Supreme Court Asks NCLT To Re-Examine RP Appointment In Finefacilis Personal Guarantor Insolvency

The Supreme Court recently sent the issue of appointing a resolution professional in insolvency proceedings against a personal guarantor of Finefacilis Management Private Limited on a plea by Samman Capital back to the National Company Law Tribunal.

It directed the tribunal to hear objections on whether the appointment followed the procedure under the Insolvency and Bankruptcy Code. The NCLT has been asked to pass a fresh order on the Section 95 application (Personal Guarantor Insolvency)

A bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan set aside a Karnataka High Court order that had kept the NCLT's earlier decision in abeyance.

The court underlined the need for speed in insolvency matters. “Time is always the essence in so far the proceedings under the I&B Code are concerned,” the Bench said.

The proceedings were initiated by Sammaan Capital Limited, formerly Indiabulls Housing Finance, against Vasudevan Sathyamoorthy. He is a personal guarantor to Finefacilis Management Private Limited. Finefacilis had borrowed Rs 86 crore from Indiabulls Commercial Credit Limited.

Sathyamoorthy, a director and shareholder of the company, executed a personal guarantee. The loan was later assigned to Indiabulls Housing Finance. A statutory demand notice for about Rs 91 crore followed. Payments of roughly Rs 30 crore were made. The outstanding amount stood at around Rs 72 crore. In October 2024, the NCLT, Benagluru appointed Ravi Shankar Devarakonda as the resolution professional based on the creditor's proposal.

Sathyamoorthy approached the Karnataka High Court. He said the tribunal had bypassed the mandatory procedure under Section 97 of the Code. According to him, when a creditor files a personal guarantor insolvency application directly, the tribunal must first seek a nomination from the Insolvency and Bankruptcy Board of India.

It cannot appoint a person suggested by the creditor. Sammaan Capital opposed the plea. It argued that the writ petition was not maintainable. It also said there was no legal bar on proposing a duly registered insolvency professional.

The Supreme Court chose not to rule on how Section 97 should be interpreted at this stage. It said the procedural objection must be examined by the tribunal itself. The Bench directed the NCLT to act without delay.

“Let the NCLT look into the objections which have been raised today before us by the respondent – herein, more particularly, as regards compliance of the procedure as laid down under sub-Sections 4 and 5 of Section 97 of the Code respectively,” the court said.

The tribunal has been asked to complete the exercise within two weeks. All questions on maintainability and related issues have been left open.

For Petitioner: Senior Advocate Rahul Kaushik with Advocates Ritesh Kumar, Ankit Rajgarhia, Adith Nair, P. Chouhan and AOR Aakash Nandolia

For Respondent: Senior Advocates Meenakshi Arora and MS Shyamsundar with AOR Ashima Mandla, and Advocates Mandakini Singh, and Mohd. Faiz