NCLAT Dismisses Petition for Personal Insolvency Resolution Process (PIRP) against Personal Guarantor on Grounds of Prematurity and Collusion.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Indevar Pandey (Technical Member) was hearing an appeal and held that the appellant's petition for Personal Insolvency Resolution Process (PIRP) under Section 95 of the IBC was rightly dismissed by the NCLT as premature and collusive, as it was filed before the expiration of the 60-day period stipulated in the personal guarantee agreement and aimed at obstructing ongoing arbitration proceedings.
The appeal was filed to contest the National Company Law Tribunal (NCLT) Mumbai Bench’s order dated November 21, 2023, which dismissed I.A. No. 2044 of 2022. This application was filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC), sought to initiate a Personal Insolvency Resolution Process (PIRP) against Mr. Praful Nanji Satra, the Personal Guarantor/Corporate Debtor. The Tribunal not only rejected the application but also imposed a cost of Rs. 5,00,000 on the Appellant, ruling that the petition was both premature and collusive.
The case centred around a personal guarantee deed dated July 27, 2011, which required the guarantor to pay the guaranteed amount within 60 days of receiving a demand notice from Neon Laboratories. The demand notice was issued on November 1, 2021. However, the PIRP petition was filed on December 2, 2021, just one day before the 60-day period stipulated in the guarantee was set to expire. This timing led to a suspension of arbitration proceedings initiated by Mr. Mayank Shah, the Intervenor, who sought substantial monetary relief in the Bombay High Court.
The NCLT found the PIRP petition premature because it was filed before the 60-day period allowed for payment under the guarantee had expired. Additionally, the Tribunal concluded that the timing of the PIRP petition was strategically chosen to delay or obstruct the arbitration process, which had been scheduled to advance on December 3, 2021. This led to the Tribunal’s suspicion of collusion between the Appellant and the Corporate Debtor to hinder the arbitration proceedings.
The NCLAT upheld the Tribunal’s decision, agreeing that the PIRP petition was improperly timed and intended to interfere with ongoing legal processes. The imposition of costs was deemed appropriate given the apparent collusion and the premature filing of the petition. The appeal was thus dismissed, and the NCLAT affirmed the NCLT’s ruling and the associated costs.
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