NCLT Mumbai Admits Personal Insolvency Plea Against Frost International's Guarantor Over Rs 285 Crore Default

The National Company Law Tribunal's Mumbai bench has admitted an insolvency application filed by Indian Bank (erstwhile Allahabad Bank) against Anoop Kumar Wadhera, personal guarantor to Frost International Ltd, in a case involving a default of approximately Rs 285.77 crore.

A coram of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar, while admitting the petition and initiating an insolvency resolution process against Wadhera, observed:

“Considering the above facts and circumstances and upon perusal of the documents on record, the C.P. (IB) / 798 / MB /2024 filed under Section 95 of the Code, hereby Admitted and the Insolvency Resolution Process stands initiated against Anoop Kumar Wadhera viz. the Personal Guarantor herein.”

The financial creditor had extended credit facilities to Frost International Ltd, which were secured, inter alia, by a personal guarantee executed by Wadhera on May 12, 2014.

Following defaults in repayment, the account was classified as a non-performing asset on June 30, 2018, and notices under the SARFAESI Act were issued on July 4, 2018. A further demand was made through a legal notice dated March 10, 2019 invoking the guarantee.

A statutory demand notice dated November 22, 2023 was thereafter issued under the Insolvency and Bankruptcy Code. Upon failure to repay within the stipulated period, the present petition was filed on March 18, 2024.

Wadhera opposed the plea, contending that he was not involved in the financial or operational management of the company and had signed the guarantee without fully understanding the extent of liability. He also alleged inaccuracies, omissions and lack of proper disclosure by the bank in relation to the credit facilities and recovery proceedings.

Rejecting these submissions, the tribunal held that ignorance of law or lack of involvement does not absolve a personal guarantor of liability. The tribunal said:

“However, the Tribunal observes that mere ignorance of law or lack of involvement in company affairs does not absolve a personal guarantor of liability, and the allegations of mismanagement or fraudulent conduct against the Bank are not supported by any credible or admissible evidence.”

Holding that the debt and default stood established and that the petition was within limitation, the tribunal admitted the application, declared a moratorium and appointed Pramod Kumar Ramesh Ladda as the resolution professional.

The tribunal also dismissed as not maintainable a separate insolvency petition filed by Central Bank of India against the same personal guarantor, holding that once the present insolvency process was initiated, further proceedings in respect of the same debt were barred under the IBC.