Mohit Dewan Vs Bank of Maharashtra & Anr (NCLAT Delhi)
In Mohit Dewan Vs. Bank of Maharashtra & Anr, the NCLAT Delhi addressed an appeal challenging the initiation of Corporate Insolvency Resolution Process (CIRP) against the appellant, a personal guarantor, under Section 95 of the Insolvency and Bankruptcy Code. The appellant contended that a One Time Settlement (OTS) proposal had been submitted by the principal borrower, which was approved by the bank for a total payment of ₹7 crores, of which ₹1.75 crores had already been paid. The OTS, however, was pending approval from the Debt Recovery Tribunal (DRT), and the bank had backtracked from the agreement, causing the proposal to fall through. The appellant also pointed out that the principal borrower had filed a writ petition before the Punjab & Haryana High Court challenging the bank’s withdrawal from the OTS. Based on these facts, the appellant argued that personal insolvency proceedings against him should not proceed.
The NCLAT, after considering the arguments and reviewing the records, observed that while the liability of a personal guarantor may end if the principal borrower settles the debt under an OTS, the issue was still under consideration in the High Court. Since the debt had not been satisfied by the principal borrower at the time, the personal guarantor’s liability remained intact. The NCLAT concluded that there was no error in initiating the personal insolvency proceedings against the appellant. However, it noted that if the High Court ruled in favor of the principal borrower and the OTS was finalized, the appellant could present this material to the Adjudicating Authority for due consideration in the insolvency proceedings. The appeal was therefore dismissed, affirming the continuation of the insolvency process.
