If CIRP or Liquidation Proceeding of a Corporate Debtor is pending before a NCLT, application relating to Insolvency Process of Corporate or Personal Guarantor should be filed before same NCLT.
National Company Law Appellate Tribunal, New Delhi (NCLAT): The Coram of Justice Ashok Bhushan (Chairperson) and Dr Alok Srivastava (Technical Member) expressed that, Application having been filed under Section 95(1) and the Adjudicating Authority for application under Section 95(1) as referred in Section 60(1) being the NCLT, the Application filed will be maintainable and cannot be rejected on the ground that no CIRP or Liquidation Proceedings were pending before the NCLT.
“…when a CIRP or Liquidation Proceeding of a Corporate Debtor is pending before ‘a’ NCLT the application relating to Insolvency Process of a Corporate Guarantor or Personal Guarantor should be filed before the same NCLT.”
An appeal was filed against the order of the National Company Law Tribunal, Kolkata. The State Bank of India had filed an application under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 to seek initiation of Corporate Insolvency and Resolution Process against the Guarantor. The said application was rejected by the Adjudicating Authority as premature.
Appellant’s Counsel submitted that NCLT did not correctly interpret Section 60(2) of the Code and the application was fully maintainable under Section 60(1) of the Code despite there being no pendency of any Corporate Insolvency Resolution Process in NCLT.
Let’s have a look at Section 60 (2) and (2) of the IBC:
Section 60: Adjudicating Authority for corporate persons.
*60.(1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate persons located.
(2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or[liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor] shall be filed before such National Company Law Tribunal.
Section 60(2) of the IBC does not in any way prohibit filing of proceedings under Section 95 of the Code even if no proceeding are pending before the NCLT.
“…Section 60(2) was applicable only when a CIRP or Liquidation Proceeding of a Corporate Debtor is pending before NCLT.”
Coram added that Section 60(2) is applicable only when CIRP or Liquidation Proceeding of a Corporate Debtor is pending, when CIRP or Liquidation Proceeding are not pending with regard to the Corporate Debtor there is no applicability of Section 60(2).
Further, it was elaborated that Section 60(1) provides that Adjudicating Authority in relation to Insolvency or Liquidation for Corporate Debtor including Corporate Guarantor or Personal Guarantor shall be the NCLT having territorial jurisdiction over the place where the Registered Office of the Corporate Person was located.
“…substantive provision for an Adjudicating Authority is Section 60, sub-Section (1), when a particular case is not covered under Section 60(2) the Application as referred to in sub-section (1) of Section 60 can be very well filed in the NCLT having territorial jurisdiction over the place where the Registered Office of corporate Person is located.”
Hence, in the present matter, the Adjudicating Authority erred in holding that since no CIRP or Liquidation Proceeding of the Corporate Debtor were pending the application under Section 95(1) was not maintainable.
“…Application having been filed under Section 95(1) and the Adjudicating Authority for application under Section 95(1) as referred in Section 60(1) being the NCLT, the Application filed by the Appellant was fully maintainable and could not have been rejected only on the ground that no CIRP or Liquidation Proceeding of the Corporate Debtor are pending before the NCLT.”
[SBI v. Mahendra Kumar Jajodia, 2022 SCC OnLine NCLAT 58, decided on 27-1-2022]
Advocates before the tribunal:
For Appellant: Malvika Trivedi, Sr. Advocate with Mr. Akash Tandon, Mr. Ashish Chudhury, Santosh Kumar, Bhargavi Kannar, Akanksha Tripathi, Rituparna Sanyal, Mansi Chaudhary, Advocates
For Respondent: Advocate Supriyo Gole
