If 2 cos fall within Ambit of Corporate Debtors, Can Start IBC against Both: SC

The Supreme Court on Thursday said if two corporate bodies fall within the ambit of corporate debtors, there is no reason why insolvency proceedings cannot be initiated against both under the IBC. Section 7 of the Insolvency and Bankruptcy Co de (IBC) deals with initiation of corporate insolvency resolution process by financial creditors. The apex court also observed that approval of a resolution in respect of one borrower cannot “certainly discharge” a co-borrower.

A bench of Justices Indira Banerjee and JK Maheshwari delivered its verdict on a plea against the August last year judgement of the National Company Law Appellate Tribunal (NCLAT), which had dismissed an appeal against an order of the adjudicating authority, the National Company Law Tribunal (NCLT), Mumbai. The NCLT had in its February last year order admitted a petition for initiation of Corporate Insolvency Resolution Process (CIRP) against a firm for the same set of loans arising out of the same loan documents, in respect of which the financial creditor had initiated CIRP against another firm.

The SC, which dismissed an appeal against a judgement passed by the NCLAT, noted in its verdict that the financial creditor had disbursed a loan of 6 crore to one of the companies pursuant to the loan-cum-pledge pacts, executed both by the two firms. It noted that the other company has been referred to in the agreement as borrower and pledger and prima facie, it appeared that the firm was a party to the loan-cum-pledge agreement in its dual capacity of borrower and pledgor of shares. While referring to a previous verdict of the apex court, the bench said it was held that the approval of a re solution plan concerning a corporate debtor does not discharge the guarantor of the corporate debtor.

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