A RP Approved by CoC with Majority Votes can’t Extinguish Liabilities of Personal Guarantors: NCLT
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- Last Updated on 30 May, 2023
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Case Details: Naveen Kumar Sood Resolution Professional of Ujaas Energy Ltd., In re, - [2023] 150 taxmann.com 242 (NCLT-Indore)
Judiciary and Counsel Details
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- Dr Madan B. Gosavi, Judicial Member & Kaushalendra Kumar Singh, Technical Member
- Saurabh Soparkar, Sr. Counsel, Rohit Dubey & Ms Mily Ghoshal Ld. Counsels for the Applicant.
- Nipun Singhvi, Counsel for the Respondent.
Facts of the Case
In the instant case, the corporate debtor was admitted into the Corporate Insolvency Resolution Process (CIRP) by the Adjudicating Authority (NCLT). The IRP made a public announcement and received four resolution plans from prospective resolution applicants.
Consequently, the resolution plan submitted by the successful resolution applicant was approved by the Committee of Creditors (CoC) with majority votes and the same was submitted before the NCLT for approval under section 30(6) of the IBC.
The successful resolution applicant proposed a relatively higher amount, considering that all the secured creditors would agree to the proposal for the extinguishment of their rights on a personal guarantee.
However, the said resolution plan was objected to by a lender bank of the corporate debtor, who was a member of the CoC. A few other creditors also filed applications objecting to the resolution plan of the successful resolution applicant.
NCLT Held
The NCLT observed that the Committee of Creditors (CoC) could make any commercial decision relating to the insolvency of the corporate debtor. However, it could not extinguish the right of the dissenting creditor(s) to pursue legal action against the personal guarantor of the corporate debtor under the guise of exercising its commercial wisdom.
The NCLT held that such a provision in the resolution plan was not only prejudicial to the rights of creditors but also against the provisions of the law. Therefore, the resolution plan deserved to be rejected.
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