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Judgment
Per: Justice N. Seshasayee, Member (Judicial)
The Appellants herein, being mother and son, have challenged the separate orders, both dated 17.01.2025 passed by the Adjudicating Authority (NCLT, Chandigarh Bench, Court – I) in CP (IB) No. 30/Chd/Hry/2024 & CP (IB) No. 20/Chd/Hry/2024, by which the Adjudicating Authority dismissed the petition filed by the Appellants under section 94 of the IBC.
The facts of the present case fall within a very narrow compass:
The appellants herein stood as personal guarantors to a loan advanced to M/s SRS Meditech Limited (Corporate Debtor).
The Corporate Debtor committed default in the repayment of the loan, and eventually the same was classified as NPA. There were also secured assets for the repayment of the loan, and the financial creditor issued a notice dated 28.05.2019 under section 13(2) of the SARFAESI Act, vide the same notice it also invoked the personal guarantee furnished by the appellants.
In the aforesaid circumstances, the appellants herein invoked Section 94 of the IBC. It was resisted by the respondent-financial Creditor herein on the ground that the petition was filed only to save their skin in the face of notice issued under SARFAESI Act.
The learned Adjudicating Authority took into account the submissions of either side and the petitions filed under section 94 of the IBC on the solitary ground that they were filed only after the financial creditor had invoked SARFAESI Act for the realization of the debts. These Orders are under challenge.
Placing reliance on the judgment CA (AT) (Ins.) No. 1953 of 2024, the learned counsel for the Appellant submitted that invocation of SARFEASI Act issuing notice under section 13(2) thereof does not take away the right of the Appellants to invoke section 94 of the IBC, rather it provides the very context for the same. Relaince was placed on the ratio in Getz Cables Pvt. Ltd. Vs. State Bank of India & anr. [CA (AT) (Ins.) No. 1953 of 2024, dated 21.11.2024. Per contra, the learned counsel for the respondent would continue to canvass that line of contention taken by it before the Adjudicating Authority, even as he conceded to the legal position.
In Getz Cables Pvt. Ltd. case [CA (AT) (Ins.) No. 1953 of 2024], the first bench of the Tribunal, has held,
“31.We in the present case are considering the question as to whether rejection of Section 10 application on the ground of invoking Section 65 is justified or not. There are no other facts and ground pleaded to prove any fraudulent and malicious intent by the CD in filing Section 10 application. For allowing Section 65 application, fraudulent and malicious intent of CD has to be proved from some materials on record. Merely because proceeding under Section 13, sub-section (2) and (4) has been initiated by the creditor prior to filing of Section 10 application, cannot be a ground to hold that Section 10 application is filed with malicious and fraudulent intent. For proving fraudulent and malicious intent, something more is required to be pleaded and proved apart from initiation of proceedings under Section 13, sub-section (2) and (4) by the creditor against the Corporate Applicant. 33. As observed above, the basis of rejection of Section 10 application is the finding by the Adjudicating Authority that application has been filed with malicious and fraudulent intent to delay and halt the recovery proceedings. There mere fact that application is filed, consequent of which the recovery proceedings may be halted, cannot lead to conclusion that intent and purpose of the application is malicious and fraudulent. We, thus, are satisfied that Adjudicating Authority committed error in allowing Section 65 application filed by the SBI.”
This has been confirmed by the Hon’ble Supreme Court Vide judgement dated 25.07.2025 in Civil Appeal No. 582 of 2025. The law as declared will apply on all force, for Section 94 is parallel to Sec. 10 IBC.
In view of the above, we have little hesitation in allowing these appeals. The appeals are accordingly allowed and the matter is remanded back to the Adjudicating Authority for its consideration other than that which formed the line of its reasoning in the impugned Order. No costs.