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

Order Date: 17 July 2026

Case Overview

The application (IA-118/2025) was filed by Resolution Professional Debashis Nanda seeking approval of a repayment plan submitted by personal guarantor Pawan Kumar Jain in the insolvency proceedings initiated by State Bank of India (IB-647/2023). The State Bank of India had filed the petition under Section 95 of the Insolvency & Bankruptcy Code, 2016 against Mr. Jain, who had provided personal guarantees for credit facilities of ₹98.15 crores sanctioned to Kotson's Pvt. Ltd. on 08.09.2020. The insolvency resolution process against Mr. Jain was commenced on 22.03.2024. The Resolution Professional received claims from four financial creditors totaling ₹187,54,22,003, which was later revised to ₹168,30,21,468 in admitted claims. The creditors were State Bank of India (₹134.90 crore, 80.16% voting share), Punjab National Bank (₹17.83 crore, 10.60%), Small Industries Development Bank of India (SIDBI) (₹14.78 crore, 8.79%), and ICICI Bank (₹0.76 crore, 0.46%).

The repayment plan proposed a settlement of ₹1.50 crores to be distributed among all unsecured financial creditors in proportion to their admitted claims, with State Bank of India receiving ₹1.20 crore, Punjab National Bank ₹0.16 crore, and SIDBI ₹0.14 crore. The funds were to be arranged through unsecured loans from friends and relatives and paid within 90 days of plan approval. The plan was approved by creditors representing 91.17% of voting share through e-voting conducted between 07.10.2024 and 10.12.2024.

SIDBI, the sole dissenting creditor with 8.83% voting share, objected specifically to Clause 6 of the repayment plan. This clause stipulated that SIDBI's show cause notice dated 19.04.2024 (which sought explanation why the borrower's account should not be classified as fraud) would be deemed withdrawn and all proceedings under it would stand abated upon approval of the repayment plan. SIDBI argued that it had already classified Kotson's account as fraud on 25.06.2024 and reported it to RBI on 01.07.2024, and had filed a complaint with the Central Bureau of Investigation on 29.08.2024. SIDBI contended that RBI guidelines prohibit compromise settlements that stop criminal complaints against fraudulent borrowers.

The tribunal noted that SIDBI had not challenged the commercial terms of the repayment plan but only the specific clause regarding withdrawal of the fraud proceedings. The Resolution Professional argued that SIDBI was estopped from objecting as it had previously voted in favor of a resolution plan for Kotson's Pvt. Ltd. (the corporate debtor) containing similar provisions, which had been fully implemented with SIDBI accepting the proceeds.

Final Outcome

The NCLT approved the repayment plan submitted by Pawan Kumar Jain, condoning the 25-day delay in filing the application. The tribunal directed the Resolution Professional to supervise implementation of the plan, including opening an escrow account, receiving funds, and distributing them to creditors. The tribunal specifically clarified that approval of the repayment plan does not operate as a waiver of any criminal proceedings, investigations, or prosecutions, and does not absolve any director, promoter, or personal guarantor from personal liability regarding criminal offences, fraud, or misfeasance. Upon full implementation, the personal guarantees given by Mr. Jain shall be released by the financial creditors.

Topics: Personal Guarantor Insolvency, Repayment Plan Approval, Fraud Classification Dispute