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2026 Supreme(Online)(NCLAT) 642
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Ashok Bhushan, Chairperson, Indevar Pandey, Member (Technical)
PAWAN GUPTA – Appellant
Versus
M/s. Charm Investments Pvt. Ltd. & Anr. – Respondent
Company Appeal (AT) (Insolvency) No. 374 of 2026
For the Respondents:Mr. Harshvardhan, Ms. Rituparnapatra, Advocates. Mr. Ankur Mittal, Mr. Arpit Sharma and Ms. Sabhya Jain, Advocates.
An order under Section 95 of the IBC appointing an RP, founded on the misrepresentation that a Deed of Guarantee and its invocation were on record, is vitiated and void ab initio, being based on incorrect jurisdictional facts.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 60, 61, 95, 96, 97(5), 99, and 100 - Indian Contract Act, 1872 - Section 126 - Initiation of proceedings under Section 95 against a co-borrower as a personal guarantor - Requirement of a valid Deed of Guarantee and its proper invocation - Misrepresentation of jurisdictional facts - Order obtained by misrepresentation is void ab initio. (Paras 1, 2, 35, 47, 48, 49)
(B) Misrepresentation and Fraud - Order obtained by fraud or misrepresentation of jurisdictional facts can be set aside at any stage, including appellate proceedings. (Para 48)
(C) Appeal - Grounds - An order based on misrepresentation where foundational documents (Deed of Guarantee and Letter of Invocation) are absent is vitiated and liable to be set aside. (Paras 47, 49)
Facts of the case:
A credit facility was sanctioned by a bank in favour of a corporate debtor. The appellant, along with another individual, was described as a co-borrower in the sanction documents, which explicitly recorded 'Guarantors: NIL'. The bank assigned the debt to a financial creditor (respondent). The respondent then initiated proceedings under Section 95 of the IBC against the appellant, portraying him as a personal guarantor to the corporate debtor. The Adjudicating Authority passed an order appointing a Resolution Professional, recording that the respondent had placed a 'Deed of Guarantee and Letter of Invocation' on record. The appellant challenged this order. Subsequently, the respondent filed an application before the Adjudicating Authority stating that no such Deed of Guarantee or Letter of Invocation had been placed on record. The Adjudicating Authority expressed dissatisfaction with the respondent's misrepresentation. The assignment agreements also recorded 'Guarantors: NIL'.
Findings of Court:
The court found that the impugned order was vitiated by misrepresentation of jurisdictional facts, as foundational documents (Deed of Guarantee and Letter of Invocation) were not placed on record. The Adjudicating Authority itself noted the misrepresentation. The order was declared void ab initio and set aside.
Issues: The main issue was whether the impugned order under Section 97 of the IBC, appointing a Resolution Professional, was valid when it was based on the respondent's misrepresentation that a Deed of Guarantee and its invocation were on record, when in fact they were not, and the appellant was only a co-borrower.
Ratio Decidendi: An order passed under Section 95/97 of the Insolvency and Bankruptcy Code, based on a misrepresentation of the existence of a Deed of Guarantee and its invocation—which are foundational jurisdictional requirements—is vitiated and void ab initio. Result : Impugned order set aside with liberty to the financial creditor to file a fresh application under Section 95 of the Code with all relevant documents. No order as to costs. (Para 50)
INDEVAR PANDEY, MEMBER (T)
This Appeal has been preferred under Section 61 of the Insolvency and Bankruptcy Code, 2016 by the Appellant, Mr. Pawan Gupta, assailing the Impugned Order dated 04.02.2026 passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi Bench-III) in CP(IB) No. 56 (ND) of 2026 filed by M/s. Charm Investments Pvt. Ltd./ Respondent No.1. The Adjudicating Authority vide the Impugned Order, initiated proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘Code’) against the Appellant and appointed Mr. Pradeep Kumar Kaushik/ Respondent No.2 as the Resolution Professional (RP) under Section 99 of the Code.
2. The Appellant is aggrieved that although the loan documents, sanction letter, DRT proceedings, SARFAESI notices, and other contemporaneous records consistently described him merely as a co-borrower in relation to the credit facilities availed by M/s. L.R. Builders Pvt. Ltd.,/Corporate Debtor, the Respondent No.1 nevertheless treated him as a “personal guarantor” for the purpose of invoking insolvency proceedings under Section 95 of the Code. According to the Appellant, no Deed of Guarantee was ever executed either by him or by any other person in respect of the subject loan account and even the sanction letter issued by Union Bank of India specifically recorded “Guarantors:
NIL”.
Brief Facts of the Case
3. Brief facts of the case relevant for deciding the Appeal are as follows:
(i) The Corporate Debtor/L.R. Builders was incorporated was engaged in the business of real estate services, including contracting, infrastructure development, and construction activities. The Company formed part of the PP Jewellers Group and had been incorporated by members of the Gupta family, including Mr. Kamal Gupta and Mr. Pawan Gupta, who served as Directors of the Company. Mr. Kamal Gupta and the Appellant Mr. Pawan Gupta are brothers and were actively associated with the affairs of the Company at the relevant time.
(ii) A credit facility amounting to Rs.5.55 Crores was sanctioned on 18.11.2011 by Union Bank of India in favour of Corporate Debtor (CD). Along with the CD, the Appellant Mr. Pawan Gupta and Mr. Kamal Gupta were reflected in the sanction documents as co-borrowers. The sanctioned amount was later reduced to Rs.4.95 Crores. The sanction documents expressly described all three entities, namely M/s. L.R. Builders, Mr. Pawan Gupta, and Mr. Kamal Gupta, as borrowers/co-borrowers. The facility was secured by mortgage of three immovable properties and the sanction documents specifically recorded “Guarantors: NIL”.
(iii) The Ministry of Corporate Affairs issued Gazette Notification S.O. 4126(E) dated 15.11.2019, whereby provisions contained in Sections 94 to 187 of the Insolvency and Bankruptcy Code, 2016 were brought into force insofar as they related to personal guarantors to corporate debtors. (vi) Due to defaults in repayment of the loan account and Union Bank of India issued a legal notice on 09.12.2019 demanding repayment of the outstanding dues. This was followed by issuance of a notice under Section 13(2) read with Section 13(3) of the SARFAESI Act on 04.01.2020. The Bank thereafter instituted Original Application No. 74 of 2021 before the Debt Recovery Tribunal-II, New Delhi for recovery proceedings.
(iv) Union Bank of India entered into an assignment agreement with M/s. Rishikesh Hire Purchase and Leasing Company Pvt. Ltd., which in turn on 24.11.2025, entered into an Assignment Agreement with the Financial Creditor/Respondent. In both the assignment agreements, it was recorded ‘Guarantors: NIL”.
(v) Thereafter, a demand notice dated 10.01.2026 was issued by the Respondent No.1 to the Appellant under the provisions of the Code. On 27.01.2026, Respondent No.1 filed CP(IB) No. 56 (ND) of 2026 before the Adjudicating Authority under Section 95 of the Code seeking initiation of insolvency proceedings against the Appellant by portraying him as a Co Borrower/
