NCLT Bengaluru Declares Congress MLC Naseer Ahmed Bankrupt Over ₹1,454 Crore Personal Guarantee Dues

The National Company Law Tribunal (NCLT) at Bengaluru recently ordered Congress MLC Naseer Ahmed bankrupt. The Tribunal noted that he failed to submit any repayment plan during his personal insolvency resolution process.

The proceedings relate to dues of ₹1,454.71 crore arising from personal guarantees furnished for credit facilities extended to Scotts Garments Limited.

A bench of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada held that the requirements for initiating bankruptcy proceedings had been substantially complied with. The bench also appointed Ravindra Beleyur as the Bankruptcy Trustee.

“In view of the foregoing discussion, this Authority is satisfied that the requirements of Sections 121 and 123 of the Insolvency and Bankruptcy Code, 2016 stand substantially complied with. Accordingly, the present Application deserves to be allowed. Consequently, the Respondent/Personal Guarantor, Mr. Naseer Ahmed, is hereby ordered as Bankrupt..”, the tribunal ruled.

The application was filed by Canara Bank, State Bank of India, and IDBI Bank. The three banks formed part of a consortium of lenders that had extended various credit facilities to Scotts Garments Limited.

Ahmed stood as a personal guarantor for those facilities. Upon Scotts Garments Limited failing to service its debt obligations, insolvency proceedings were initiated against him.

The Tribunal admitted the insolvency petition on June 7, 2022. It appointed a Resolution Professional. The Resolution Professional invited claims from creditors and admitted claims aggregating to ₹764.90 crore.

The tribunal noted that Ahmed did not submit any repayment plan during the personal insolvency resolution process. Creditors consequently treated the absence of a plan as a deemed repayment plan of nil value. They thereafter resolved to seek initiation of bankruptcy proceedings.

“It is observed that no repayment plan was submitted by the respondent/PG during the Personal Insolvency Resolution Process. The creditors have treated the absence of an approved repayment plan as a deemed repayment plan of 'nil' value and have consequently resolved to seek initiation of bankruptcy proceedings against the Personal Guarantor”

Ahmed opposed the application. He contended that there was no privity of contract between him and the banks because the deed of guarantee had been executed in favour of SBICAP Trustee Company Limited as security trustee.

He also argued that recovery proceedings concerning the same debt were pending before the Debt Recovery Tribunal. According to him, the bankruptcy proceedings amounted to forum shopping.

Ahmed further questioned Canara Bank's authority to initiate proceedings on behalf of the other consortium lenders.

The Tribunal observed that the objections had been adequately addressed by the lenders.

“Upon consideration of the same, this Authority finds it unnecessary to separately reproduce or re-examine each of the objections in detail herein.”, it noted.

The tribunal also noted a discrepancy relating to particulars of unsecured debt in the application. However, it held that the defect was not material enough to defeat the proceedings.

The bench further condoned a delay of less than a week in filing the bankruptcy application. It thereafter ordered Ahmed bankrupt and appointed Ravindra Beleyur as Bankruptcy Trustee.

For Petitioner: Hemanth Rao

For Respondent: Akshay J Simha