A Case to Remember

Under Insolvency and Bankruptcy Code (IBC) 2016, the New Delhi bench of National Company Law Tribunal (NCLT) passed an order, dated 1 August 2017, admitting an application for initiating corporate insolvency resolution by a guarantor of a corporate debtor.

Sumit Aviation Private Limited (corporate debtor/borrower) had taken a loan from Punjab National Bank and the petitioner, Davinder Ahluwalia, was the guarantor for the said loan and had mortgaged his immovable property with the bank. To redeem the aforesaid mortgage of his property and reduce the liability of the corporate debtor, the guarantor paid a sum of Rs 1.05 crore to the bank.

On the failure of the corporate debtor to repay the above-mentioned amount to the guarantor, he invoked proceedings against the corporate debtor by filing an application to initiate the corporate insolvency resolution process for recovery of his dues. To support of his application, the guarantor attached his bank statements evidencing the loans aggregating to around Rs 29 lakh, which had been advanced by him (guarantor) to the debtor. The guarantor also attached copies of cheques issued by the corporate debtor to him for the aforesaid amount, which was returned dishonoured.

On account of the above facts, the NCLT admitted the application of the guarantor and appointed the interim resolution professional (IRP) proposed. It further directed the IRP to make a public announcement and declare moratorium for prohibiting certain actions as prescribed under IBC, including stay of pending proceedings, etc., against the corporate debtor during the moratorium period.