Appeal Against Admission of Insolvency Proceedings Against Personal Guarantors Maintainable Under Section 61 of the IBC
- REEDLAW
- 1 day ago
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NCLAT held that an appeal against the admission of insolvency proceedings initiated against personal guarantors of a corporate debtor is maintainable under Section 61 of the Insolvency and Bankruptcy Code, 2016.
On 03-04-2025, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, adjudicated a batch of four appeals filed by the personal guarantors of corporate debtors. The Bench held that an order passed by the NCLT under Section 100 of the Insolvency and Bankruptcy Code, 2016, in proceedings initiated under Section 95 against personal guarantors, is appealable under Section 61 of the Code, as such matters fall within the jurisdiction of the NCLT under Section 60 and are not excluded from the appellate framework.
The present appeals were filed by the personal guarantors of M/s. Bhushan Power and Steel Limited, challenging the order of the Adjudicating Authority (NCLT, Principal Bench, New Delhi), which admitted an application filed by the State Bank of India under Section 95 of the Insolvency and Bankruptcy Code, 2016, and initiated the insolvency resolution process against the appellants under Section 100. The principal issue before the National Company Law Appellate Tribunal (NCLAT) was the maintainability of these appeals under Section 61 of the Code.
SBI, through its senior counsel, raised a preliminary objection contending that the order impugned was passed under Section 100, which fell under Part III of the Code, and therefore not appealable under Section 61, which pertains to appeals arising from Part II. It was submitted that since appeal rights are statutory, and no provision expressly granted a right of appeal against such orders, the appeals were not maintainable. However, the appellants countered that Section 60 of the Code provided for the NCLT to act as the adjudicating authority in matters involving personal guarantors of corporate debtors, and since the application was filed and decided under Section 60, the appellate jurisdiction under Section 61 was attracted.
The NCLAT, after considering the submissions, rejected the respondent’s preliminary objection. It held that Section 60(1) designated the NCLT as the adjudicating authority for insolvency matters involving personal guarantors of corporate debtors. Section 60(2) and (3) further supported that proceedings involving personal guarantors, when related to a corporate debtor undergoing CIRP, must be instituted before or transferred to the NCLT. The Tribunal emphasized that when an application under Section 95 is filed before the NCLT and an order is passed under Section 100, such an order is appealable under Section 61 of the Code.
The NCLAT drew support from the Supreme Court’s authoritative ruling in Lalit Kumar Jain v. Union of India and Others, REEDLAW 2021 SC 05510, which upheld the validity of the notification making insolvency provisions applicable to personal guarantors and affirmed the legislative intent of treating them as a distinct class connected to corporate debtors. The Apex Court had clarified that proceedings against personal guarantors were to be adjudicated by the NCLT under Section 60, and that the NCLT was vested with all powers of the DRT under Part III by virtue of Section 60(4). The NCLAT also referenced its earlier ruling in Anita Goyal v. Vistra ITCL (India) Limited and Another, REEDLAW 2025 NCLAT Del 01564, reaffirming that the NCLT had jurisdiction to entertain applications filed under Section 95 against personal guarantors.
Accordingly, the Tribunal concluded that the appeals filed under Section 61 were maintainable and could not be dismissed on the ground of lack of appellate jurisdiction. The objections raised by the respondent were overruled, and the appeals were directed to be listed for admission on 21st April, 2025.
Mr. Sandeep Bajaj, Mr. Soayib Qureshi, Mr. Mayank Biyani and Ms. Anchal Singh, Advocates, represented the Appellants.
Mr. Sanjeev Sen, Sr. Advocate with Ms. Srideepa Bhattacharya, Ms. Neha Shivhare, Ms. Anjali Singh, Ms. Prahalad Balaji and Mr. Pragyan Mishra, Advocates, appeared for the respondent No. 1.
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