A financial debt exists despite a one-time settlement with guarantors; ongoing liabilities remain enforceable against the corporate debtor, justifying insolvency proceedings under the IBC.

JUDGMENT

(3^rd July, 2025)

INDEVAR PANDEY, MEMBER (T)

The present appeal has been filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘Code’), by the Appellant, Mr. Puneet Resutra (erstwhile Director of M/s Ace Engineering (India) Private Limited), challenging the impugned order dated 06.03.2023 passed by the National Company Law Tribunal (Adjudicating Authority), Chandigarh Bench, in CP (IB) No. 54/Chd/J&K/2019 titled Jammu & Kashmir Bank Ltd. v. M/s Ace Engineering (India) Private Limited. By the said impugned order, the Adjudicating Authority admitted the application filed by the Jammu & Kashmir Bank Ltd./Financial Creditor under Section 7 of the Code and initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, M/s Ace Engineering (India) Private Limited.

2. The Appellant, Mr. Puneet Resutra, who is the erstwhile Director and Shareholder of the said Corporate Debtor, has contended that the said order is legally unsustainable, as the financial debt, which formed the basis of the Section 7 application, stood fully discharged through a one-time settlement with the guarantors in the year 2017–2018. Despite the Appellant’s assertion that the loan account stood settled and the property mortgaged for securing the loan had already been released by the Bank, the Adjudicating Authority failed to consider these facts and proceeded to admit the Section 7 petition, thereby giving rise to the present appeal.

Brief facts of the Case:

3. Brief facts of the case are given below:

(i) The Corporate Debtor, M/s Ace Engineering (India) Private Limited, had availed two separate credit facilities from the Respondent Bank, namely (a) a Cash Credit facility amounting to Rs.9,00,00,000/- (Rupees Nine Crores), and (b) a Secured Overdraft facility amounting to Rs.4,00,00,000/- (Rupees Four Crores).

(ii) The aforesaid credit facilities were secured by (i) personal guarantees executed by Shri Siddharth Bhatia and Shri Munish Bhatia—both sons of Shri Madan Mohan Bhatia and Directors of the Corporate Debtor; and (ii) by way of mortgage over immovable properties, including 12 Marlas of land situated at Apsra Road, Gandhi Nagar, Jammu, owned by the aforesaid guarantors, and a factory unit measuring 12 Kanals of land located in SIDCO Industrial Area, Bari Brahmana, Samba, Jammu & Kashmir, belonging to the Corporate Debtor.

(iii) On 31.03.2016, both loan accounts, i.e., the Rs.9 Crore Cash Credit facility and the Rs.4 Crore Overdraft facility, were classified as Non- Performing Assets (NPAs) by the Respondent Bank due to default in repayment.

(iv) Subsequently, on 20.04.2016, an Agreement to Sell and corresponding Power of Attorney, both dated the same day, were executed between the Appellant and the two personal guarantors, wherein, in lieu of full repayment of the outstanding dues of the Corporate Debtor to the Respondent Bank, the Appellant agreed to transfer immovable property measuring approximately 175 Kanals located in Village Ghaink, Khasra No. 2210, Tehsil Bhalwal, District Jammu, to the guarantors. The Guarantors Siddarth Bhatia and Munish Bhatia thereby took upon themselves the responsibility to discharge the entire outstanding liabilities of the Corporate Debtor under the said loan accounts.

(v) The said Agreement to Sell and Power of Attorney were registered before the office of the 3rd Additional Munsiff, Jammu (Sub-Registrar), and included express recitals stipulating that the guarantors would be solely responsible for discharging the entire loan liability of the Corpora