Authority: National Company Law Appellate Tribunal, Chennai Bench (Justice N. Seshasayee, Member (Judicial) and Jatindranath Swain, Member (Technical))
Order Date: 05 October 2026
Case Overview
The National Company Law Appellate Tribunal (NCLAT) at Chennai heard an interim application (IA No.1473/2026) in Company Appeal (AT) (CH) (Ins) No. 518/2026. The appellant is R. Radha, Director (Suspended) and Promoter of Hotel Radha Prasad Private Limited, based in Chennai. The respondents are S. Sephulohiniam and Palanigounder Eswaramoorthy, the Interim Resolution Professional (IRP) of Hotel Radha Prasad Private Limited.
The core legal issue concerns whether the Corporate Debtor (Hotel Radha Prasad Private Limited) can be treated as a guarantor in the context of the insolvency proceedings. The Tribunal raised a fundamental legal question regarding the validity of treating the principal borrower as a guarantor to itself, noting that such an arrangement may not be permissible under Section 126 of the Indian Contract Act, 1872, which typically requires three distinct parties for a valid contract of guarantee.
This jurisdictional question directly impacts whether the Tribunal can legally take cognizance of the debt and default alleged by the creditor based on the deed of guarantee presented. Given the substantive nature of this legal dispute, the Tribunal had previously passed an interim order staying the proceedings.
Final Outcome
The NCLAT maintained the interim stay on the Corporate Insolvency Resolution Process against Hotel Radha Prasad Private Limited. Both parties were directed to submit their pointed notes of submission specifically addressing this legal issue. The appeal has been listed for next hearing on 18 November 2026 for further consideration of this jurisdictional point of law.
Topics: Insolvency Proceedings, Contract Law Jurisdiction, Corporate Guarantee