Financial Creditor Can't File Same Claim Twice For Same Loan In Multiple Insolvency Proceedings Without Proper Adjustment: NCLAT
The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Rakesh Kumar Jain (Judicial Member), Mr Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) has held that a financial creditor is not permitted to file the same claim twice for the same loan in multiple insolvency proceedings without proper adjustment. In the present case, the...
The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Rakesh Kumar Jain (Judicial Member), Mr Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) has held that a financial creditor is not permitted to file the same claim twice for the same loan in multiple insolvency proceedings without proper adjustment. In the present case, the Appellant filed the same claim in two separate proceedings without disclosing the claims filed in an earlier proceeding.
The present appeal has been filed under section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against an order passed by the National Company Law Tribunal (NCLT) by which it dismissed the Application of the Appellant seeking status of a financial creditor on ground of corporate guarantee executed in its favor.
The Appellant submitted that the Code permits the initiation of CIRP against guarantors; whether corporate or personal, even in cases where disbursement has been made only to the principal borrower. Therefore, the rejection of the Appellant's claim on the limited ground of non-disbursal to the Corporate Debtor reflects a misapplication of the settled legal principle.
It was submitted that Insolvency Committee categorically clarified that if any portion of the debt is recovered in one proceeding (e.g., CIRP of IHCPL), the creditor's claim in the other (e.g., CIRP of the Corporate Debtor) would be proportionately reduced. Therefore, any concern of duplicity or double recovery is ill-founded and cannot form the basis for rejection of the Appellant's claim.
Per contra, the Respondent submitted that no corporate guarantee was ever executed by the Corporate Debtor in favour of the Appellant. Despite repeated assertions, the Appellant has failed to place on record any duly executed deed of guarantee by the Corporate Debtor. Clause 28 of the Master Loan Agreement, relied upon by the Appellant, does not constitute a binding guarantee deed.
The Tribunal noted that while section 5(8) of the IBC permits invocation of guarantor liability for a debt disbursed to a third party, the claimant must establish the existence of a valid and enforceable guarantee. In the present case, the Appellant has failed to establish any such deed of guarantee that was executed by the Corporate Debtor.
It further noted that clause 28 of Master Loan Agreement (MLA) is couched in a broader language in which the corporate debtor appears to have undertaken the responsibility to repay the loan. This clause also provided for the invocation of guarantee but no invocation was done in this case. Moreover, no board resolution was placed on record authorising the execution of the guarantee which is vital to establish a binding corporate guarantee.
It observed that the Supreme Court in Anuj Jain v. Axis Bank Ltd. held that in insolvency proceedings, financial debt must be established with proper and valid documentation. The Appellant's reliance on clause 28 of the MLA after failing to prove a deed of guarantee raises serious doubts about its claims. The Appellant also referred to a joint declaration but it just outlined the mutual arrangements and does not constitute an enforceable security or financial guarantee under the IBC.
It held that “the guarantee, even assuming its validity, had therefore not matured into an enforceable claim against the Corporate Debtor as of the date when CIRP commenced. A mere default by IHCPL does not suffice to convert a contingent obligation into a live financial debt enforceable against the guarantor in the absence of invocation.”
It further observed that the Appellant was aware of the timely filing of its claims despite this it failed to file the claims for 388 days therefore it cannot be said that it failed to do so due to lack of knowledge or external impediments. No valid explanation has been provided for such delay.
The Tribunal further observed that the Appellant filed the same claim in separate proceedings for the same loan which clearly amounted to impermissible duplication and violated the IBC's principle of equitable distribution. A creditor cannot seek the same claim in multiple CIRP's without proper adjustment.
Accordingly, the present appeal was dismissed.
Case Title: Moneywise Financial Services Pvt. Ltd. Versus Mr. Arunava Sikdar
Case Number:Company Appeal (AT) (Ins.) No. 310 of 2024
Judgment Date: 03/07/2025
For Appellant: Mr. Abhishek Garg and Mr. Yash Gaiha, Advocates.
For Respondent: Ms. Varsha Banerjee, Advocate.