Shareholders & Guarantors Have No Locus To Intervene In CIRP Based On Private Unregistered MoU: NCLT Kochi
The National Company Law Tribunal (NCLT), Kochi Bench, comprising Justice Vinay Goel (Member-Judicial) and Madhu Sinha (Member-Technical), has held that any private agreement between the corporate debtors, borrowers, and guarantors is not binding on the financial institutions unless the institutions are parties to the agreement and have explicitly consented to...
The National Company Law Tribunal (NCLT), Kochi Bench, comprising Justice Vinay Goel (Member-Judicial) and Madhu Sinha (Member-Technical), has held that any private agreement between the corporate debtors, borrowers, and guarantors is not binding on the financial institutions unless the institutions are parties to the agreement and have explicitly consented to it.
The Corporate Insolvency Process (CIRP) of the corporate debtor was going on, and during the resolution plan certain applications were filed alleging ownership over parts of the corporate debtor's assets.
The claim was based on an MoU and addendum executed between the applicant and the respondent. Pursuant to which the respondent was required to transfer the Kandla SEZ business to the applicant. Despite getting all the regulatory approvals for the transfer, the respondent delayed the transfer, which resulted in unjustified debts, now repayable by the applicant. The applicant urged the respondent to follow the MoU and addendum, but the respondent didn't comply with that.
Contention of the Parties
The applicant contended that the MoU constitutes a binding agreement and the assets were required to be transferred to the applicant. It also highlighted that the assets belonging to the subsidiaries were wrongfully included in the liquidation estate.
The applicant argued that such inclusion is in violation of sections 18 and 36(4) of the IBC, 2016, and violates the principles of natural justice as well. Also, since no notices were served to the subsidiaries, it violates Regulation 9A of the CIRP Regulation as well. Hence, the adjudicating authority should exclude such assets by intervening in the plan approval application.
Per contra, the resolution professional contended that the applicants had no locus standi, as they were neither creditors nor stakeholders in the CIRP. It contended that the MoU was unregistered, executed privately, and not supported by any board resolution.
Observations of the Adjudicating Authority
The adjudicating authority observed that the applicants have no locus standi to intervene in the CIRP, as they were not participants in it in any capacity.
The bench further noted that the MoU and its addendum were neither registered nor executed by the resolutions of the board. Also, it was not disclosed to any statutory authorities and didn't comply with the Companies Act, 2013, the Income Tax Act, or the requirements regarding the stamp duty, etc.
Referring to the supremacy of the creditors' right under the IBC, the bench observed that any private agreement, including an unregistered MoU, cannot defeat the statutory process to impair the rights of the secured creditor.
Lastly, the bench observed that the applicants lack locus standi to intervene in the CIRP of the corporate debtor, as the CIRP is not related to either the shareholders or the related parties. Further, if the applicants are guarantors, the financial creditor may proceed against them separately under the IBC. Therefore, the application was dismissed.
Case Name: Dr. Badri Prasad and Ors. Vs. Alok Kumar Agarwal, RP of Furnace Fabrica (India) Ltd. and Ors.
Case No.: IA(IBC)/93/KOB/2024 IN CP(IBC)/14/KOB/2023
Bench: Justice Vinay Goel (Member-Judicial) and Madhu Sinha (Member-Technical),
Order Date: 22.08.2025