Case Note & Summary
The case involves an appeal filed by Comandur Parthasarathy, the personal guarantor, against an order dated 21.10.2024 passed by the National Company Law Tribunal (NCLT), Hyderabad Bench, in IA No. 1987/2024 in CP (IB) No. 111/95/HDB/2024. The appellant challenged the order on the ground that he was deprived of an opportunity to file objections to the report submitted by the Resolution Professional (RP) under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC), as the proceedings had reached the stage of Section 99 IBC. The appellant argued that he should have been heard before the adjudicating authority passed any order on the report. The respondents, including the RP and the financial creditor (Shinhan Bank), opposed the appeal, contending that the appellant had ample opportunity to object earlier. The NCLAT examined Section 99(4) and (5) of the IBC, which deal with the adjudicating authority's consideration of the RP's report. The Tribunal held that although the section does not explicitly provide for filing objections, the principles of natural justice require that the personal guarantor be given an opportunity to file objections before the adjudicating authority passes an order under Section 99. The NCLAT set aside the impugned order and directed that the appellant be allowed to file objections within two weeks, and the NCLT to decide the matter afresh after hearing both sides. The appeal was allowed with the above directions.
Headnote
A) Insolvency and Bankruptcy Code - Personal Guarantor - Right to Object to RP Report - Section 99(4)(5) IBC - The issue was whether the personal guarantor could file objections to the report submitted by the Resolution Professional under Section 99 IBC after the report had been filed. The NCLAT held that the personal guarantor must be given an opportunity to file objections before the adjudicating authority passes any order under Section 99, as the right to object is inherent in the scheme of the Code and principles of natural justice. (Paras 1-12) B) Insolvency and Bankruptcy Code - Interpretation of Procedural Provisions - Section 99 IBC - The court interpreted Section 99(4) and (5) of the IBC, noting that while the section does not explicitly provide for filing objections, the adjudicating authority must consider the report and any objections before making a determination. The court directed that the personal guarantor be allowed to file objections within two weeks, and the adjudicating authority to decide after hearing both sides. (Paras 2-12)
Issue of Consideration
Whether a personal guarantor is entitled to file an objection to the report submitted by the Resolution Professional under Section 99 of the Insolvency and Bankruptcy Code, 2016, after the report has been filed and the proceedings have reached the stage of Section 99.
Final Decision
The appeal is allowed. The impugned order dated 21.10.2024 is set aside. The appellant is permitted to file objections to the report submitted by the Resolution Professional under Section 95 IBC within two weeks from the date of the order. The NCLT Hyderabad is directed to decide the matter afresh after hearing both sides, in accordance with law.
Law Points
- Right of personal guarantor to file objection to resolution professional's report under Section 99 IBC
- Section 99(4) and (5) IBC
- opportunity of hearing before adjudicating authority
- natural justice
- interpretation of procedural provisions
