Joint Consideration of Personal Guarantors’ Repayment Plans Does Not Amount to Group Insolvency: NCLAT
- REEDLAW
- 4 minutes ago
- 4 min read
REEDLAW Legal News Network reports: In a clarificatory ruling on insolvency proceedings involving personal guarantors, the Appellate Tribunal held that the joint consideration of repayment plans did not amount to impermissible group insolvency where each plan had been independently examined and rejected on commercial grounds, and mere conduct of joint meetings could not invalidate the decision-making process under the Insolvency and Bankruptcy Code, 2016.
The National Company Law Appellate Tribunal, Chennai Bench, while adjudicating a batch of appeals filed by personal guarantors, examined the challenge to the rejection of repayment plans under Section 105 of the Insolvency and Bankruptcy Code. The Bench comprising Justice Sharad Kumar Sharma (Judicial Member) and Mr. Jatindranath Swain (Technical Member) noted that each repayment proposal had been individually deliberated by the Resolution Professional and thereafter rejected by the Committee of Creditors on commercial considerations, despite repeated opportunities granted to revise the plans. The Tribunal held that the mere fact that joint meetings were convened did not convert the process into a case of group insolvency, and accordingly found no ground to interfere with the order of the Adjudicating Authority.
The Appellants, who were personal guarantors to the financial assistance extended to the Corporate Debtor by the Financial Creditor, had challenged the rejection of their respective repayment plans submitted during the personal insolvency process initiated under Section 95 of the Insolvency and Bankruptcy Code, 2016. It was an admitted position that the applications under Section 95 had been admitted by the Adjudicating Authority, resulting in the initiation of personal insolvency proceedings against the Appellants, and that the said orders of admission had attained finality. Pursuant thereto, a Resolution Professional had been appointed, who issued a public announcement inviting claims, whereupon only the Financial Creditor lodged its claim.
The Appellants had submitted repayment plans under Section 105 of the Code, which were placed before the Resolution Professional and taken on record by the Adjudicating Authority. Meetings of creditors were convened under Section 106 to consider the repayment plans, during which the Committee of Creditors deliberated upon each plan. The Committee found the repayment plans unacceptable and, despite granting opportunities and extensions of time to the Appellants to submit revised proposals, no modified repayment plan was furnished in accordance with the conditions stipulated by the Committee. Consequently, the Committee rejected the repayment plans with unanimous voting and directed the Resolution Professional to submit a report under Section 112, leading to rejection of the repayment plans by the Adjudicating Authority.
Before the Appellate Tribunal, the Appellants primarily contended that the Resolution Professional and the Adjudicating Authority had impermissibly treated the proceedings as a group insolvency of personal guarantors, whereas each repayment plan ought to have been considered independently. It was further argued that the Resolution Professional had failed to discharge his statutory duties under Section 105 by not adequately assisting the Appellants in restructuring their repayment proposals. The Appellate Tribunal, however, found from the record and the minutes of meetings that each repayment plan had been independently deliberated upon, and that joint meetings did not amount to a group insolvency process. It was also noted that the Appellants had actively participated in the proceedings without objection and had repeatedly sought time to submit revised plans, which they ultimately failed to do.
The Appellate Tribunal held that the Resolution Professional and the Committee of Creditors had acted in accordance with the statutory framework, and that the commercial wisdom exercised in rejecting the repayment plans did not suffer from any legal infirmity. It was further observed that the plea of group insolvency was raised belatedly as an afterthought and was unsupported by the record. In view of the failure of the Appellants to submit revised repayment plans despite multiple opportunities, and in the absence of any perversity in the findings of the Adjudicating Authority, the Appellate Tribunal declined to interfere and dismissed the appeals, noting additionally that subsequent bankruptcy orders had already been passed against the Appellants, rendering the challenge academic.
Mr. K. Jagannathan, Advocate for Mr. Anil Relwani, Advocate, represented the Appellant.
Mr. E. Om Prakash, Senior Advocate for Mr. Ashwin Shanbhag and Ms. Nandhini Ramalingam, Advocates, appeared for the Respondent.
This is premium content available to our subscribers.
To access the full content related to this article — including the complete judgment, detailed legal analysis, ratio decidendi, headnotes, cited case laws, and updates on relevant statutes and notifications — we invite you to subscribe to REEDLAW’s premium research platform.
Click here to Subscribe and unlock exclusive access to structured legal analysis, judicial summaries, and a comprehensive legal research database.
REEDLAW Legal Intelligence & Research is India’s most trusted legal publishing and research platform, empowering professionals with structured judicial insights and authoritative legal intelligence since 1985.
The platform offers comprehensive resources spanning Corporate Insolvency, Bankruptcy, Company Law, SARFAESI, Debt Recovery, Contract, MSMEs, Arbitration, Banking, and Commercial Laws. Through curated journals like IBC Reporter and Bank CLR, and an advanced Online Legal Research Database, REEDLAW simplifies complex legal research for professionals, institutions, and academia across India.
Comments