NCLAT rejects IFCI plea, says can't seek fresh insolvency against guarantor

The National Company Law Appellate Tribunal (NCLAT) has dismissed the insolvency plea filed by IFCI against ACCIL Hospitality, a corporate guarantor of debt-ridden steel products maker Asian Colour Coated Ispat.

The tribunal observed that creditors of a debt-ridden company cannot file fresh insolvency plea against its corporate guarantor after collating the claims from principal borrowers as it would amount to "duplicity of claims being pressed".

Public sector financial institution IFCI had filed petition to initiate insolvency proceedings against ACCIL Hospitality, which had extended a corporate guaranty for Asian Colour Coated Ispat Limited (ACCL) - a company currently under insolvency proceedings.

A two-member bench headed by Chairperson Justice S J Mukhopadhaya also held that though the creditor may be faced with the prospect of taking a haircut, this could not be a ground to trigger a fresh resolution process against the Corporate Guarantor.

"Once the Financial Creditor's claim has been collated and admitted by the IRP in its entirety, invoking of jurisdiction of the Adjudicating Authority at its instance for triggering a fresh Corporate Insolvency Resolution Process against the Corporate Guarantor would amount to duplicity of claims being pressed," said the NCLAT.

ACCL was the principal borrower, which had defaulted in clearing its outstanding liability of loan facility of Rs 150 crore extended to it by the financial creditor and is going through insolvency process.

The appellate tribunal upheld the orders of the New Delhi-based Principal Bench of the National Company Law Tribunal (NCLAT), which had on October 21, dismissed IFCI plea to initiate insolvency proceedings against ACCIL Hospitality.

"This being a second application for same set of claim and arising out of the same default cannot be admitted against the Corporate Guarantor' while CIRP initiated against the Principal Borrower' is still subsisting," said NCLAT.

According to NCLAT: "The fact that the Resolution Plan is yet to be approved by the NCLT and the Financial Creditor may be faced with the prospect of taking a haircut is no ground to trigger a fresh resolution process against the Corporate Guarantor".

IFCI had contended that liability of ACCIL Hospitality was joint and coextensive with that of the Principal Borrower, ACCL and the mere filing of claim by the a financial creditor in the corporate insolvency resolution proceedings could not absolve the Corporate Guarantor of its contractual obligation of discharging the liability.

Rejecting it NCLAT said:"There being no merit in the appeal same is dismissed."