Plan Invocation cannot be directed after CoC agrees to release personal guarantees upon Payment: NCLAT [Read Order]

The appeal was filed challenging the observations made in paragraphs 28 & 39 of the order dated 27.03.2025 passed by the adjudicating authority. By the impugned order, the adjudicating authority approved the resolution plan submitted by the appellant. It is submitted that under the resolution plan there was already contemplation for release of all personal and corporate guarantees and third party assets provided in security for the debt on payment of the amount. The observations made in paragraph-28 & 39 have been made without looking into the said clause in the plan which has already been approved.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The challenge in the appeal is only two paragraphs, paragraph- 28 & 39. Counsel for the appellant submits that in the resolution plan there was contemplation of release of all personal and corporate guarantees and third party assets on payment of which he has referred to. He submitted that in view of aforesaid there was no occasion for making any observation with regard to as has been made in paragraphs- 28 & 39. Counsel for the appellant also referred to the letter of the Committee of Creditors dated 03.07.2024 by which the CoC has already sent a communication clarifying to the CoC reiterating the same position in para-1.

It is submitted that the resolution plan having been approved by the 100% CoC. The observations made in paragraphs- 28 & 39 are contrary to the terms of the plan and unsustainable. Counsel for the CoC also submits that in view of the plan which has been approved the observations made in paragraph- 28 & 39 are not necessary.

Counsel for the appellant has also referred to the letter of the CoC dated 03.07.2024 which is at page- 451 of the paper book, para-1 of the letter states that only after complete implementation and payment of resolution plan amount personal and corporate guarantee shall stands released.

Want a deeper insight into the Income Tax Bill, 2025? Click here

There was no question of invocation of personal guarantee as observed in paragraph-28 and 39. When personal guarantee were being released on payment after implementation of the plan invocation of personal guarantee was not even contemplated. The observations made in paragraphs- 28 & 39 of the impugned order are not in accordance with the clause of the resolution plan as noted above which was approved with 100% CoC.

A two-member bench of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member - Technical) held that when the CoC itself has agreed to release the personal guarantees after receiving the payment under the plan question of invocation of personal guarantee does not arise. We thus are satisfied that observations needs to be deleted from the impugned order.

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates