Personal Guarantors Can't Seek Disclosure of Resolution Plan Details u/s 60(5) IBC: NCLT Mumbai

Personal Guarantors Can't Seek Disclosure of Resolution Plan Details u/s 60(5) IBC: NCLT Mumbai

Introduction

The National Company Law Tribunal (NCLT), Mumbai Bench, has held that personal guarantors cannot seek disclosure of resolution plan details under Section 60(5) of the Insolvency and Bankruptcy Code (IBC) or Rule 11 of the NCLT Rules.

Factual Background

The Corporate Insolvency Resolution Process (CIRP) of Prabhat Technologies (India) Ltd. was initiated, and a resolution plan was approved by the Committee of Creditors (CoC). The personal guarantors, who had guaranteed a loan taken from the State Bank of Bikaner & Jaipur (now merged with SBI), filed an application, under Section 60(5) of the IBC, seeking disclosure of the treatment of the guarantor in the resolution plan and the status of their guarantees and loans from SBI.

Procedural Background

The personal guarantors requested the resolution professional and SBI to disclose the necessary details, but their requests were not met. They then approached the NCLT, seeking directions for disclosure under Rule 11 of the NCLT Rules.

Issues

1. Disclosure of Resolution Plan: Whether personal guarantors can seek disclosure of resolution plan details under Section 60(5) of the IBC or Rule 11 of the NCLT Rules.

2. Inherent Power: Whether the NCLT can exercise its inherent power to direct disclosure of resolution plan details.

Reasoning & Analysis

The bench of Justice Sushil Mahadeorao Kochkey (Member-Judicial) and Prabhat Kumar (Member-Technical) observed that there is no provision in the IBC that allows sharing of the resolution plan with anyone except the members of the CoC and the suspended Board of Directors. Moreover, relying on the decision of Glas Trust Company LLC v. Biju Raveendran, the bench held that the inherent power under Rule 11 cannot be exercised to override or ignore the express provisions of the law.

Decision

The NCLT dismissed the application, holding that the personal guarantors are not entitled to seek disclosure of resolution plan details.

Implications

The decision clarifies the rights of personal guarantors in relation to resolution plans and the limits of the NCLT's inherent power.

Conclusion

The NCLT's judgment in this case provides clarity on the rights of personal guarantors and the limits of the NCLT's inherent power. The decision is significant for personal guarantors, resolution professionals, and financial creditors.

In this case the applicant was represented by Mr. Prathamesh Nirkhe along with Mr. Amit Tungare, Advocates.