syal on 28 October.
Syal was personal guarantor for a loan of Rs 40 crore from Union Bank of India to Flywheel Logistics.
Besides committing defaults in making payment of Rs 40 crore to Union Bank of India, Syal had also failed to make payment of Rs 2.75 crore to one Rangoli International, Rs 2.65 crore to various individuals, apart from payment against various personal and credit card loans.
As per the Section 97 of the IBC, the NCLT had appointed Avneesh Srivastava as the resolution professional on 18 September 2020 asking him to issue public notice and inviting claims from all creditors.
The NCLT noted that from report filed by the resolution professional, it did not appear that there was a need to issue instructions for the purpose of conducting negotiations between the debtor and creditors for arriving at a repayment plan. Therefore, as per the rules laid down the NCLT admitted the insolvency petition against Anil Syal.
The bankruptcy provisions for personal guarantors allow both debtors and creditors to initiate a personal insolvency. The resolution professional is selected by whoever initiates the insolvency proceedings. The role of RP in the personal insolvency process includes assisting debtors in preparing and submitting their repayment plans.
The creditors then vote to approve or reject the plan or modify it with the debtor’s consent. A repayment plan can be approved by three-fourth of votes of creditors. The resolution professional then implements the plan and applies for debtor’s discharge.
However, if the debtor and the creditors fail to reach a repayment agreement, the insolvency proceedings starts against the debtor.
Once the insolvency resolution process starts, moratorium is declared. During the moratorium period, all pending legal proceedings related to any debt are stayed, creditors are not supposed to initiate any new proceedings against the debtor in relation to any debt. The debtor would not be able to dispose off, transfer or encumber any of his assets, legal rights, etc during the moratorium period.
Anil Syal had set up Flywheel Logistics in 2009. Flywheel Logistics, according to Syal’s LinkedIn profile, is India’s first container network on road. Flywheel offers services 18 states in India. This is not Syal’s first brush with entrepreneurship. He had earlier set up skyl, an IT-Middleware platform for the retail supply chain, in 2007, which he sold off in 2008.
A similar personal insolvency application was filed against Anil Ambani by State Bank of India. However, the same was stayed by Delhi High Court. The case is now being heard by the Supreme Court.
