Application U/S 95 Cannot Be Rejected On Grounds Of Pendency Of One Time Settlement Proposal: NCLAT

Brief Facts

These two appeals have been filed challenging the order passed by National Company Law Tribunal, Chandigarh Bench by which Section 95 application filed by the appellant who was the personal guarantors have been admitted.

The appellant submitted that there was an OTS proposal submitted by principal borrower which was approved by the bank for total payment of Rs. 7 crores and out of said Rs.7 crores, amount of Rs.1.75 was already paid which was recorded in the OTS entered between the parties which was subject to consent by the DRT where application was pending.

That however the bank has back track from the OTS due to which the OTS could not be fructified. The borrower has already filed a writ petition before the Punjab & Haryana High Court challenging the action of the bank from back tracking of the OTS which is under consideration.

That in view of the aforesaid facts, the personal insolvency against the appellant would not be allowed to continue.

Observations:

The tribunal noted that there is no dispute to the preposition that in event bank accepts the OTS against the principal borrower and the entire amount is satisfied the liability of the guarantor shall also come to an end. However, which issue is under consideration before the High Court thus, as on date the debt is not even satisfied by the principal borrower hence the liability of the personal guarantor cannot be set to be wiped out.

The tribunal further observed that just because the OTS proposal is pending that itself cannot be a ground to refuse the initiation of the insolvency process against the personal guarantors.

The tribunal concluded that there is no error in initiation of personal insolvency against the appellant, however, it shall always be open for the appellant to place such material before the Adjudicating Authority in event any order of the High Court favourable to the principal borrower is passed which shall be taken due consideration in the personal insolvency of the guarantors also.

Accordingly, the present appeals were dismissed.

Case Title: Mohit Dewan v. Bank of Maharashtra and Anr.

Case Reference:Comp. App. (AT) (Ins) No. 2176 of 2024 & I.A. No. 8129 of 2024

Judgment Date: 22/11/2024

For Appellant : Mr. Aditya Grover, Mr. Gautam Singh and Mr. Naman Chawla, Advocates.

For Respondents : Mr. Viren Sharma, Advocate for R1.