NCLT Kolkata Imposes ₹1 Lakh Penalty On Indian Bank For Filing Insolvency Proceedings Against Personal Guarantor Already Undergoing Insolvency

NCLT Kolkata Imposes ₹1 Lakh Penalty On Indian Bank For Filing Insolvency Proceedings Against Personal Guarantor Already Undergoing Insolvency

The National Company Law Tribunal (NCLT) Kolkata Bench, comprising Bidisha Banerjee (Judicial Member) and D. Arvind (Technical Member), has imposed a ₹1 lakh penalty on Indian Bank for initiating insolvency proceedings against a personal guarantor who was already under insolvency proceedings initiated by the same bank.

Indian Bank, acting as the Financial Creditor, sought to commence insolvency proceedings against Mr. Manish Kumar, the personal guarantor for M/s. Aryavrat Trading Pvt. Ltd. (the Principal Borrower). The proceedings were initiated under Section 95(1) of the Insolvency and Bankruptcy Code (IBC), 2016, with the total default amount claimed at ₹18,28,47,313. The bank contended that Mr. Kumar had provided a personal guarantee for loans extended to Aryavrat Trading Pvt. Ltd., which had defaulted on repayments, leading to the account being classified as a Non-Performing Asset (NPA). Notices demanding payment were issued to Mr. Kumar, and the corporate debtor was subsequently admitted to the Corporate Insolvency Resolution Process (CIRP), and liquidation proceedings were initiated on September 21, 2022.

Mr. Kumar contested the claim, arguing that the default from December 29, 2018, was not substantiated by supporting documents. He highlighted that Indian Bank had previously filed a petition under Section 95 of the IBC against him concerning a different guarantee for Wearit Global Limited, which was also undergoing corporate insolvency. This earlier petition had led to an interim moratorium under Section 96 of the IBC, barring further legal actions. Mr. Kumar further argued that the Resolution Professional’s report lacked due diligence and failed to comply with the mandatory requirements of the IBC and related rules.

The NCLT observed that Mr. Kumar was already undergoing insolvency proceedings as of January 18, 2024, due to an earlier petition by Indian Bank. With the interim moratorium in effect under Section 96 of the IBC, all legal actions related to any debt against Mr. Kumar were stayed, meaning no creditors could initiate further legal actions regarding his debts.

The Tribunal noted that Indian Bank failed to disclose the ongoing CIRP for Mr. Kumar in its submission. Furthermore, the Resolution Professional’s recommendation to admit the company petition was made without verifying that Mr. Kumar was already undergoing insolvency proceedings. The NCLT emphasized that the resolution professional’s role is to facilitate and verify facts accurately.

Consequently, the NCLT deemed the application by Indian Bank as frivolous and imposed a penalty of ₹1 lakh under Section 65 of the IBC. The bank was directed to pay the penalty for its procedural lapses.