Authority: National Company Law Appellate Tribunal, Chennai (Justice N. Seshasayee - Member (Judicial) and Jatindranath Swain - Member (Technical))

Order Date: 17 August 2026

Case Overview

The appeal challenges the order initiating bankruptcy proceedings against appellants M. Shanmugam and S. Chandra, who are personal guarantors to Tamilnad Mercantile Bank Limited (Financial Creditor). The proceedings were initiated under Section 94 of the Insolvency and Bankruptcy Code (IBC) by the appellants themselves.

The appellants' counsel submitted that they had already repaid Rs. 1 crore to the financial creditor as directed by the Tribunal and promised to deposit an additional Rs. 5 crore toward repayment. They emphasized their ongoing efforts to repay debts and engagement in talks with the bank. The appellants sought stay of the bankruptcy trustee's auction of their property scheduled for 20 August 2026.

The financial creditor's counsel opposed the stay, stating the total liability is approximately Rs. 12 crore and accusing the appellants of delaying their repayment obligations. They highlighted that the appellants had never submitted any repayment plan and were only making payment promises when their property faced imminent auction. The bank revealed that appellants had been granted time until June 2026 to settle the entire matter but failed to comply.

The Tribunal considered that if the promised Rs. 5 crore payment is made, the appellants would have paid about 50% of their total liability. Referring to Section 142(1)(b) of the IBC, which gives tribunals authority to discharge bankruptcy proceedings, the bench noted that payments being made should be encouraged. While acknowledging the appellants' failure to meet their June 2026 undertaking, the Tribunal found their current promise to deposit Rs. 5 crore encouraging enough to grant relief.

Final Outcome

The Tribunal conditionally stayed the auction scheduled for 20 August 2026, subject to the appellants depositing Rs. 5 crore with the financial creditor by 18 August 2026. If this payment is not made by the deadline, the bankruptcy trustee will be free to proceed with the sale of the appellants' personal assets. The appeals are listed for next hearing on 7 September 2026 to monitor compliance.

Topics: Personal Guarantor Insolvency, Bank Debt Recovery, Auction Stay