NCLAT Upholds CIRP Initiation Against Corporate Guarantor in Deepak Raheja Case
Tribunal Confirms Validity of Security Trustee's Authorization and Dismisses Appeal as Meritless
News Report:
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, dismissed the appeal filed by Deepak Raheja, Suspended Director of Advantage Raheja Hotels Private Limited, challenging the Corporate Insolvency Resolution Process (CIRP) initiated against the company. The tribunal upheld the validity of the proceedings initiated by IDBI Trusteeship Services Ltd., acting as Security Trustee on behalf of Omkara Assets Reconstruction Pvt. Ltd., the assignee of loan rights.
The case originated from a loan agreement dated 26.12.2017, involving Piramal Capital and Housing Finance Ltd. (PCHFL) and borrowers Gstaad Hotels Pvt. Ltd. and Neo Capricorn Plaza Pvt. Ltd. Advantage Raheja Hotels Pvt. Ltd. executed a Corporate Guarantee in favor of the Financial Creditor. Subsequent default by the borrowers led to Omkara acquiring the rights from PCHFL and initiating CIRP proceedings.
The appellant contested the authorization of IDBI Trusteeship to file the Section 7 application, claiming lack of valid authorization. However, the tribunal, chaired by Justice Ashok Bhushan, found sufficient evidence, including written instructions from Omkara dated 15.03.2023, authorizing the Security Trustee to act on behalf of the lender. The tribunal emphasized the sustained validity of the Security Trustee Agreement despite the assignment of loan rights.
Moreover, the tribunal noted that CIRP against the principal borrowers had already been affirmed, rendering the appeal against the Corporate Guarantor unsustainable. The NCLAT's decision underscores the legal robustness of security trustee arrangements in insolvency proceedings, reinforcing creditor rights under the Insolvency and Bankruptcy Code, 2016.
Bottom Line:
Corporate Insolvency Resolution Process (CIRP) initiated against a Corporate Guarantor is valid when the Security Trustee is authorized to act upon written instructions from the Lender, and such authorization is duly proved.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 7
