The National Company Law Appellate Tribunal (NCLAT) New Delhi bench has held that as the National Company Law Tribunal (NCLT) is the proper forum for starting insolvency proceedings against personal guarantors, personal guarantors may file an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (Code) against an order issued by the Adjudicating Authority under Section 100 of the Code, directing the initiation of the Personal Insolvency Resolution Process (PIRP).
The appellant, Aarti Singal, filed an appeal under section 61 of the Code against an order issued by the Adjudicating Authority that admitted an application under section 95 and directed the start of the insolvency resolution process against the personal guarantors under section 100 of the code.
According to the Respondent, the order was issued in accordance with Section 100, which permits the appellant to be subject to a personal insolvency resolution process under Part III of the Code. Since an order issued under Section 100 is not appealable under Section 61, it is argued that the current appeal, which was filed under Section 61 of the Code, cannot be maintained.
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In contrast, the appellant argued that, in accordance with Section 60 of the Code, NCLT is the appropriate forum for submitting an application under Section 95 against the personal guarantor. Since the NCLT issues the order, an appeal under Section 61 will also be available when the NCLT serves as the forum for bringing an application against personal guarantors.
The bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) observed that section 60(1) of the code explicitly states that the NCLT with territorial jurisdiction over the location of the corporate person’s registered office shall serve as the adjudicating authority with regard to insolvency resolution and liquidation for corporate persons, including corporate debtors and personal guarantors.
It was held that when SBI has invoked Section 60(1) for forum for proceeding against the personal insolvency resolution process, which order is appealable under Section 61. The Supreme Court in ‘Embassy Property Developments Pvt. Ltd.’ Vs. ‘State of Karnataka & Ors.'(2020) held that “Insofar as insolvency resolution of corporate debtors and personal guarantors are concerned, any order passed by the NCLT is appealable to Nclat under Section 61 of the IBC, 2016 and the orders of the Nclat are amenable to the appellate jurisdiction of this Court under Section 62.”
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While dismisisng the appeal, the Tribunal held that since the NCLT is the designated forum for filing an application under section 95 of the code, the appellate jurisdiction under section 61 can very well be availed of by the personal guarantor.
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