Case Law Details
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.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
These two appeals have been filed challenging the order passed by National Company Law Tribunal, Chandigarh Bench by which Section 95 application filed by the appellant who was the personal guarantors have been admitted.
2. Counsel for the appellant challenging the order Impugned initiating CIRP against personal guarantors submits that there was an OTS proposal submitted by principal borrower which was approved by the bank for total payment of Rs. 7 crores and out of said Rs.7 crores, amount of Rs.1.75 was already paid which was recorded in the OTS entered between the parties which was subject to consent by the DRT where application was pending. He submits that however the bank has back track from the OTS due to which the OTS could not be fructified. The borrower has already filed a writ petition before the Punjab & Haryana High Court challenging the action of the bank from back tracking of the OTS which is under consideration. He submits that in view of the aforesaid facts, the personal insolvency against the appellant would not be allowed to continue.
3. We have considered submissions of counsel for the appellant and perused the records. There is no dispute to the preposition that in event bank accepts the OTS against the principal borrower and the entire amount is satisfied the liability of the guarantor shall also come to an end. However, which issue is under consideration before the High Court thus, as on date the debt is not even satisfied by the principal borrower hence the liability of the personal guarantor cannot be set to be wiped out.
4. We thus do not find any error in initiation of personal insolvency against the appellant, however, it shall always open for the appellant to place such material before the Adjudicating Authority in event any order of the High Court favourable to the principal borrower is passed which shall be taken due consideration in the personal insolvency of the guarantors also. With these observations, we dismiss the appeal.
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