2026 Supreme(Online)(NCLT) 226

NATIONAL COMPANY LAW TRIBUNAL
Rammurti Kushawaha, Judicial Member, Yogendra Kumar Singh, Technical Member
SATISH SHARMA – Appellant
Versus
MR. AMIT PAREEK – Respondent
IA (IBC)/137/GB/2025 | IA (IBC) (Plan)/1/GB/2024 | IA (IBC)/50/GB/2025 | CP (IB)/9/GB/2019

Resolution plan remanded for non-disclosure of financial distress by applicant and impermissible PBG adjustment; guarantee clause valid post full payment via subrogation; Adjudicating Authority may intervene on Section 30(2) violations despite CoC approval.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 30(2), 30(6), 31(1), 29A, 60(5) read with NCLT Rules, 2016 - Rules 11, 34; IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Regulations 36B(4A), 38(4), 39(4) - Resolution plan approval - Plan approved by CoC with 75.32% voting share remanded for fresh consideration due to material non-disclosures by successful resolution applicant regarding financial distress of connected persons, inadequate funding capacity, suppression of statutory recovery proceedings against strategic investor, and impermissible adjustment of performance bank guarantee towards resolution consideration - Clause requiring release of securities against principal borrower upon full payment of adjudicated guarantee claim held valid as statutory consequence under Section 140, Indian Contract Act, 1872, not rendering plan conditional - Adjudicating Authority empowered to remit plan to CoC where prima facie violation of feasibility, viability under Section 30(2)(b),(e) established notwithstanding post-CIRP period expiry - CIRP extended by 60 days for fresh process. (Paras 34-90)

(B) Insolvency and Bankruptcy Code, 2016 - Section 31(1) proviso - Conditional resolution plan - Clause stipulating issuance of no dues certificate, release of securities, and withdrawal of proceedings qua principal borrower upon 100% payment of finally adjudicated guarantee debt not ultra vires as it flows from co-extensive liability and subrogation rights, causing no commercial prejudice to creditor receiving full entitlement. (Paras 40-46)

(C) Contract Act, 1872 - Section 140 - Subrogation - Surety paying full adjudicated liability entitled to all creditor rights against principal debtor; creditor cannot retain securities post full satisfaction to avoid unjust enrichment. (Para 40)

Facts of the case:
CIRP initiated against corporate debtor (guarantor) on application by financial creditor claiming dues under invoked corporate guarantee for principal borrower's loan - Claim adjudicated and finally settled at reduced amount by NCLT, NCLAT, Supreme Court - Two resolution plans submitted; CoC approved plan offering 100% to creditors including full payment to financial creditor - Plan contained clause for release of principal borrower's securities upon payment - Post-approval, revelations of successful applicant's financial incapacity, borrowings for performance security, statutory dues defaults by connected persons, and SARFAESI proceedings against joint property emerged - CoC members holding 66.29% later resolved for reconsideration.

Findings of Court:
Resolution plan non-compliant with Section 30(2)(b),(e) due to suppressed material facts impacting feasibility/viability; performance security treatment violative of Regulation 36B(4A); connected person's ineligibility under Section 29A(c),(g); financial creditor's objection to guarantee clause untenable as full payment discharges liability with subrogation.

Issues: (1) Validity of plan clause extinguishing creditor rights against principal borrower; (2) Material irregularities, non-disclosures, funding inadequacy rendering plan unviable; (3) Scope for Adjudicating Authority to remand post-CoC approval and CIRP expiry.

Ratio Decidendi: Adjudicating Authority must scrutinise Section 30(2) compliance beyond CoC commercial wisdom; suppression vitiating informed approval and feasibility permits remand even post-CIRP; full guarantee payment triggers subrogation without affecting independent principal liability unless debt fully satisfied.

Result: IA challenging guarantee clause dismissed; plan approval application remanded to CoC for fresh process; CIRP extended 60 days.

Table of Content
1. cirp history, claim adjudication, and plan submission timeline. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9)
2. financial creditor objects to plan clause extinguishing principal borrower rights. (Para 10 , 11)
3. rp defends coc process and full discharge upon payment. (Para 12)
4. sra justifies clause as subrogation consequence of full payment. (Para 13)
5. unsuccessful pra challenges sra plan viability and disclosures. (Para 14 , 15)
6. rp upholds coc commercial wisdom and plan compliance. (Para 16)
7. coc members seek plan reconsideration due to sra distress. (Para 17)
8. sra defends plan against post-approval challenges. (Para 18)
9. rp seeks approval of coc-approved sra resolution plan. (Para 19 , 20 , 21 , 22 , 23 , 25 , 26 , 27 , 29 , 30 , 31 , 33)
10. clause 7.4(d)(ii)(g) lawful as subrogation on full payment. (Para 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 48)
11. sra plan non-compliant due to suppressions and pbg misuse. (Para 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 , 70 , 71 , 72 , 73 , 74)
12. plan approval declined for section 30(2) violations. (Para 75 , 76 , 77 , 78 , 80 , 81 , 82 , 83 , 84)
13. remand to coc for fresh plan evaluation; cirp extended. (Para 85 , 86 , 87 , 89 , 90)

1. The Corporate Insolvency Resolution Process (“CIRP”) of National Plywood Industries Limited (“Corporate Debtor”) was initiated on the basis of an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“the Code”) by Stressed Assets Stabilisation Fund (“former Financial Creditor/ SASF”), the then Financial Creditor. The said application was admitted by this Adjudicating Authority vide order dated 26.08.2019 in CP(IB)/09/GB/2019, whereby Mr. Sandeep Khaitan was appointed as the Interim Resolution Professional.

2. During the course of the CIRP, disputes arose regarding the verification of claims and conduct of the process. Pursuant to an order dated 08.04.2022 passed in IA(IBC)/43/2021, this Adjudicating Authority directed recommencement of the CIRP from the stage of second Expression of Interest (“EoI”) and replaced the then Resolution Professional with Mr. Amit Pareek, who was appointed as the Resolution Professional.

3. Aggrieved by the said order, appeals were preferred before the Hon’ble National Company Law Appellate Tribunal (“NCLAT”), which by its order dated 10.05.2022 granted interim IA(IBC)(Plan)/1/GB/2024 And IA(IBC)/50/GB/2025 In CP(IB)/9/GB/2019 _____________________________________________________________________________________________

relief and, by a subsequent judgment dated 08.02.2024, upheld this Tribunal’s order and directed completion of the CIRP within a period of 90 days. The Hon’ble NCLAT also observed that, though the Section 7 application filed by the former Financial Creditor partook the character of a recovery proceeding, the process had by then advanced substantially, and therefore directed that the CIRP be completed in accordance with law.

4. In compliance with the directions of the Hon’ble NCLAT, the Resolution Professional issued Form-G on 26.02.2024, inviting EoI for submission of resolution plans. Upon scrutiny, the Resolution Professional published the Provisional List of Prospective Resolution Applicants (“PRAs”) on 21.03.2024 and the Final List on 27.03.2024. Subsequently, the Request for Resolution Plan (“RFRP”) along with the Evaluation Matrix was issued on 30.03.2024, and the Information Memorandum was circulated to all eligible PRAs on 06.04.2024.

5. In response, two PRAs submitted their respective Resolution Plans on 30.04.2024, which were opened before the Committee of Creditors (“CoC”) during its 23rd meeting held on 02.05.2024. As the 90-day period granted by the Hon’ble NCLAT was expiring on 07.05.2024, the Resolution Professional, with CoC’s approval, filed an appeal before the Hon’ble NCLAT seeking extension of the CIRP period. The Hon’ble NCLAT, vide order dated 21.05.2024 in Comp. App.

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