Authority: National Company Law Tribunal (NCLT), New Delhi Bench, Court-III

Order Date: 17 July 2026

Case Overview

This application (IA-117/2025) was filed by Mr. Debashis Nanda, the Resolution Professional (RP), seeking approval of a repayment plan under the Insolvency and Bankruptcy Code (IBC), 2016 for Mr. Mohnish Jain, a personal guarantor to corporate debtor Kotson's Pvt. Ltd. The insolvency process against Mr. Jain was initiated by the State Bank of India (SBI) and commenced by the NCLT on 22 March 2024.

The total admitted debt against Mr. Jain was ₹168.30 crores, owed to four financial creditors: State Bank of India (SBI) (₹134.90 Cr, 80.16% vote share), Punjab National Bank (PNB) (₹17.83 Cr, 10.60%), Small Industries Development Bank of India (SIDBI) (₹14.78 Cr, 8.79%), and ICICI Bank (₹0.76 Cr, 0.46%).

The repayment plan, submitted jointly by three personal guarantors (Mohnish Jain, Pawan Jain, and Siddharth Jain), proposed a full and final settlement of ₹1.50 crores to be paid to the unsecured financial creditors within 90 days of the plan's approval. This amount was to be distributed proportionally: SBI (₹1.20 Cr), PNB (₹0.16 Cr), and SIDBI (₹0.14 Cr). Resolution process costs were to be paid in full separately, and a contingency reserve of ₹1.50 lakhs was set aside.

The plan was approved by creditors representing 91.17% of the vote share (SBI and PNB) in an e-voting process concluded by 10 December 2024. SIDBI, with an 8.83% vote share, was the sole dissenting creditor. Its objection was not against the commercial terms of the settlement but specifically against Clause 6 of the plan. This clause stipulated that upon approval and implementation of the plan, a show-cause notice dated 19 April 2024 issued by SIDBI (seeking to classify the borrower's account as fraud) would be deemed withdrawn, and all proceedings under it would stand abated.

SIDBI argued that the account of Kotson's Pvt. Ltd. had already been classified as 'fraud' and reported to the RBI on 1 July 2024, and a complaint had been filed with the Central Bureau of Investigation (CBI) on 29 August 2024. SIDBI cited RBI guidelines on fraud, which state that no compromise settlement is allowed unless it stipulates that criminal complaints will continue, and that penal measures apply to fraudulent borrowers.

The RP argued that the plan was approved by a majority under the commercial wisdom of creditors, that SIDBI was estopped from objecting as it had voted in favor of a resolution plan for the corporate debtor (Kotson's Pvt. Ltd.) containing a similar clause, and that the IBC has an overriding effect over other laws under Section 238.

Final Outcome

The NCLT bench allowed the application and approved the repayment plan. The tribunal condoned a 25-day delay in filing the application and took the RP's report under Section 112 of the IBC on record. It overruled SIDBI's objection, primarily on the grounds of estoppel, noting that SIDBI had accepted a resolution plan for the corporate debtor with an identical clause and had appropriated the proceeds from it.

The tribunal issued specific directions: The RP must supervise the plan's implementation, including operating an escrow account and distributing funds. The RP must file a final report upon implementation. Financial creditors must release the personal guarantees upon full implementation. Crucially, the order clarifies that the approval does not operate as a waiver for any excluded debts and explicitly states that it does not absolve, discharge, or release any director, promoter, or guarantor from personal liability regarding any criminal offence, fraud, or misfeasance committed by them. The order does not affect any ongoing or future criminal proceedings.

Topics: Personal Guarantor Insolvency, Debt Settlement, Fraud Classification