Mr. Laji Joseph vs The South Indian Bank

(Hybrid Mode)

25.03.2026:

Oral Judgment: Justice Sharad Kumar Sharma, Member (Judicial):

These are a set of two Company Appeals, which engage consideration of a common issue. Hence, for the purposes of brevity, they are being taken up together.

The Appellants in the instant Company Appeals, who are the Personal Guarantors to M/s. Orma Timbers Private Limited (the Principal Borrower), have questioned the propriety of the respective impugned orders dated 27.05.2025, as it has been rendered by the Learned NCLT, Kochi Bench in CP(IBC)/36/KOB/2024 and impugned order dated 27.05.2025 as rendered in CP(IBC)/34/KOB/2024. The Appellant in Comp App (AT) (CH) (Ins) No. 385/2025 is Mr. Laji Joseph and the Appellant in Comp App (AT) (CH) (Ins) No. 386/2025 is Mrs. Joys Laji.

The principal facts that engage consideration in Comp App (AT)

(Ins) No. 385/2025 and Comp App (AT) (CH) (Ins) No. 386/2025 are that the Learned Tribunal had proceeded to pass an order of admission of the Application preferred under Section 95 of I & B Code, 2016 by the Financial Creditor/Respondent herein, as against the present Appellants in the capacity of being the Personal Guarantors and that the said order was passed after taking into consideration the submission of the Financial Creditor that the Principal borrower has defaulted in repayment to the extent of Rs. 6,68,63,386/-.

The Learned Tribunal after considering the rival contentions in the aforesaid company petitions had come to the conclusion that, since the guarantors as per the terms of the Guarantee Deed had undertaken an absolute and immediate obligation to repay the amount due to the bank in an event of default by the Principal borrower, which could be either in the repayment of the loan or in fulfilling of any of the terms and conditions as contained under the loan agreement, the liability of the directors would arise forthwith upon such an event of default and that on a demand being raised by the bank, the same could be pressed into, before an appropriate forum as against the Personal Guarantors too.

Consequently, there was an occurrence of default and the Applications under Section 95 of the I & B Code, 2016 were filed and the Resolution Professional (RP) was appointed. The RP in his report filed under Section 99 of the I & B Code, 2016 did not recommend any negotiation between the parties so as to arrive at an amicable settlement for the repayment. Accordingly, the Learned Adjudicating Authority, acting as per the provisions contained under Section 100 of I & B Code, 2016, ordered admission of the applications filed under Section 95 of the I & B Code, 2016, by virtue of the respective orders passed in CP(IBC)/34/KOB/2024 and CP(IBC)/36/KOB/2024, which are impugned in the instant Appeals.

The Company Appeals thus preferred, remained pending consideration before this Appellate Tribunal and in the absence of there being any Interim Order, the proceedings before the Learned Adjudicating Authority, has proceeded further, resulting in failure of Insolvency Resolution Process. Subsequently, the Financial Creditor, i.e., The South Indian Bank Ltd. has filed applications for initiating bankruptcy of the said Debtors/Personal Guarantors by invoking the provisions contained under Section 121(B) and 123(1) of the I & B Code, 2016, to be read with Rule 7 of I & B (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors Rules, 2019). The applications which were thus preferred by the Financial Creditor, were numbered as IA(IBC)/64/KOB/2026, as preferred in CP(IBC)/34/KOB/2024 and IA(IBC)/65/KOB/2026 as filed in CP(IBC)/36/KOB/2024. In the applications thus preferred by the Financial Creditor, they have prayed for seeking an initiation of the Bankruptcy Process, as against the Appellants herein, who are the Personal Guarantors to the Corporate Debtor i.e., M/s. Orma Timbers Private Limited. Consequently, the Learned Tribunal, by virtue of an order as passed on 20.02.2026, has ordered the Appellants/Personal Guarantors to be ‘Bankrupt’ and has appointed a Bankruptcy Trustee, resulting into commencement of the bankruptcy proceedings as against the Personal Guarantors.

It has been submitted by the Learned Counsel for the Appellant and as seconded by the Learned Counsel for the Respondent that, owing to the fact that since in the proceedings of IA(IBC)/64/KOB/2026 and IA(IBC)/65/KOB/2026 respectively, the Learned Tribunal has already passed the order on 20.02.2026, directing commencement of the bankruptcy proceedings, as against the Personal Guarantors that is namely Mrs. Joys Laji and Mr. Laji Joseph, and since the bankruptcy process has already been commenced, no purpose will be served in adjudicating upon the impugned order, dated 27.05.2025, directing the admission of the applications filed under Section 95 of I & B Code, 2016. The Learned Counsels make a statement at a bar that due to the aforesaid subsequent development the proceedings of the instant Company Appeals have been rendered infructuous in the light of the order of the bankruptcy dated 20.02.2026.

Accordingly, the Comp App (AT) (CH) (Ins) Nos. 385 & 386/2025 would stand closed as having been rendered infructuous. All pending Interlocutory Applications would stand closed.

[Justice Sharad Kumar Sharma] Member (Judicial) [Jatindranath Swain] Member (Technical)