Case Synopsis – CIRP cannot be initiated again Corporate Guarantor who is an NBFC – By Adv. Jaydeep Mehta

Case Synopsis by Adv. Jaydeep Mehta

Landmark Judgement of NCLAT

Corporate Insolvency Resolution Process (CIRP) cannot be initiated again Corporate Guarantor who is an NBFC

Case Citation: (2022) ibclaw.in 1055 NCLAT

NCLAT quashes an order of NCLT, Kolkata. Synopsis of the judgement is as follows:

  1. NCALT allowed an appeal challenging an NCLT order admitting an application filed by the financial creditor (Respondent) under Section 7 of the IBC, 2016 against a Corporate Guarantor 9an NBFC) on account of default committed by Adhunik Alloys & Power Limited (Corporate Debtor) in paying a financial debt.
  2. In light of applicant’s submission that the Section 7 application was not maintainable as the Corporate Guarantor was registered as an NBFC with the RBI at the time of filing of the Section 7 application, NCLAT peruses the provisions of the IBC, 2016, wherein the definition of corporate person U/s. 3(7) specifically excludes any financial service provider.
  3. NCLT had no jurisdiction to invoke its power for the purpose of initiation of CIRP proceedings.
  4. NCLAT draws strength from the Hon’ble Supreme Court decision in Jagmittar Sain Bhagat V/s. Health Services Haryana, where Apex Court held that if NCLT did not have the jurisdiction to initiate the proceedings, then the said proceedings were nonest in the eyes of law and such an issue could be raised even in appeal.

(NCLAT Judgement date 19.12.2022)

 


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