TaxTMI 
TaxTMI 
2026 (4) TMI 310
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.... had been allowed by an order passed on a common date i.e. 14.01.2026, consequentially resulting into directing the initiation of the Bankruptcy proceedings as against the Appellants, who happened to be the Personal Guarantors. 3. The grievance of the Appellant, who admit their status as to be that of the Personal Guarantor, is as against this impugned order of 14.01.2026, that has been respectively rendered in the following proceedings: A) Company Appeal (AT) (CH) (INS) No. 116 / 2026, under challenge is an order passed on IA (IBC) / 488 / 2025 in CP (IBC) / 42 / 2024; B) In Company Appeal (AT) (CH) (INS) No. 117 / 2026, the challenge is to IA (IBC) / 492 / 2025 as preferred in CP(IBC) / 53 / 2024; C) In Company Appeal (AT) (CH) (INS) No. 118 / 2026, the challenge is to the impugned order passed on IA (IBC) / 489 / 2025 as preferred in CP(IBC) / 52 / 2024, and D) In Company Appeal (AT) (CH) (INS) No. 119 / 2026, the challenge is to the IA (IBC) / 490 / 2025 as preferred in CP (IBC) / 44 / 2024. 4. The facts, which could be derived on the basis of the pleadings which has been brought on record by the Appellant are that:- The Corporate De....
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....sonal Guarantor, demanding the payment of the said amount and later on, after lapse of period granted in the loan Recall Notice dated 13.02.2019, in order to satisfy the pre- conditions for the purposes of initiation of the proceedings as against the Personal Guarantors, the notice as contemplated under Section 95(4)(b) of the Code, was too issued in the shape of Form B on 02.05.2022, to all the Appellants, the Personal Guarantors herein. 10. As a consequence of the delivery of the notice of demand in the shape of Form B dated 02.05.2022, which as per records have been received by the Personal Guarantors on 14.05.2022, Company Petitions proceedings were drawn before the Ld. Adjudicating Authority, in the shape of the Company Petitions, which has been already detailed in the preceding paragraph. 11. The Ld. Tribunal after scrutinizing and upon recording its satisfaction upon the ingredients contemplated under Section 95 of the Code and finding the proceedings under Section 95 of the Code to be justified in the eyes of law had proceeded to pass an order on 26.09.2024, thereby directing the appointment of the Resolution Professional for carrying out the proceedings against the P....
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.... sub-section (1) of Section 112 was to be further acted upon subject to the condition of the receipt of the repayment plan, which had been received and upon its consideration the Resolution Professional would decide as to the Repayment Plan submitted by was to be approved or rejected. 18. The List of Creditors who are present or are represented at the meeting under Section 112 of the Code, would be having a voting right to participate in the proceedings upon submission of the report by the Resolution Professional in compliance with the object of Section 99 to be read with Section 100 of I & B Code, 2016. Its thereafter that the process of scrutinization of Repayment Plan is to be carried as per sub-section (2) of Section 112 of the Code. 19. The legal bearing of the consideration of the report by the Creditors owing to the implications flowing from Section 112 of the Code would be, that such information as Resolution Professional derives from the report after following the procedure under Section 112(2) would constitute as to be falling to be a positive information to the Ld. Adjudicating Authority about the justification for the initiation of the proceedings under the Code, ....
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....t, in the given set of circumstances of the present case, since, the Corporate Debtors have not submitted any proposal or a viable repayment plan for the debts, before the Resolution Professional as per Chapter III. Hence, in the absence of there being any viable Resolution Plan, being submitted by the Personal Guarantors, there was no occasion for the Ld. Adjudicating Authority to consider the Repayment Plan and determines either acceptance or rejection of the Repayment Plan on the basis of the report of Resolution Professional, on the plan of Personal Guarantors or on the basis of the decision taken in the meeting as contemplated under Section 112 of the Code. 24. Admittedly, after exhaustion of the aforesaid process, the Ld. Adjudicating Authority had taken a decision by passing of an order under Section 114 sub- section (1), but, passing of an order under Section 114 sub-section (1) on 28.08.2025 on the basis of the report supplied to the Ld. Adjudicating Authority as per Section 112(1) of the Code. The order passed under Section 114(1) of the Code by the Ld. Adjudicating Authority is an order having an authoritative impact on the proceedings as per Chapter III and IV of the....
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....ses of implementation of the repayment plan or the decision taken by the Committee of Creditors in its meeting under Section 112 of the Code. 28. Admittedly, the proceedings upto Section 114(1) of the Code has already been exhausted without a challenge to it and later thereto, the consequences upon the plan having been taken into consideration by the Ld. Adjudicating Authority in a proceedings under Section 114(1) of the Code is followed by the proceedings which are held by the Ld. Adjudicating Authority under Section 115, which intends to ensure implementation of the approved Resolution Plan, that has to take effect as if the Debtors and the Creditors, as mentioned in the repayment plan would be bound by the decision taken under Section 114 and consequentially the order passed under Section 114 as directed to be affirmed and acted upon in a proceedings under Section 115 of the Code was required to be placed before the Board for its recording an entry in the Register referred to under Section 196. Thus, the order dated 28.08.2025 had opened the proceedings prescribed under Section 115(2) of the Code, as against the Personal Guarantors. 29. Meaning thereby, in view of what has....
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....ons contained under Rule 37 of the NCLT Rules, 2016, which contemplates issuance of a prior notice of Show Cause on a Petition, which is moved before the Ld. Adjudicating Authority and if that has not been done, the Appellant contends that the action taken would be in violation of the provisions contained under sub-section (1) of Section 420 of the Companies Act. 34. The Ld. Tribunal while considering the aforesaid grounds had come to the conclusion that in the absence of the Appellant having given a challenge to the order of 28.08.2025 which attaches finality to the necessity of initiation of the Bankruptcy proceedings, issuance of a notice for the proceedings under Section 121 of the Code, may not have a very fatal bearing particularly when the Appellants themselves have submitted to the process contemplated under Section 114(1) of the I & B Code, 2016, by accepting and the process upto that stage, as rest of the proceedings would be consequential only. 35. The procedure for regulating the proceedings under Section 121 of the Code, for the purposes of initiation of the Bankruptcy process, on an application preferred by the Creditor, it prescribes that, for justifying the ne....
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....lue of the unsecured part of the debt. (3) If a secured creditor makes an application for bankruptcy and submits a statement under clause (b) of sub-section (2), the secured and unsecured parts of the debt shall be treated as separate debts. (4) The creditor may propose an insolvency professional as the bankruptcy trustee in the application for bankruptcy. (5) An application for bankruptcy under sub-section (1), in case of a deceased debtor, may be filed against his legal representatives. (6) The application for bankruptcy shall be in such form and manner and accompanied by such fee as may be prescribed. (7) An application for bankruptcy by the creditor shall not be withdrawn without the permission of the Adjudicating Authority.'' 38. If we scrutinize the provisions contained under Section 123 where the Bankruptcy process is intended to be initiated on an application preferred by the Creditor under Section 121 and Section 123 in itself does not at any stage contemplates any specific provision upto the stage of Section 126 of the Code of passing of the Bankruptcy order, of necessity to adhere to the principles of natural justice, and i....
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....on of law at any stage after the stage of Section 115(2) to be read with Section 121(1)(b) of the Code. 41. Another question which has been argued by the Ld. Counsel for the Appellant and as pleaded too, is in the light of the provisions contained under Section 420 of the Companies Act and particularly, he has made reference to sub-section (1) of Section 420 of the Companies Act, which contemplates of providing of effective opportunity of hearing before passing any order. 42. In fact, we are of the view, that till the order dated 28.08.2025 subsists, in the eyes of law as it remained unchallenged by the Appellants, subsequent holding of the proceedings under Section 121 of the Code, which is to be read with Section 123 is nothing but, a mischievous act of processing the Bankruptcy proceedings which falls due to its natural and legal corollary, in the light of the necessities contemplated under Section 123 of the Code, and in those circumstances, the objective as contemplated under sub-section (1) of Section 420 may not be attracted, which only intends to that where there is an inception of a proceedings at that stage, before it is given a finality and ample of opportunity of ....