NCLAT upholds Section 95 application against personal guarantor despite jurisdictional challenges by co-creditor

The NCLAT dismissed an appeal challenging admission of a Section 95 application against a personal guarantor. The tribunal held that when CIRP proceedings against a corporate debtor are pending before an NCLT, applications under Section 95 against personal guarantors must be filed before the same NCLT per Section 60(2). The application by one financial creditor filed before NCLT New Delhi lacked jurisdiction since the corporate debtor's proceedings were at NCLT Chandigarh. However, another creditor's subsequent application was within limitation period and properly admitted. The appellant failed to deny debt and default, rendering the appeal meritless.

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Issues Involved:
1. Jurisdiction of the NCLT, New Delhi in admitting the Section 95 application.
2. Impact of interim moratorium under Section 96 of the I&B Code.
3. Bar of limitation on the application filed by State Bank of India.

Detailed Analysis:

1. Jurisdiction of the NCLT, New Delhi:
The Appellant challenged the jurisdiction of the NCLT, New Delhi, arguing that an application under Section 95 could not be filed there due to an existing application by L&T Finance Ltd. against the Appellant. The Tribunal clarified that the application by L&T Finance was filed without jurisdiction because the Corporate Insolvency Resolution Process (CIRP) against Castex Technologies Pvt. Ltd. was already pending before NCLT, Chandigarh. As per Section 60(2) of the I&B Code, any application relating to the insolvency resolution of a personal guarantor of such a corporate debtor must be filed before the same NCLT where the CIRP is pending. The application by L&T Finance at NCLT, New Delhi, was thus not maintainable, and interim moratorium under Section 96 did not apply.

2. Impact of Interim Moratorium under Section 96:
The Appellant argued that the interim moratorium commenced with the filing of the L&T Finance application, prohibiting any other creditor from initiating proceedings. The Tribunal referred to the judgment in "Bhavesh Gandhi vs. Central Bank of India," which states that interim moratorium under Section 96 prevents other creditors from initiating any legal action in respect of any debt. However, since the application by L&T Finance was filed without jurisdiction, the interim moratorium did not apply. The Tribunal emphasized that an application filed before an adjudicating authority without jurisdiction does not trigger the interim moratorium, aligning with the statutory scheme under the I&B Code.

3. Bar of Limitation on the Application Filed by State Bank of India:
The Appellant contended that the application filed by State Bank of India was barred by limitation, as the default occurred on 29.12.2016, and the application was filed on 23.11.2020. The Tribunal noted that the limitation period should be considered from the date of the demand notice issued to the personal guarantor, which was on 24.09.2018. The application under Section 95 was filed within three years from this date, making it well within the limitation period. The Tribunal dismissed the argument that the application was time-barred.

Conclusion:
The Tribunal upheld the order of the NCLT, New Delhi, admitting the Section 95 application filed by State Bank of India. It found no merit in the Appellant's arguments regarding jurisdiction, the impact of interim moratorium, and the bar of limitation. The appeal was dismissed, affirming the validity of the proceedings initiated by the State Bank of India against the personal guarantor under the I&B Code.

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