Personal Guarantor's Fresh Insolvency Application Dismissed by NCLAT, Validating Earlier Non-Compliance Ruling
- REEDLAW
- Sep 5, 2024
- 2 min read
he NCLAT upheld the dismissal of the personal guarantor's fresh insolvency application and affirmed the validity of the previous ruling on non-compliance.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Baru Mitra and Mr. Arun Baroka reviewed an appeal and observed that the Adjudicating Authority's dismissal of the personal guarantor's application for non-compliance with IBC requirements was valid and was not negated by subsequent orders, as the liberty to re-file did not override the prior dismissal's effect on the maintainability of the new application.
In the present case, two appeals were filed by personal guarantors of a corporate debtor challenging an order dated May 17, 2024, issued by the Adjudicating Authority in Company Petition (IB) Nos. 60/Chd/HP/2024 and 61/Chd/HP/2024. The factual matrix of both appeals was identical, so the Court considered the facts and pleadings from Company Appeal (AT) (Insolvency) No. 1146 of 2024 for its decision. The case involved the appellant, a personal guarantor for multiple companies, who had initially filed an application under Section 94 of the Insolvency and Bankruptcy Code (IBC). Despite several opportunities and directives to comply with the requirements, the Appellant's application faced delays and non-compliance issues. The application was ultimately dismissed on February 1, 2024, for non-compliance.
Following this, the Appellant sought restoration of the application via IA No. 519 of 2024. On February 28, 2024, he was granted permission to withdraw the application with the liberty to re-file it. Subsequently, a new application was filed on February 29, 2024, but the Adjudicating Authority deemed it not maintainable on May 17, 2024, citing misuse of the interim moratorium provided under Section 96 of the IBC. The Adjudicating Authority's order noted the appellant's failure to comply with previous orders and deemed the new application a continuation of the earlier non-compliant petition.
The appeals argued that the liberty to re-file granted on February 28 should have rendered the new application maintainable. However, the financial creditor respondents contended that the interim moratorium had been misused and that the appellant's withdrawal of the restoration application did not negate the effect of the February 1 dismissal. The adjudicating authority's decision was scrutinized, and it was determined that while the appellant was granted liberty to re-file, it did not override the earlier order's implications. The appeals were therefore dismissed, with the Court finding no error in the Adjudicating Authority's dismissal of the application as not maintainable.
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