Appeal U/S 61 Of IBC Is Maintainable Against Order Passed By NCLT Initiating Insolvency Process Against Personal Guarantors: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) has held that An appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (Code) can be filed by personal guarantors against an order passed by the Adjudicating Authority under Section 100 of the Code, directing the initiation of the Personal Insolvency Resolution Process (PIRP), as the National Company Law Tribunal (NCLT) is the appropriate forum for initiating insolvency proceedings against personal guarantors. Brief Facts: These appeals have been filed under section 61 of the Code against an order passed by the Adjudicating Authority by which an application under section 95 was admitted and an order under section 100 of the code was also passed directing to initiate insolvency resolution process against the personal guarantors. The Respondent submitted that the order has been passed under Section 100 admitting personal insolvency resolution process against the appellant which is under Part III of the Code. It is submitted that the present appeal which has been filed under Section 61 of the Code is not maintainable since an order passed under Section 100 is not appealable under Section 61. Per contra, the Appellant submitted that the forum for filing an application under Section 95 against the personal guarantor is NCLT as per Section 60 of the Code. When the NCLT is forum for filing an application against personal guarantors, appeal shall also lie under Section 61, since the order is passed by the NCLT. Observations: The Tribunal observed that Section 60(1) of the code clearly provides that adjudicating authority in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors and thereof shall be the NCLT having territorial jurisdiction over the place where the registered office of the corporate person is located. It further said that although part III of the code applies to individuals and partnership firms under the jurisdiction of the DRT, the insolvency resolution process for personal guarantors to corporate persons falls within the jurisdiction of the NCLT. In the present case, the SBI filed an application under section 95 of the cod before the NCLT as it is the appropriate forum for personal guarantors. Based on the above, it held that when SBI has invoked Section 60(1) for forum for proceeding against the personal insolvency resolution process, which order is appealable under Section 61. The Supreme Court in 'Embassy Property Developments Pvt. Ltd.' Vs. 'State of Karnataka & Ors.'(2020) held that Insofar as insolvency resolution of corporate debtors and personal guarantors are concerned, any order passed by the NCLT is appealable to Nclat under Section 61 of the IBC, 2016 and the orders of the Nclat are amenable to the appellate jurisdiction of this Court under Section 62. Similarly, the Supreme Court in 'Lalit Kumar Jain' Vs. 'Union of India & Ors.' (2021) held that the Amendment of 2018 also altered Section 60 in that insolvency and bankruptcy processes relating to liquidation and bankruptcy in respect of three categories i.e. corporate debtors, corporate guarantors of corporate debtors and personal guarantors to corporate debtors were to be considered by the same forum i.e. NCLT.” The Apex Court in the above case also held that section 64 of the code vests NCLT with all powers of the DRT. The NCLT is also vested powers under part III of the code. The Parliament merged part III of the code with part II for proceedings against the personal guarantors alongside corporate debtors under section of the code. Based on the above, the Tribunal held that since the NCLT is the designated forum for filing an application under section 95 of the code, the appellate jurisdiction under section 61 can very well be availed of by the personal guarantor. Accordingly, the present appeals were dismissed. Case Title: Aarti Singal Versus State Bank of India and Ors. Case Number:Company Appeal (AT) (Insolvency) No. 2121 of 2024, Company Appeal (AT) (Insolvency) No. 2124 of 2024, Company Appeal (AT) (Insolvency) No. 2114 of 2024 and Company Appeal (AT) (Insolvency) No. 2115 of 2024 Order Date: 03/04/2025 For Appellant : Mr. Sandeep Bajaj, Mr. Soayib Qureshi, Mr. Mayank Biyani and Ms. Anchal Singh, Advocates. For Respondents : Mr. Sanjeev Sen, Sr. Advocate with Ms. Srideepa Bhattacharya, Ms. Neha Shivhare, Ms. Anjali Singh, Ms. Prahalad Balaji and Mr. Pragyan Mishra, Advocates for SBI. Click Here To Read/Download The Order

Appeal U/S 61 Of IBC Is Maintainable Against Order Passed By NCLT Initiating Insolvency Process Against Personal Guarantors: NCLAT

Mohd Malik Chauhan

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