Legitimate Claim of Creditors cannot be Defeated Using Moratorium as Shield: NCLT Rules on Punjab National Bank Case
The NCLT observed that no subsequent steps were taken after the petition was filed under section 94 of the IBC by the personal guarantor. No resolution professional was appointed even after a lapse of significant time from the date of petition being filed
NCLT – NCLT Rules – IBC – Punjab National Bank -TAXSCAN
NCLT – NCLT Rules – IBC – Punjab National Bank -TAXSCAN
In a ruling of Punjab National Bank Chandigarh Bench of the National Company Law Tribunal ( NCLT ) while admitting an insolvency petition under section 95 of the Insolvency and Bankruptcy Code ( IBC ) against Ms. Mohita Indrayan, a personal guarantor, for the debts of M/s Indian Clothing League Private Limited (corporate debtor), observed that Legitimate Claim of Creditors cannot be Defeated Using Moratorium as Shield.
The petition was filed by Punjab National Bank along with Indian bank (banks)The corporate debtor took loan to the tune of Rs. 20 crores from Punjab National Bank and Rs. 15 crores from Allahabad Bank( now merged with Indian bank) for which Ms. Mohita Indrayan (personal guarantor) provided a personal guarantee.
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The personal guarantor filed a petition under section 94 of the IBC for initiating insolvency proceedings against itself on September 1, 2022. Consequently, this petition triggered an interim moratorium under section 96 of the IBC. Thereafter, a separate petition under section 95 of the IBC was filed by the banks on May 20, 2023 seeking insolvency resolution against the personal guarantor.
Subsequently, an application was filed by the personal guarantor seeking dismissal of the petition under section 95 of the IBC filed by the banks. The second application bearing was a report filed under section 99 of the IBC by resolution Professional (RP) in which admission of the banks' petition was recommended.
A two member bench comprising Shri Harnam Singh Thakur (Judicial Member) and Shri Ashish Kumar Verma (Technical Member) held that despite a petition under section 94 of the IBC filed by the personal guarantor, no further steps were taken to proceed with the case therefore benefit of interim moratorium under section 96 of the IBC could not be given.
If a Personal Guarantor files a petition under Section 94 of the Insolvency and Bankruptcy Code (IBC) before a Financial Creditor files a petition under Section 95, whether Personal Guarantor is entitled to the benefit of an interim moratorium under Section 96 of the IBC.
The NCLT observed that no subsequent steps were taken after the petition was filed under section 94 of the IBC by the personal guarantor. No resolution professional was appointed even after a lapse of significant time from the date of petition being filed. Additionally, repeated adjournments were taken. The tribunal further noted that the petition under section 94 was a tactic adopted by the personal guarantor to delay any action being taken in the petition filed by the banks under section 95 of the IBC. It was observed as under:
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The NCLT concluded that the petition filed under section 95 of the IBC by Punjab National Bank along with Indian Bank cannot be refused to be admitted on the ground that a petition under section 94 of the IBC had already been filed by Ms. Mohita Indrayan rendering subsequent petition inadmissible due to interim moratorium under section 96 of the IBC. The purpose of the IBC will be defeated if such proceedings are allowed to continue. The tribunal finally held as under.
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