470-Day Delay in Claim Filing Condoned Where Personal Guarantor Suppressed Mortgage: NCLT Kochi

Background of the Dispute

The matter in Federal Bank Limited Vs C. Prabhakaran (NCLT Kochi) arose from an application moved under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (Insolvency and Bankruptcy Code, 2016), read with Rule 11 of the National Company Law Tribunal Rules, 2016.

Federal Bank Limited approached the National Company Law Tribunal, Kochi Bench, seeking:

  • Condonation of a 470-day delay in filing its claim in the bankruptcy process of a personal guarantor, and
  • A direction to the Bankruptcy Trustee to admit and process its claim of ₹47,99,399.76 in accordance with law.

The bankruptcy proceedings concerned Mrs. Reena Paul, a personal guarantor, in C.P. (IBC)/48/KOB/2023. The core controversy was whether a secured creditor’s delayed claim could be condoned when the delay arose from the bankrupt’s deliberate concealment of crucial information, and where no dividend or distribution had yet taken place.

Initiation of Bankruptcy and Appointment of Trustees

Commencement of Bankruptcy Proceedings

  • A bankruptcy order against Mrs. Reena Paul was passed on 18.04.2024 in C.P. (IBC)/48/KOB/2023.
  • Pursuant to that order, Mr. C. A. Jasin Jose was initially appointed as Bankruptcy Trustee.
  • Subsequently, by order dated 14.11.2025 in IA(IBC)/422/KOB/2025, the Tribunal replaced him and appointed Mr. C. Prabhakaran as the new Bankruptcy Trustee.

Under Section 131 of the Insolvency and Bankruptcy Code, 2016, creditors are required to lodge their claims within the time limit specified in the public announcement.

Public Announcement of Bankruptcy

The Bankruptcy Trustee caused a public announcement inviting claims:

  • Public notice was issued on 24.04.2024 in:
    • Vernacular daily Dinakaran, and
    • English daily The Times of India,
      at the place of residence of the bankrupt.

This announcement, in terms of Section 131, was treated by the Tribunal as valid notice to all creditors, including the applicant bank, in the ordinary course.

Credit Facilities and Security: Federal Bank’s Exposure

Facilities Availed by the Bankrupt

The Bank submitted that Mrs. Reena Paul, as proprietrix of “M/s. Rich N Rich”, along with co-borrower Mr. Paul K.G., had taken multiple credit facilities from Federal Bank’s Chennai / Mount Road Branch, including:

  1. Overdraft Facility (OD-FTLS Clean)

    • Account No.: 11005600003103
    • Sanction limit: Rs. 35,00,000/-
    • Originally sanctioned on 30.10.2009
    • Last renewed on 14.02.2024

  2. Emergency Credit Line Guarantee Scheme (EI-GECL)

    • Account No.: 11006900002746
    • Amount: Rs. 7,06,000/-
    • Sanction date: 26.08.2020

  3. Another EI TL-GECL Loan

    • Account No.: 11006900003389
    • Amount: Rs. 3,50,000/-
    • Sanction date: 17.08.2021

Personal Loan Secured by Mortgage

In addition, in her individual capacity, along with co-borrower Mr. Paul K.G., Mrs. Reena Paul availed:

  • Home Plus Top-Up Equity Loan
    • Account No.: 11007600003406
    • Amount: Rs. 7,50,000/-
    • Date of sanction: 23.11.2018

These facilities were serviced through Federal Bank’s Chennai / Mount Road Branch.

Creation of Equitable Mortgage

To secure the above credit facilities, an equitable mortgage was created in favour of Federal Bank by depositing original title deeds of:

  • An undivided 1/4th (25%) share in land measuring 1568 sq. ft. out of a total of 2 Grounds and 1472 sq. ft. (6272 sq. ft.),
  • Along with a first-floor flat measuring 2312 sq. ft.,
  • Situated at Plot No. 820, West Madras Neighbourhood Scheme, Arignar Anna Nagar, Door No. D-31, 5th Street, Anna Nagar, Chennai – 600102,
  • Comprised in T.S. No. 2 part in Block No. 7 of Periyakudal Village, Chennai District, within the Registration District of Chennai and Sub-Registration District of Anna Nagar.

The Bank later recalled these facilities on 26.06.2025, citing the bankruptcy order against the personal guarantor and co-borrower.

Outstanding Dues on Bankruptcy Commencement Date

Federal Bank indicated that as of the bankruptcy commencement date (18.04.2024), a sum of Rs. 47,99,399.76 remained outstanding in the loan accounts of Mrs. Reena Paul and Mr. Paul K.G.

How the Delay Occurred: Lack of Knowledge and Suppression by Bankrupt

Bank’s Claim of No Prior Knowledge

Federal Bank asserted that it was unaware of the bankruptcy proceedings when they were initiated and had received no direct notice or intimation from the Bankruptcy Trustee at the relevant time.

The Bank stated that: