Sushant Chhabra Vs Catalyst Trusteeship Ltd. & Anr. (NCLAT Delhi)
Conclusion: Insolvency plea was quashed as insolvency applications filed during the subsistence of an interim moratorium were void ab initio even if the original proceedings were later withdrawn.
Held: Personal Guarantors of the Corporate Debtor, M/s UM Autocomp Pvt. Ltd. (now UM Automotive Pvt. Ltd.), challenged the order dated 17.02.2026 passed by the NCLT admitting applications under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed by Catalyst Trusteeship Ltd. The financial creditor, Catalyst Trusteeship Ltd., had initiated proceedings against the guarantors following a ₹36.14 crore default on non-convertible debentures (NCDs) issued by UM Automotive Pvt. Ltd. Prior to these applications, Canara Bank had already filed Section 95 applications against the same Personal Guarantors on 12.01.2025, which triggered an interim moratorium under Section 96 IBC. During the subsistence of this moratorium, Catalyst Trusteeship Ltd. filed fresh Section 95 applications on 05.08.2025. Although Canara Bank’s applications were later withdrawn on 10.11.2025, the NCLT admitted Catalyst’s applications based on the Resolution Professional’s report. Appellants contended that the applications filed by Catalyst Trusteeship Ltd. were non-maintainable and void ab initio, having been instituted during the subsistence of the interim moratorium under Section 96 IBC, which bars initiation of proceedings against the Personal Guarantor. It was argued that such proceedings were non-est in law and could not be validated by subsequent withdrawal of earlier proceedings. Respondent contended that upon withdrawal of Canara Bank’s applications, the interim moratorium ceased to exist and the parties were restored to the status quo ante, thereby validating the subsequent proceedings. Reliance was placed on principles governing withdrawal of suits, asserting that withdrawn proceedings are deemed never to have existed. Tribunal held that the interim moratorium under Section 96 IBC operated as a statutory bar on initiation of any proceedings against the Personal Guarantor during its currency. Any application filed in violation of such moratorium was non-est in law from inception. The subsequent withdrawal of the earlier Section 95 applications did not retrospectively validate proceedings initiated during the moratorium period. The Adjudicating Authority failed to appreciate the legal effect of the subsisting moratorium at the time of filing of Catalyst’s applications. The impugned order admitting the Section 95 applications was set aside. The applications filed by Catalyst Trusteeship Ltd. were dismissed as non-maintainable, with liberty granted to file fresh applications in accordance with law after cessation of the interim moratorium.
These Appeals have been filed by Personal Guarantors of Corporate Debtor (“CD”) M/s UM Autocomp Pvt. Ltd. (Now M/s UM Automotive Pvt. Ltd.) challenging order dated 17.02.2026 passed by National Company Law Tribunal, New Delhi Bench, Court-II admitting Section 95 application filed by Catalyst Trusteeship Ltd. being CP(IB)-450/ND/2025 in Catalyst Trusteeship Ltd. vs. Sushant Chhabra; and CP(IB)-446/ND/2025 in Catalyst Trusteeship Ltd. vs. Verinder Kumar Chhabra.
