NCLAT Declines Appeal, Awaits Third Member’s Opinion on Admission of Personal Guarantors Under Section 419(5), Companies Act
- REEDLAW
- 1 day ago
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The National Company Law Appellate Tribunal (NCLAT) declined to entertain the appeal, observing that the matter concerning the admission of personal guarantors is already under consideration by a third member pursuant to a judicial-technical dissent, in accordance with Section 419(5) of the Companies Act, 2013.
On 11 July, the National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), while adjudicating a batch of company appeals and interlocutory applications, held that when a difference of opinion arises between the Judicial and Technical Members of the Adjudicating Authority under Section 419(5) of the Companies Act, 2013, the matter must be referred to a third Member for resolution on the specific point of disagreement. The Tribunal further held that no appeal is maintainable at the interim stage, pending the third Member's opinion and the issuance of a final order.
On 21 June 2025, the appellant filed three appeals challenging a common order dated 07 May 2025 passed by the Adjudicating Authority in C.P. (IB) Nos. 355, 356, and 357 of 2024. The appeals were accompanied by applications seeking condonation of a 15-day delay in filing. The delay was attributed to the dissenting views of the Judicial and Technical Members of the Adjudicating Authority, which necessitated a referral to the Hon’ble President under Section 419(5) of the Companies Act, 2013, for the constitution of a third Member Bench. The referral order was issued only on 26 May 2025, and during this period, the appellant’s counsel was unavailable due to travel between 13 May and 18 May 2025 during the summer vacation. Finding sufficient cause for the delay and noting that the filing was within the condonable period, the Appellate Tribunal condoned the delay.
The appeals challenged the correctness of the dissenting order dated 07 May 2025, where the Judicial and Technical Members differed on the question of whether personal guarantors could be admitted or rejected into the Corporate Insolvency Resolution Process (CIRP) on merits. The Judicial Member opined that all three applications filed by personal guarantors under Section 95 of the IBC were liable to be rejected, whereas the Technical Member allowed the applications and directed the appointment of a Resolution Professional (RP) to submit a report after issuing notices to all lenders and forming an opinion based on replies received.
In light of this disagreement, the matter was placed before the Hon’ble President for reference to a third Member, and hearings before the third Member had already commenced on multiple dates in June and July 2025. The Bench noted that the third Member was seized of the issue and had been conducting regular hearings, with the next date of hearing listed for 17 July 2025.
The appellant argued that the difference of opinion between the Members ought to have been framed more specifically under Section 419(5) to assist the third Member in addressing the precise legal question. However, the Appellate Tribunal found no grounds to interfere at the interim stage, especially since the third Member had already begun hearing the matter. Accordingly, the appeals were closed with liberty to the parties to raise their issues before the Adjudicating Authority after the final opinion is expressed by the third Member and the resulting order is passed. The Tribunal reiterated that, in accordance with Section 419(5), the third Member must render an opinion specifically on the point of difference between the two original Members.
The appeals were thus disposed of.
Mr. Ritin Rai, Senior Advocate, represented the Appellants.
Mr. Ashok Kumar Mishra, Advocate, appeared for the Respondent.
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