NCLT rejected CIRP plea u/s 94 as bank took no action against appellant-guarantor

Case Details: Amanjyot Singh v. Navneet Kumar Jain - [2023] 148 taxmann.com 72 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson Kanthi Narahari & Barun Mitra, Technical Member
  • Rajesh Bohra & S. Bohra, Advs. for the Appellant.
  • Amit Sharma, Navneet Kumar Jain & Gautam, Advs. for the Respondent.
  • Rajesh Bohra, Sangeeta Bohra, Advs. Navneet Kumar Jain, RP, Amit Sharma, Gautam Singhal, Advs. & Rajat Chaudhary, Advs. for the Appearing Parties.

Facts of the Case

In the instant case, the corporate debtor had obtained financial facilities from the financial creditor banks, and the appellant (i.e. a guarantor of the corporate debtor) stood as a personal guarantor.

Thereafter, the financial creditor bank issued a notice u/s 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) against the corporate debtor and personal guarantors. The mortgaged properties were sold and a part of the loan was recovered.

Then, the corporate debtor filed an application u/s 10 of the IBC before the Adjudicating Authority (NCLT) to initiate the CIRP, which was admitted by the NCLT. Subsequently, the appellant filed an application u/s 94 of the IBC, claiming that he had committed a default in making an outstanding payment.

However, the NCLT rejected the said application by the impugned order on the ground that the appellant had not produced any document. Thereafter, an appeal was made to the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT.

NCLAT Held

The NCLAT observed that the bank had only auctioned mortgaged properties that were held as a security interest and had recovered a part of the loan amount. However, no steps had been taken by the bank to invoke a guarantee or recover any amount from the appellant.

The NCLAT held that since no substantial steps had been taken by the financial creditor bank against the appellant for recovery of any outstanding dues and the guarantee of the appellant had not been invoked, there was no sufficient ground to admit the application filed u/s 94 for initiating the CIRP against the appellant. Accordingly, the appeal was to be dismissed.

List of Cases Reviewed

• • Amanjyot Singh Gulati v. Arun Chadha [2023] 148 taxmann.com 71 (NCLT – New Delhi) (para 12) affirmed [See Annex].