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2025 Supreme(Online)(NCLAT) 405
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Justice Ashok Bhushan (Chairperson) , Hon'ble Mr. Arun Baroka (Member (Technical)) , Hon'ble Mr. Barun Mitra (Member (Technical)) ,
ANIL SYAL – Appellant
Versus
Ajay Gupta & Anr. – Respondent
523/ND/2025 COMPANY APPEAL(AT)(INS)
The Bankruptcy Trustee must comply with statutory obligations to file for a discharge under Section 138 of the IBC. Failure to do so allows the bankrupt individual to seek discharge independent of trustee actions.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 138(1)(a) and 138(1)(b) - Appeal against rejection of discharge application in bankruptcy - Appellant alleged non-compliance with statutory obligation by Bankruptcy Trustee to file discharge - Tribunal emphasized that Bankruptcy Trustee has a duty to adhere to timelines set in IBC; application must be filed within one year of bankruptcy commencement - Dismissal of Appellant's application was deemed an abdicating of jurisdiction by the Adjudicating Authority. (Paras 24, 26, 28)
(B) Application for Discharge - Legal standing of the Appellant - Court recognized the Appellant's rights under IBC to seek discharge if the Bankruptcy Trustee fails to fulfil statutory obligations. (Paras 3, 4, 26)
Facts of the case:
The Appellant filed for personal insolvency resolution, which led to bankruptcy proceedings after failed repayment plans. The Appellant submitted an application for discharge after more than one year, but it was rejected by the NCLT, citing potential disruption to ongoing bankruptcy proceedings.
Findings of Court:
The Tribunal noted the failure of the Bankruptcy Trustee to apply for discharge as mandated by law and overruled the NCLT's decision, directing the Bankruptcy Trustee to file the application for discharge.
Issues: Whether the Appellant possessed the right to apply for discharge after the expiration of one year and whether the Adjudicating Authority erred in rejecting the application.
Ratio Decidendi: The Tribunal highlighted the failure of the Bankruptcy Trustee to comply with their statutory duty and affirmed that the Appellant retains the right to seek discharge, regardless of objections from creditors.
Result: Appeal allowed, with directives for the Bankruptcy Trustee to file the discharge application.
JUDGMENT
ASHOK BHUSHAN, J.
This Appeal by a Bankrupt has been filed challenging the order dated 11.02.2025 passed by National Company Law Tribunal (“NCLT”) New Delhi Bench, Court-III rejecting IA No.3964 of 2024 filed by the Appellant under Section 139(1)(a) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “IBC”) read with Rule 11 of the NCLT Rules, 2016 , where the Appellant had prayed for an order for discharge of the Applicant from the Bankruptcy Process under Section 138(1)(a) of the IBC. Adjudicating Authority having rejected the application, aggrieved by which order, this Appeal has been filed by the Appellant.
2. Brief background facts necessary to be noticed for deciding the Appeal are:
(i) Personal Insolvency Resolution Process (“PIRP”) commenced on an application filed by the Appellant under Section 94 of the IBC on 28.10.2020. No repayment plan having been approved, on an application filed by the Appellant, Bankruptcy Process under Section 122 was initiated vide order dated 30.09.2022. By a subsequent order dated 23.12.2022, the Adjudicating Authority directed the Bankruptcy Process commencement dated to be treated as 23.12.2022.
(ii) On 16.03.2023, the Union Bank of India (“UBI”) submitted its claim for Rs.71.90 crores, while relinquishing its security interest in the asset of the Appellant (50% share in the Flat bearing First Floor, H No.11, Uday Park, New Delhi).
(iii) Bankruptcy Trustee made a public announcement for e- auction of 50% rights of the Appellant in the above asset. On 27.06.2023, e-auction was conducted by Respondent No.1 and one Mr. Akshat Gupta was declared as successful bidder at an auction price of Rs.91.72 lakhs. On 05.07.2023, Sale Certificate was issued by Respondent No.1 to Successful Bidder.
(iv) Respondent No.1 issued notice under Section 176 of the IBC of the intention to declare the final dividend. Respondent No.1 submitted Report to the CoC in the 4th Meeting held on 21.08.2023 for completion of administration of estate of Bankrupt. Respondent No.1 also filed an IA No.5990 of 2023 under Section 138(1)(b) of the IBC seeking discharge of the Bankrupt on 31.10.2023.
(v) The Union Bank of India (Respondent No.2) filed an IA No.4421 of 2023 seeking setting aside of the e-auction. The Adjudicating Authority vide order dated 04.07.2024 set-aside the e-auction on the ground that only 15 days’ notice for auction was given by Respondent No.1. The Adjudicating Authority directed the Bankruptcy Trustee and the UBI to conduct a fresh valuation for the same property, average of which valuation was to be considered for the fresh auction.
(vi) The Appellant filed Company Appeal (AT) (Ins.) No.1437 of 2024, challenging the order dated 04.07.2024, which Appeal came to be disposed of on 30.07.2024. This Tribunal did not interfere with the order directing for re-valuation of the property. However, liberty was given to the Appellant to make an appropriate application before the Adjudicating Authority for raising the issue of discharge of the Appellant.
(vii) After passing of the order dated 04.07.2024, the 5th CoC Meeting was convened on 30.07.2024, where Respondent No.1 informed the CoC that one year period had elapsed, hence, discharge application needs to be filed under Section 138(1)(a). Respondent No.2 requested Respondent No.1 to defer the agenda, so that UBI may obtain a legal advice on the same, which was not provided to Respondent No.1 so far.
(viii) On 06.08.2024, IA No.5990 of 2023 for discharge under Section 138(1)(b) of the IBC filed by the Bankruptcy Trustee was allowed to be withdrawn having become infructuous.
(ix) On 06.08.2024, the Appellant filed IA No.3964 of 2024 seeking discharge of the Appellant in terms of Section 138(1)(a) of the IBC. Discharge application filed by the Appellant was opposed by the Bankruptcy Trustee as well as the UBI. Both Respondent Nos.1 and 2 pleaded that Appellant has no locus to file discharge application under Section 138(1)(a). The UBI filed r
