National Company Law Appellate Tribunal dismisses appeal against parallel proceedings

National Company Law Appellate Tribunal dismisses appeal against parallel proceedings

Appellate Tribunal ruled that parallel proceedings against borrower and guarantor is maintainable under Section 60(2) of Insolvency and Bankruptcy Code

The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal filed against the order passed by the National Company Law Tribunal (NCLT) at Mumbai Bench, which disposed of an application u/S 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) without dealing with the Appellant's issue about parallel proceedings of Principal Borrower and Corporate Guarantor.

The matter titled Emerald Realtors Pvt Ltd (Shareholder of Sapphire Land Development Pvt Ltd) v Suraksha Asset Reconstruction Ltd & Anr was heard by the Principal Bench of the National Company Law Appellate Tribunal at New Delhi, comprising of Justice A.I.S. Cheema and Dr Alok Srivastava.

The facts of the case were that the Appellant was the shareholder of Sapphire Land Development Pvt Ltd who is the Principal Borrower and the Housing Development and Infrastructure Limited (HDIL) was its Corporate Guarantor. The Petitioner submitted that there was already a Corporate Insolvency Resolution Process (CIRP) initiated on 20 August 2019 against the Corporate Guarantor where the claim of the Financial Creditor was admitted. The Petitioners further submitted that the National Company Law Tribunal did not raise the issue of parallel proceeding even though they had filed written submissions and objections on it.

The bench while considering this issue reproduced Section 60(2) of the Insolvency and Bankruptcy Code, which reads as follows:

"60. Adjudicating Authority for corporate persons -

(2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or [liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor] shall be filed before such National Company Law Tribunal."

The bench observed that Section 60(2) of the Insolvency and Bankruptcy Code itself made it clear that, if Corporate Insolvency Resolution Process or liquidation proceeding of a Corporate Debtor is pending before the National Company Law Tribunal, an application relating to Insolvency Resolution of a Corporate Guarantor or Personal Guarantor, as the case may be, of such Corporate Debtor, would be filed before such National Company Law Tribunal.

It was concluded by this bench that Section 60(2) speaks for itself that the parallel proceedings against borrower and guarantor are maintainable.

The appeal was dismissed for not having any substance.