Tribunal Dismisses Appeal, Validates Proceedings Without Resolution Professional’s Report
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Chennai, upheld the liability of personal guarantors in insolvency proceedings, even in the absence of a report from the Resolution Professional. The judgment came in the case of Dr. Badri Prasad versus Tata Capital Financial Services Limited, where Dr. Prasad, the appellant, contested the proceedings initiated under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC), against him as a personal guarantor.
The bench, comprising Mr. Justice Sharad Kumar Sharma and Mr. Jatindranath Swain, delivered the judgment on June 25, 2026. Dr. Prasad argued that the proceedings were vitiated due to the absence of a report under Section 99 of the IBC. However, the tribunal clarified that the absence of such a report does not invalidate the proceedings if debt, default, and liability are established through other documents and admitted facts.
The case revolves around a loan sanctioned by Tata Capital Financial Services Limited to M/s. Furnace Fabrica India Limited, where Dr. Prasad was a personal guarantor. The tribunal noted that Dr. Prasad had admitted signing the loan sanction letter and the letter of guarantee, which explicitly recognized his role as a guarantor. The tribunal dismissed the appellant's claim of duress, stating that such claims were raised belatedly and were unenforceable.
Furthermore, the tribunal emphasized that the report by the Resolution Professional under Section 99 of the IBC is recommendatory and aids adjudication. In this case, since the facts regarding debt and default were undisputed, the proceedings were valid even without the report.
The tribunal also dismissed Dr. Prasad's argument that other legal proceedings initiated by him should affect the insolvency proceedings. It clarified that these subsequent proceedings do not impact the validity of the application under Section 95 of the IBC.
This judgment reaffirms the enforceability of personal guarantees in insolvency cases and clarifies procedural aspects regarding the necessity of a Resolution Professional’s report in such proceedings.
Bottom line:-
Insolvency and Bankruptcy Code, 2016 - Proceedings under Section 95 against a personal guarantor cannot be vitiated in the absence of a report from the Resolution Professional under Section 99 if debt, default, and liability are established through other documents and admitted facts.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 - Sections 95, 99, 100
