NCLT Kolkata Admits Insolvency Petition Against Vasupujya Enterprise Pvt. Ltd.
UCO Bank's application under Section 7 of IBC upheld; CIRP to commence against corporate guarantor amid parallel proceedings.
In a significant move, the National Company Law Tribunal (NCLT), Kolkata Bench, has admitted the insolvency petition filed by UCO Bank against Vasupujya Enterprise Pvt. Ltd., marking the initiation of the Corporate Insolvency Resolution Process (CIRP) against the corporate guarantor. The judgment was delivered by Smt. Bidisha Banerjee, Member (Judicial), and CMDE Siddharth Mishra, Member (Technical).
The petition was filed by UCO Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking action against Vasupujya Enterprise, which had provided a corporate guarantee for the loan facilities extended to the Principal Borrower, Ankit Metal & Power Limited. The tribunal addressed objections concerning the limitation and maintainability of the proceedings due to parallel actions against the Principal Borrower and other guarantors.
The tribunal held that acknowledgments of debt by the Principal Borrower extend the limitation for the Corporate Guarantor, as per Section 18 of the Limitation Act, 1963, and Clause 29 of the Deed of Guarantee. The judgment confirmed that parallel insolvency proceedings under IBC are permissible against both Principal Borrowers and Corporate Guarantors for the same debt.
The tribunal also emphasized that the provisions of the Insolvency and Bankruptcy Code have an overriding effect over other laws, ensuring that the insolvency resolution process can proceed even if other recovery proceedings are pending in other forums.
The tribunal's decision allows the moratorium under Section 14 of IBC to come into effect, prohibiting any institution or continuation of suits, transfer of assets, and recovery actions against the Corporate Debtor during the CIRP period.
The interim resolution professional (IRP) appointed is Kanchan Dutta, who will manage the affairs of the Corporate Debtor during the insolvency resolution process. The tribunal has directed the IRP to make a public announcement regarding the admission of the application and call for the submission of claims.
This ruling reiterates the legal framework allowing financial creditors to pursue insolvency proceedings against guarantors independently of actions against the principal borrower, underscoring the comprehensive approach of the IBC in addressing insolvency issues.
Bottom Line:
Corporate Insolvency - Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 by Financial Creditor against Corporate Guarantor is maintainable even if parallel proceedings are ongoing against the Principal Borrower or other Guarantors.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 7, Section 14, Section 238; Limitation Act, 1963 Section 18.
UCO Bank v. Vasupujya Enterprise Private Limited, (NCLT)(Kolkata) : Law Finder Doc Id # 2783411
