NCLAT Upholds Insolvency Initiation Against Supertech Guarantor, Says Invalid Plea Can't Trigger Moratorium Bar

The National Company Law Appellate Tribunal (NCLAT) in Delhi has upheld the admission of an insolvency application against Mohit Arora, personal guarantor to loans taken by Supertech Ltd. and two other companies.

It held that the process initiated by PNB Housing Finance cannot be blocked by a moratorium arising from another petition, which is non-est in law.

“...when the IFCI petition being CP IB No. 428 of 2021 was filed on 02.06.2021 during the interim moratorium commenced by the filing of the petition by the PNB being 203 of 2021 the petition filed by the IFCI on 02.06.2021 would be deemed to be non-est in the eye of law and therefore cannot commence any interim moratorium.”, it observed.

A bench of Judicial Member Justice Mohd. Faiz Alam Khan and Technical Member Naresh Salecha further held:

“Therefore, we do not find any force in the submissions of Ld. Counsel for the Appellant that the second petition filed by the PNB CP IB No. 395 of 2021 on 24.07.2021 is barred by the interim moratorium of CP IB No. 428 of 2021, for the reason that CP IB No. 428 of 2021 is/was non-est in the eye of law and could not commence any interim moratorium.”

Arora had executed personal guarantees for loan facilities of Rs. 275 crore extended to Supertech Ltd., Sarv Realtors Pvt. Ltd. and ASP Sarin Realty Pvt. Ltd. and had challenged the admission of an application filed against him by PNB Housing Finance Limited.

PNB Housing Finance Limited had first filed an application against Mohit Arora on March 26, 2021. During the interim moratorium triggered by this filing, IFCI filed a separate application on June 2, 2021. The PNB Housing Finance application was later withdrawn on July 8, 2021 with liberty to file afresh, and a fresh application was filed on July 24, 2021.

Mohit Arora argued that the second application filed by PNB Housing Finance was not maintainable, as it was filed during the interim moratorium arising from the IFCI petition. It was also contended that the Adjudicating Authority could not have exercised inherent powers contrary to the statutory scheme, relying on Lokhandwala Kataria Construction Pvt. Ltd. v. Nisus Finance & Investment Managers LLP.

Rejecting these submissions, the tribunal held that the IFCI petition itself was filed during the interim moratorium triggered by PNB Housing Finance's earlier application and was therefore non-est in law. As a result, it could not have given rise to any valid interim moratorium.

The tribunal reiterated that any proceeding initiated during the currency of an interim moratorium is non-est and without legal effect from inception, and such a proceeding cannot later be relied upon to defeat another application.

Relying on its earlier decision in Sushant Chhabra v. Catalyst Trusteeship Ltd., the tribunal held that a proceeding which is non-est from the very beginning cannot become valid merely because the earlier proceeding is subsequently withdrawn.

On Mohit Arora's conduct, the tribunal upheld findings of material concealment and abuse of process.

“No litigant could be permitted to play hide and seek with the Courts and who so ever is coming before the Court of law is duty bound to disclose all the material facts which are in his or her knowledge.”

Finding no illegality in the admission of the application filed by PNB Housing Finance Limited, the NCLAT dismissed the appeal as devoid of merit.