NCLT Can’t Reject Discharge Plea If Trustee Fails to File | NCLAT

Case Details: Anil Syal v. Ajay Gupta - [2025] 176 taxmann.com 293 (NCLAT-New Delhi)

Judiciary and Counsel Details

• Justice Ashok Bhushan, Chairperson, Barun Mitra & Arun Baroka, Technical Member
• Ms Prachi Johri & Ms Abhipsa Sahu, Advs. for the Appellant.
• Milan Singh Negi, Nikhil Kumar Jha, Ms Aakriti Gupta, Brijesh Kumar Tamber & Prateek Kushwaha, Advs. for the Respondent.

Facts of the Case

In the instant case, the personal Insolvency Resolution Process (PIRP) commenced on an application filed by the appellant under section 94 of the IBC. As no repayment plan had been approved, the bankruptcy process under Section 122 of the Act was initiated upon the appellant’s application.

The Union Bank of India (UBI) submitted its claim for Rs. 71.90 crores, while relinquishing its security interest in the subject asset of the bankrupt, i.e., the appellant. The Bankruptcy trustee made a public announcement regarding the e-auction of 50% of the appellant’s rights in the said asset. The E-auction was conducted and one ‘A’ was declared as the successful bidder.

Thereafter, the appellant filed an application under section 138(1)(a) of the IBC seeking a discharge. The NCLT, by the impugned order, rejected the said application because it had to be filed by a Bankruptcy Trustee and had been filed to disrupt and derail the Bankruptcy Process.

It was noted that Section 138 of the Act obliged the Bankruptcy Trustee to apply to the NCLT for a discharge of the bankrupt on expiry of one year from the bankruptcy commencement date.

However, in the instant case, more than two years had expired, and no application had been filed by the bankruptcy trustee; thus, the appellant, who was directly affected by the continuance of the bankruptcy process, was fully entitled to bring it to the notice of the NCLT.

NCLAT Held

The NCLAT noted that the Bankruptcy Trustee was in possession of the appellant’s assets. Thus, the observation made by the NCLT that the application had been filed by the appellant to disrupt and derail the Bankruptcy Process was also without any substance and unfounded.

The NCLAT held that it was not even explained in what manner the appellant was disrupting and derailing the bankruptcy process. Thus, the NCLT had committed an error in refusing to consider the application filed by the appellant, and accordingly, the impugned order passed by the NCLT was to be set aside.

List of Cases Reviewed

• Order dated 11.02.2025 passed by NCLT, New Delhi in I.A. No.3964/2024 in IB-589(PB)/2020) (Para 28) reversed

List of Cases Referred to

• Anil Syal v. Ajay Gupta [Company Appeal (AT) (Ins.) No. 1437 of 2024, dated 30-7-2024] (para 2)
• Anil Syal v. Ajay Gupta [IA No. 5990 of 2023, dated 6-8-2024] (para 2).