Adjudicating Authority cannot Accept Report of RP without Independent Assessment u/s 100 of IBC: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench has held that the Adjudicating Authority, while considering the report of the Resolution Professional must conduct its own independent assessment under section 100 of the Insolvency Bankruptcy Code (IBC), 2016 . Read More: Amidst ongoing Controversy Regarding Empuraan Movie, Producer Antony Perumbavoor gets Income Tax Notice Indian Bank provided corporate debtor M/s. Metrix Healthcare Private Limited with financial services. The bank offered FITL and a working capital arrangement. In favor of the bank guaranteeing the repayment, the appellant Rajani Ajay Gupta, Personal Guarantor to M/s. Metrix Healthcare Pvt. Ltd., signed a personal guarantee deed. A demand notice in 'Form-B' was sent out on March 16, 2024. Following the demand notice, Mrs. Rajini Ajay Gupta (Personal Guarantor) was the target of Company Petition (IB) No. 158/AHM/2024. Following the submission of Resolution Professional's (RP) report on May 23, 2024, the adjudicating authority issued the contested order under Section 100 of the Code, thereby admitting an application under Section 95 of the Code. As required by Regulation 2A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations), the appellant argued that the Indian Bank's application was incomplete because it lacked the record of default. Know Practical Aspects of Tax Planning, Click Here It was further argued that the guarantors' personal insolvency is not a possibility as long as the amount owed to the corporate debtor has not yet been determined. It was further argued that guarantors must provide a repayment plan and that personal guarantors cannot submit a repayment plan unless the amount owed on the corporate debtor—that is, the amount payable by the guarantors—is determined. The adjudicating authority must consider every factor that could affect the application's acceptance. In contrast, the Respondent argued that the bank had explicitly stated in the Section 95 application the amount realized from the sale of the mortgaged assets, and that the amount claimed as owing was after deducting the amount realized from the sale of the mortgaged assets. Finally, it was argued that the bank had rightfully pursued the personal guarantor because the corporate debtor had defaulted on repayment of the obligation. The Tribunal noted that the bank must notify the personal guarantor in "Form-B" prior to submitting the application under section 95 of the code. Notice was given in this instance on March 16, 2024, and the application was submitted using 'Form-C,' which includes all required documentation pertaining to the debt details. The Tribunal found that the adjudicating authority's order makes it clear that no independent assessment has been conducted by the adjudicating authority. Read More: AO Failed to Consider Rule 6DD Exceptions in Cash Deposit Disallowance: ITAT Remits Case for De Novo Assessment The bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) observed that when the principal borrower defaults, the surety is held accountable to the creditor on a joint and several basis. In this instance, the bank received ₹5,92,92,750/-from the sale of the corporate debtor's and personal guarantors' properties under the SARFAESI Act. The personal guarantor also wrote an email stating that the bank's property was adequate to pay off the debt Want a deeper insight into the Income Tax Bill, 2025? Click here The Tribunal came to the conclusion that key matters brought up before the RP and presented in the RP's report were not taken into account by the Adjudicating Authority. In order to settle the entire obligation, the personal guarantor said that Rs. 6 crore had already been realized and that the corporate debtor's assets, valued at Rs. 1.66 crore, were in the bank. The Adjudicating Authority ought to have taken these things into account before accepting the application. In light of observation, the present appeal was allowed and set aside the impugned order. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates