NCLT’s Court III Rightfully Appointed RP for Personal Guarantor During Pending CIRP of CD in Court V | NCLAT

Case Details: Bhavesh Harkishandas Mehta v. Kookmin Bank - [2024] 160 taxmann.com 73 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Ashok Bhushan, Chairperson, Barun Mitra & Arun Baroka, Technical Member
  • Yahya Batatawala, Ms Meghna Rao & Ms Uma Chatterjee, Advs. for the Appellant. & Others.
  • Akshay Sapre, Abhijeet Swaroop & Ms Shivani Karmakar, Advs. for the Respondent. & Others.
    
  • Abhijeet Swaroop & Shivani Karmakar, Advs. for the Financial Creditor.
  • Rajvi Sheth for the Personal Guarantor.

Facts of the Case

In the instant case, the financial creditor extended the credit facility to the corporate debtor. The appellants/personal guarantors of the corporate debtor executed a deed of personal guarantee to the financial creditor in respect of the said credit facility. Subsequently, the financial creditor filed an application u/s 7 of the IBC seeking initiation of the CIRP against the corporate debtor before Court V of the NCLT of Mumbai.

The financial creditor issued a demand notice u/s 8 of the IBC to the appellants and filed an application u/s 95 of the IBC against the appellants which was heard by Court III of the NCLT of Mumbai. Court III passed the impugned order in an application filed u/s 95, appointing the RP and directing the RP to submit a report u/s 99 of the IBC.

Thereafter, an appeal was made to the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT.

The appellants contended that as per section 60(2) of the IBC, an application filed under section 95 was required to be heard by the same bench i.e. Court V where proceedings u/s 7 against the corporate debtor were pending and the impugned order was passed without jurisdiction.

NCLAT Held

The NCLAT observed that when an insolvency proceeding of the corporate debtor is pending in a different courtroom of a particular Bench of NCLT, proceedings under section 95 can be entertained by another court of the same Bench as per general or special order of the President under Rule 16 of the NCLT Rules, 2016.

Further, an order passed under section 95 application by the Court different from the Court where an insolvency proceeding is pending shall not be without jurisdiction.

The NCLAT held that section 60(2) of the IBC contemplates filing an application for the personal guarantor before the NCLT or its benches and not to a particular courtroom of the NCLT or its benches. Therefore, the impugned order passed by Court III of the NCLT, Mumbai Bench was well within its jurisdiction and the instant appeals were to be dismissed.

List of Cases Reviewed

• • Kookmin Bank v. Bhavesh Harkishandas Mehta [2024] 159 taxmann.com (NCLT -Mum.) (para 39) affirmed See Annex