Rejection Of Personal Guarantor's Repayment Plan By CoC Has Same Effect As Tribunal Rejection: NCLT Indore

The Indore bench of the National Company Law Tribunal (NCLT) has observed that rejection of a repayment plan by the Committee of Creditors (CoC) has the same effect as rejection of the plan by the adjudicating authority, while rejecting a personal guarantor's repayment plan after it was voted down by creditors.

A bench of Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta observed:

“It is pertinent to note that the rejection of the Repayment Plan by the Committee of Creditors (CoC) has the same effect as the rejection of a Repayment Plan under Section 114, as contemplated under Section 115(2) of the Insolvency and Bankruptcy Code, 2016.”

The order was passed in the personal insolvency resolution process of Krati Manglani, personal guarantor of Dhanlaxmi Solvex Pvt. Ltd. The process had been initiated on an application filed by the State Bank of India.

By an order dated January 27, 2025, the tribunal commenced the insolvency process against the personal guarantor. Dr. Vichitra Narayan Pathak was appointed as the Resolution Professional (RP).

The RP thereafter published a public notice and prepared a list of creditors. The personal guarantor, in consultation with the RP, submitted a repayment plan for restructuring her debts and affairs.

During the sixth CoC meeting held on October 24, 2025, creditors were informed about the repayment plan. Following discussions, the guarantors agreed to enhance the repayment plan amount to ₹27.13 crore. The revised plan was thereafter placed before creditors for consideration.

The CoC members requested that the repayment plan be put to e-voting. E-voting commenced on October 26, 2025, and was initially scheduled to remain open until November 2, 2025. The voting period was subsequently extended multiple times at the request of creditors and finally closed on March 23, 2026.

The repayment plan was rejected by creditors holding a 76.64% voting share. Creditors holding 14.72% voting share voted in favour of the proposal.

The tribunal observed, “It is observed that since the Repayment Plan was rejected by the CoC, the same was never placed before the Adjudicating Authority for approval. Therefore, in terms of the provisions of Section 114 of the Insolvency and Bankruptcy Code, 2016, the Repayment Plan is deemed to have been rejected upon its rejection by the CoC.”

The tribunal further noted that, in the event of rejection of a repayment plan, a creditor may make an application for bankruptcy in the circumstances contemplated under the Code.

Accordingly, the bench condoned a delay of 189 days in filing the application. It took the RP's report on record and accepted it. The tribunal rejected the repayment plan, noting that it had already been rejected by the CoC.

The bench granted liberty to creditors to initiate bankruptcy proceedings within three months from the date of the order.

The tribunal further recorded that the moratorium applicable to the personal guarantor had ceased to have effect on expiry of 180 days. It observed that creditors were at liberty to pursue remedies outside the Code, subject to applicable laws.

The RP was discharged from his duties. The application was accordingly disposed of.