The National Company Law Tribunal (NCLT), New Delhi bench, comprised of Justice Ramalingam Sudhakar and Sh. Hemant Kumar Sarangi, recently adjudicated on a significant matter involving the application of Section 95 of the Insolvency and Bankruptcy Code (IBC) in the case of Alchemist Asset Reconstruction Company v. Mr. Deepak Puri. The case centered around the rejection of an application filed by the Financial Creditor under Section 95 of the IBC, 2016, against the Personal Guarantor of the Corporate Debtor. The crux of the matter was whether the proceedings against the Personal Guarantor could continue post his demise.
The tribunal delved into the specifics of the case, examining the legal framework and precedents to arrive at a just decision. Section 95 of the IBC addresses the application of the Code to personal guarantors to corporate debtors. It provides a mechanism for initiating insolvency proceedings against personal guarantors in certain circumstances. However, a crucial aspect of the provision is that it does not expressly address the situation where the personal guarantor passes away during the pendency of such proceedings.
The Financial Creditor, in this case, sought to rely on Section 60(2) of the IBC, which deals with the abatement of proceedings in the event of the death of a corporate debtor. However, the tribunal noted that Section 60(2) specifically pertains to the abatement of corporate insolvency resolution process against the corporate debtor. It does not explicitly address the abatement of proceedings against the personal guarantor.
To resolve this ambiguity, the tribunal referred to various legal principles and precedents. It highlighted that the death of a party typically terminates legal proceedings against that party. The tribunal also referred to Section 306 of the Indian Succession Act, 1925, which provides for the abatement of legal proceedings upon the death of a party, unless a specific provision exists to the contrary.
In light of these principles, the tribunal examined the intent and purpose of the IBC. It noted that the IBC aims to balance the interests of various stakeholders while ensuring the efficient resolution of insolvency proceedings. Considering these factors, the tribunal held that the proceedings under Section 95 of the IBC against the Personal Guarantor abate upon his death.
The tribunal’s decision in this case is significant as it clarifies the legal position regarding the abatement of proceedings against a personal guarantor under the IBC. It underscores the need for clarity in the legal framework to ensure smooth and efficient resolution of insolvency proceedings. The decision also highlights the importance of considering legal principles and precedents in interpreting the provisions of the IBC to achieve the underlying objectives of the Code.
