Personal Property of Guarantors Cannot Be Transferred During CIRP of Corporate Debtor: NCLAT

The National Company Law Appellate Tribunal has held that the personal property of the Guarantors could not be transferred in the Corporate Insolvency Resolution Process of the Corporate Debtor, even though, their properties were mortgaged with the Financial Creditors. Officiating Chairperson AIS Cheema and Technical Member Alok Srivastava held under Section 61(3) of IBC that the Resolution Plan as approved by NCLT was in contravention of the provisions of law and there were material irregularities in exercise of powers by NCLT when it directed the Appellants that they shall enter into a Tripartite Agreement for transfer of the premises. Furthermore, the part of the order which said that the Financial Creditors were at liberty to proceed against the properties of the Promoters, was like a blank cheque given to proceed even with regard to any other property also of the Personal Guarantors. “In our view, without resorting to appropriate proceedings against the Personal Guarantors of Corporate Debtor this is irregular exercise of powers.”