Tribunal holds that liberty to revive appeals is not available when settlement fails due to default of principal borrower and guarantors themselves; appellants cannot benefit from their own wrong.
In a significant judgment dated September 30, 2026, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, dismissed the restoration applications filed by personal guarantors Arun Singh @ Arun Kumar, Rohit Singh, and Brijesh Kumari seeking revival of their appeals against the initiation of Personal Insolvency Resolution Process (PIRP) by Indian Bank. The appeals had earlier been dismissed as infructuous following a One-Time Settlement (OTS) accepted by the bank. However, after the failure of the OTS due to non-payment of subsequent installments by the principal borrower and guarantors, the applicants sought restoration of their appeals.
The tribunal bench comprising Mr. Justice Mohammad Faiz Alam Khan (Judicial Member) and Mr. Naresh Salecha (Technical Member) observed that the liberty granted to the appellants to revive the appeals in case of failure of the settlement was conditional on the failure being attributable to the bank or circumstances beyond the appellants' control. Since the principal borrower, M/s RGV Infra Project Pvt. Ltd., and the guarantors failed to pay the agreed installments of Rs. 1.30 crore and Rs. 2.84 crore within stipulated timelines after paying only Rs. 46 lakhs upfront, the OTS was rightly rejected by the bank. Consequently, bankruptcy proceedings were initiated against the appellants.
The tribunal emphasized that the liability of the principal borrower and the personal guarantors is co-extensive, and the OTS required both to adhere strictly to the payment schedule and other conditions, including withdrawal of pending appeals and cooperation in asset sale under SARFAESI in the event of default. The appellants' failure to honor these conditions constituted their own default. Thus, they could not invoke the liberty to revive the appeals as it would amount to taking advantage of their own wrong.
The NCLAT reiterated the principle that a party cannot benefit from its own fault or breach of agreement. The judgment clarified that the liberty to revive appeals granted earlier was to be exercised only if the settlement failed due to the bank's failure or other valid reasons not attributable to the appellants. The tribunal's order dismissed the restoration applications and upheld the initiation of bankruptcy proceedings against the guarantors.
This ruling underscores the strict approach of the tribunal in dealing with personal guarantors under the Insolvency and Bankruptcy Code, 2016, particularly regarding compliance with settlement terms and conditions. It also serves as a caution to guarantors that revival of appeals post settlement failure is not automatic and depends on the nature and cause of the failure.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Appeals dismissed as infructuous on basis of One Time Settlement cannot be revived at instance of personal guarantors when failure of settlement occurred due to default of principal borrower/guarantors themselves - Liberty to revive on failure of settlement is available only where settlement fails not on account of appellants' own default - A party cannot take advantage of its own wrong.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 - Sections 95, 100, 123
