Authority: National Company Law Appellate Tribunal Principal Bench, New Delhi (Justice Mohd. Faiz Alam Khan, Member (Judicial) and Naresh Salecha, Member (Technical))

Order Date: 07 September 2026

Case Overview

This appeal was filed by Pankaj Chhabildas Sheth under Section 61 of the Insolvency and Bankruptcy Code, 2016 (Code), challenging the order dated 11 May 2026 passed by the National Company Law Tribunal, Mumbai Bench-I (Adjudicating Authority) in CP (IB) No. 185/2026. The Adjudicating Authority had dismissed the appellant's petition under Section 94 of the Code.

The appellant is a director and personal guarantor of the corporate debtor, M/s Veer Wires Private Limited, which had availed credit facilities from the financial creditor, Abhyudaya Cooperative Bank Limited. The facilities included term loans TL1, TL2, and TL3 amounting to ₹18,90,000/-, ₹5,50,000/-, and ₹24,00,000/- respectively, sanctioned on 04 January 2020, and a cash credit facility of ₹3,50,00,000/- sanctioned on 02 March 2021. The appellant executed a personal guarantee deed on 31 January 2020.

The corporate debtor's accounts were classified as NPA on 31 July 2021. The financial creditor issued a demand notice under Section 13(2) of the SARFAESI Act on 31 December 2021 for outstanding dues of ₹3,84,87,979.73 and invoked the guarantee. A possession notice was issued on 11 March 2022 for outstanding dues of ₹3,96,86,417.73. Recall notices were sent to the appellant on 20 April 2022. Arbitration proceedings under the Multi-State Cooperative Societies Act, 2002 resulted in an award dated 23 June 2023, holding the corporate debtor and guarantors jointly and severally liable for ₹4,20,94,708.73 as of 31 July 2022 with interest at 14.50% per annum.

The appellant first filed an application under Section 94(1) on 01 November 2023 (CP (IB) No. 1054 (MB) 2023), which was dismissed as withdrawn on 13 October 2025 due to the non-production of the guarantee deed. After the moratorium from this petition lapsed, a court commissioner issued a possession notice on 10 January 2026, fixing physical possession for 06 February 2026. The appellant filed a second petition under Section 94 on 01 February 2026. The Resolution Practitioner appointed recommended admission, but the Adjudicating Authority dismissed it, finding the intent was not genuine insolvency resolution but to frustrate the possession process.

The NCLAT examined the timing and conduct. The first petition provided a two-year moratorium. The second petition was filed immediately after a possession notice was issued (10 Jan 2026, possession fixed for 06 Feb 2026, petition filed 01 Feb 2026). The appellant also sent an email on 02 February 2026 to the financial creditor intimating the commencement of the interim moratorium. The court found this pattern consistent with attempting to stall SARFAESI proceedings, not a bona fide attempt at resolution. The appellant had not attempted repayment in the two years after the demand notice or during the first PIRP.

The NCLAT relied on its precedents in Ashwani Kumar Oberoi v. State Bank of India & Ors. and Syed Sirajis Salikin Khadri vs. Edelweiss Asset Reconstruction Company Ltd. & Anr., which emphasize that initiating Section 94 proceedings after recovery has substantially progressed, particularly when coinciding with possession notices, can indicate an abuse of process to misuse the interim moratorium under Section 96.

Final Outcome

The NCLAT dismissed the appeal, upholding the Adjudicating Authority's order. It found no merit in the appeal and concluded that the appellant's actions were not a bona fide attempt at insolvency resolution but a tool to obstruct lawful recovery proceedings. There was no order as to costs.

Topics: Personal Guarantor Insolvency, SARFAESI Act, Abuse of Process