No Procedural Lapse by Resolution Professional: NCLAT Upholds Order Rejecting Repayment Plans of Guarantors [Read Order]

The National Company Law Appellate Tribunal (NCLAT) at Chennai has upheld the rejection of repayment plans submitted by personal guarantors undergoing insolvency proceedings under the Insolvency andBankruptcy Code, 2016, holding that the Resolution Professional (RP) and the Adjudicating Authority acted strictly in accordance with the statutory framework.

The Tribunal found no illegality or procedural lapse in the evaluation process and confirmed that the guarantors themselves had failed to file any revised or compliant repayment proposals within the timelines prescribed under the Code.

The bench was hearing appeals filed by Reena Paul and another appellant, both personal guarantors to the debt of a corporate debtor. The appellants contended that their repayment plans were rejected without proper consideration and argued that the RP had evaluated their plans jointly instead of individually, despite each being an independent insolvency process under Part III of the IBC.

They further alleged that the rejection order was mechanical and failed to appreciate the financial constraints and disclosure provided in their respective proposals.

The Tribunal, comprising Justice M. Venugopal (Judicial Member) and Shreesha Merla (Technical Member), noted that the RP had issued a communication to both guarantors, seeking revised repayment plans after pointing out deficiencies and non-compliance with mandatory disclosures. Despite this opportunity, no revised plan was filed by either of the appellants.

The NCLAT observed that the repayment plans placed before the RP did not satisfy the requirements under Section 105 and Section 115 of the Code, particularly concerning repayment structure, priority of payments, timelines, asset details, and viability assessment.

The Appellate Tribunal also rejected the contention that the RP had treated the proceedings as a form of group insolvency. It held that the RP had evaluated each plan independently, and the Adjudicating Authority had rightly remarked that the non-filing of a revised plan left no option but to reject the initial plans.

The NCLAT emphasised that the repayment plan mechanism under Part III mandates strict compliance with statutory disclosures, and personal guarantors cannot seek approval based solely on broad assertions or incomplete financial information.

Finding no error in the rejection order, the NCLAT upheld the decision of the Adjudicating Authority and dismissed both appeals.

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