The NCLT Mumbai Bench affirmed the validity of the guarantee, ruling that defects in stamp duty do not affect the enforcement of the Insolvency and Bankruptcy Code.
The National Company Law Tribunal (NCLT), Mumbai Bench, consisting of Justice (Retd.) V.G. Bisht (Judicial Member) and Prabhat Kumar (Technical Member), held that defects in stamp duty are curable and do not invalidate guarantees, thus allowing the Insolvency Resolution Process to proceed. The NCLT Bench further observed that a petition under Section 95 of the Insolvency and Bankruptcy Code for initiating insolvency proceedings against a personal guarantor is valid, as it was filed within the limitation period starting from the date the guarantee was invoked.
In a recent order by the National Company Law Tribunal (NCLT), Petitioner/Financial creditor filed a petition under Section 95 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of insolvency resolution proceedings against Mr. Jitendra V Kikavat, the personal guarantor for M/s Mahavir Roads and Infrastructure Pvt Ltd, for recovery of an amount totalling ₹66,35,16,757.11. The default date specified in the petition was January 30, 2016. Despite multiple notices and demand letters issued by the petitioner, including a statutory notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019, the respondent failed to make payment.
The NCLT addressed several key issues during the proceedings. The respondent argued that the guarantee agreement was insufficiently stamped and that the claim was time-barred, as it was filed beyond the limitation period. Additionally, the respondent challenged the validity of the proceedings based on the non-provision of an Information Utility Certificate and the failure of the Resolution Professional to provide a detailed calculation of the debt. The NCLT found that the petition was filed within the limitation period, as the limitation against a personal guarantor runs from the date the guarantee is invoked, not from the date of default by the principal borrower.
The NCLT also rejected the respondent's arguments about the inadequacy of the stamp duty, citing recent Supreme Court rulings that deemed such defects curable and did not affect the enforceability of the guarantee. The tribunal concluded that the guarantee was valid and that the Insolvency Resolution Process could proceed. As a result, the NCLT admitted the petition, initiated the insolvency resolution process and appointed Mr. Kairav Anil Trivedi as the Resolution Professional. The process includes a moratorium on all legal actions against the respondent, the publication of a public notice to invite claims from creditors and the preparation and submission of a repayment plan by the Resolution Professional. The petitioner was also directed to deposit ₹2,00,000 towards the Resolution Professional's fees.
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