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Insolvency Resolution process initiated against Anil Ambani by NCLT: Mumbai Special Bench

While debt and default have remained undisputed, the incongruity of the declaration of NPA has not been raised and contested by the Respondent. Besides, a reappraisal of the declaration of the NPA by this Authority would not fall within the ambit of the provisions of the Code, under which the instant held by Justice Janab Mohammed Ajmal and Justice Ravikumar Duraisamy in State Bank of India vs Anil D Ambani [CP(IB)916 (MB) of 2020].

The National Company Law Tribunal, Mumbai (NCLT) allowed the initiation of Insolvency Resolution proceeding against Anil Ambani, Chairman of the Reliance ADA Group.

 Facts related to this case is Project Finance Strategic Business Unit of State Bank of India (Financial Creditor) had filed two applications against Anil Ambani for necessary orders u/s 97(3) of IBC. Anil Ambani was the personal guarantor of Reliance Communications Limited (RCOM) and Reliance Infratel Limited (RITL) when it took a credit of Rs. 565 crores and Rs 635 crores respectively, from SBI. In January 2018, the Financial Creditor invoked the personal guarantee agreement. Anil Ambani in response to the application contended that since the Resolution Plan for the two Corporate Debtors was already formulated,  it would be prudent not to proceed against the personal guarantor i.e. Anil Ambani.

The main issue in this petition was whether the liability of a guarantor of a debt of a corporate debtor stands reduced/extinguished upon an Insolvency Resolution Plan in respect of the corporate debtor, being approved under the Insolvency and Bankruptcy Code, 2016?

While discussing the issue referred to the decision of the Hon’ble Apex Court in Maharashtra State Electricity Board v. Official Liquidator and quoted the following. The Supreme Court in Maharashtra State Electricity Board, Bombay (supra) has held that a discharge which the principal debtor may secure by operation of law in bankruptcy or in liquidation proceedings in the case of a company does not absolve the surety of his liability. In such a case, the Supreme Court has considered the interplay of sections 128 and 134 of the Act of 1872. In the facts of that case, a company in respect of which a bank issued a guarantee in favour of the Electricity Board, went into liquidation. The Supreme Court has held that the fact that the company which is the principal debtor has gone into liquidation would not have any effect on the liability of the guarantor.

The decision held by the Hon’ble Bench of NCLT perused the provisions of the IBC and observed that it was “fallacious” to assume that no action could be taken in the present case against the personal guarantor. NCLT stated that a plain reading of Section 60(2) read with Sections 95 and 97(3) IBC indicated that even while an application for CIRP or liquidation proceedings of corporate debtors was pending, an application against the personal guarantor was also allowed to be filed. Accordingly, Jitender Kothari was appointed as the Resolution Professional under section 97 (4) IBC read with Rule 8 of the I&B (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors) Rules, 2019.

Click here to the judgement

 

Judgement reviewed by -Sarita Kumari

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