The NCLAT remanded the Section 94 applications for a hearing, emphasizing the importance of due process in the Corporate Insolvency Resolution Process (CIRP) against personal guarantors.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Mr. Arun Baroka (Technical Member) reviewed a bunch of appeals and observed that the Adjudicating Authority erred by rejecting the Section 94 applications as time-barred without adequately hearing both the personal guarantor and the resolution professional, thereby necessitating a remand for proper consideration.
In the matter at hand, six appeals were filed against an order passed by the Adjudicating Authority concerning three separate applications initiated under Section 94 of the Insolvency and Bankruptcy Code (IBC) for starting the Corporate Insolvency Resolution Process (CIRP) against the personal guarantor of the appellant in Company Appeals (AT) (Ins) No. 1447 of 2024, 1448 of 2024, and 1482 of 2024. The Adjudicating Authority rejected the Section 94 applications as time-barred. The Respondent subsequently filed three appeals challenging the same orders.
For clarity, the facts in Company Appeal (AT) (Ins) No. 1447 of 2024 were emphasized, noting that the application under Section 94 was submitted by the personal guarantor on November 19, 2021. After the report's submission, the first hearing occurred on April 19, 2024, during which the Adjudicating Authority noted the absence of representation for the personal guarantor while only the Respondent appeared. The resolution professional was also noted to be absent, arguing the case online from her car, leading to the hearing being reserved.
The appellant pointed out that the impugned order erroneously stated that the applicant was present during the proceedings, despite clear documentation indicating otherwise. The absence of the appellant was acknowledged in the order that reserved judgment. Furthermore, it was argued that the resolution professional’s recommendation for admission was not considered, and neither the resolution professional nor the personal guarantor was given an opportunity to be heard.
The NCLAT observed that the Adjudicating Authority's failure to hear both parties and the incorrect assertion regarding the applicant’s presence warranted the setting aside of the impugned order. This led to a remittance of the application back to the Adjudicating Authority for reconsideration. The appeals from the State Bank of India were noted but no further orders were deemed necessary as a result of the remittance. The tribunal refrained from expressing opinions on the merits of the case, allowing both parties to present their arguments before the Adjudicating Authority. Ultimately, the appeals in CA (AT) (Ins) Nos. 1447, 1448, and 1482 of 2024 were allowed, and all related appeals were disposed of accordingly.
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