NCLAT Allows Personal Guarantors Fresh Window to Submit Repayment Plans: Bankruptcy Orders Quashed in Consensus-Based Ruling
In a significant development concerning the insolvency resolution process for personal guarantors, the National Company Law Appellate Tribunal (NCLAT), Chennai, has set aside bankruptcy initiation orders, thereby granting a fresh opportunity to the guarantors to submit their repayment plans. The judgment, delivered in the matter of Satheesh Babu V.K Vs Dileep K.P, underscores the flexibility of the Insolvency and Bankruptcy Code, 2016 (IBC) when creditors and debtors reach a consensus to prioritize debt resolution over immediate bankruptcy.
The appellate tribunal's decision came in response to a batch of six appeals filed under Section 61 of the IBC, challenging the orders of the Adjudicating Authority which had prematurely triggered bankruptcy proceedings due to the non-submission of repayment plans.
Factual Matrix and Procedural History
The litigation traces its origins to insolvency proceedings initiated against four personal guarantors connected to the Corporate Debtor, M/s. Propyl Packaging Limited. The financial creditor, State Bank of India (SBI), had originally filed applications under Section 95 of the IBC to trigger the insolvency resolution process against the guarantors.
Following the statutory procedure, the Adjudicating Authority admitted these applications on 22.06.2022, appointing a Resolution Professional (RP) under Section 97. Subsequently, a public announcement was made on 29.06.2022 inviting claims from creditors.
Admitted Claims
The claims admitted against the respective personal guarantors were substantial, reflecting the magnitude of the financial default:
- SBI: Rs. 2074.57 Crores (applicable to all appellants)
- KSIDC: Rs. 2839.18 Crores (applicable to KS Rajesh, Satheesh Babu, and Saleesh K Satheesh)