Retention of Excluded Rights Under Resolution Plan Allows Financial Creditor to Proceed Against Guarantor: NCLT New Delhi

Retention of Excluded Rights Under Resolution Plan Allows Financial Creditor to Proceed Against Guarantor: NCLT New Delhi

Introduction

The National Company Law Tribunal (NCLT), New Delhi Bench has held that Financial Creditors can proceed against Personal Guarantors even after the approval of a Resolution Plan, if actionable rights under the guarantee are expressly preserved.

Factual Background

The Petitioner, M/s IFCI Limited, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, M/s ACCIL Hospitality Private Limited.

The Petitioner submitted that a fresh cause of action accrued on 24.11.2020, when the legal restriction, if any, on initiating CIRP against a corporate guarantor was lifted. The petition was filed on 09.09.2021, claimed to be within the three-year limitation period from the date of such change in law.

Procedural Background

An earlier petition filed in 2019 was dismissed on 21.10.2019 and the dismissal was upheld by NCLAT on 17.02.2020. The present petition was filed subsequent to the change in law, invoking the preserved rights under the Resolution Plan.

Contentions of the Parties

• Petitioner's Submissions: The Petitioner argued that the approved Resolution Plan explicitly classified the mortgage, hypothecation, and corporate guarantees provided by ACCIL Hospitality Pvt. Ltd. as “Excluded Rights”, thereby retaining the Financial Creditor’s right to proceed separately against the Corporate Guarantor for any remaining dues.
• Respondent's Submissions: The Respondent contended that the claim was barred under Article 137 of the Limitation Act since no fresh demand notice or acknowledgment of debt had been issued before filing the present petition. It was further argued that once the debt had been assigned, the Financial Creditor could not initiate parallel proceedings against the Corporate Guarantor based on the same obligation.

Tribunal's Analysis

The Bench comprising Shri Manni Sankariah Shanmuga Sundaram (Hon’ble Member Judicial) and Shri Atul Chaturvedi (Hon’ble Member Technical) referred to Mr. Vikas Aggarwal v. Asian Colour Coated Ispat Limited & Ors., where the NCLAT held that Financial Creditors may retain certain rights under an approved Resolution Plan that are not transferred to the Resolution Applicant or its Special Purpose Vehicle (SPV).

Applying this principle, the Tribunal held that even if the debt of the principal borrower was transferred to the SPV, the Financial Creditor could still initiate insolvency proceedings against the Personal Guarantor—provided such rights were expressly preserved under the Resolution Plan.

Reasoning & Conclusion

The Tribunal observed that mere pendency of writ petitions does not bar statutory adjudication under the IBC, unless there is a specific stay order or injunction from a competent court.

However, it concluded that since the petition was filed three years after the invocation of the guarantee, it was clearly barred by limitation, rendering it non-maintainable.

Outcome

The compounding application was dismissed as being time-barred, despite the Tribunal affirming that actionable rights under a preserved guarantee clause may still be enforced in principle.