NCLT Mumbai Bench Initiates Insolvency Resolution Process Against Personal Guarantor

Tribunal affirms independence of IBC proceedings despite ongoing SARFAESI actions, appoints new Resolution Professional to manage insolvency.

In a significant decision dated October 29, 2025, the National Company Law Tribunal (NCLT) Mumbai Bench IV has admitted an application filed under Section 94 of the Insolvency and Bankruptcy Code, 2016 (IBC), initiating insolvency resolution proceedings against Ms. Bhavna Ravi Matta, a personal guarantor to North American Mercantile India Pvt. Ltd. The tribunal, comprising Member (Technical) Anil Raj Chellan and Member (Judicial) K.R. Saji Kumar, reiterated the independence of IBC proceedings from actions under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

The case emerged from a loan default by the corporate debtor, North American Mercantile India Pvt. Ltd., leading Abhyudaya Co-Operative Bank Limited to issue a notice under SARFAESI Act, invoking personal guarantees provided by Ms. Matta. The financial creditor's loan, initially Rs. 9.5 crore and later modified to Rs. 12.83 crore, was not serviced, prompting the creditor to transfer the debt to Asrec (India) Limited, which subsequently took possession actions under SARFAESI.

Despite objections from Asrec (India) Limited, the tribunal upheld the applicant's request to undergo personal insolvency, highlighting that the initiation of insolvency proceedings under Section 94 is not hindered by concurrent SARFAESI proceedings. The tribunal noted the application was filed within the permissible three-year limitation period post-default, which was determined to be April 25, 2020.

The tribunal appointed Mr. Kushal Jajodia as the new Resolution Professional, replacing Mr. Dinesh Ruparel whose Authorisation for Assignment (AFA) had expired. Mr. Jajodia is tasked with issuing public notices to creditors, preparing a list of claims, and assisting the debtor in formulating a repayment plan. A moratorium on debts has been declared, effective immediately, lasting until the resolution process concludes or for a maximum of 180 days.

The tribunal's decision underscores the legal autonomy of IBC proceedings and provides a structured pathway for personal guarantors like Ms. Matta to propose a repayment plan, potentially restructuring their debt obligations. The resolution process is designed to balance the interests of creditors while offering debtors an opportunity to address their financial liabilities.

The tribunal has mandated regular reporting from the Resolution Professional to ensure compliance with procedural standards and has directed Ms. Matta to deposit Rs. 2 lakh towards initial expenses. This decision marks a pivotal step in harmonizing insolvency resolution practices within the framework of Indian corporate and financial law.

Bottom Line:

Insolvency and Bankruptcy Code - Initiation of insolvency resolution process against a personal guarantor is independent of proceedings under the SARFAESI Act, and cannot be inhibited by the pendency of such proceedings.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 94, 99, 100, 101, 102, 114; Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Sections 13(2), 13(4), 14.

Bhavna Ravi Matta, (NCLT)(Mumbai Bench - IV) : Law Finder Doc Id # 2811308