Mere Filing Of Personal Insolvency After SARFAESI Plea Doesn't Show Intent To Stall Recovery: NCLT Chennai
The National Company Law Tribunal (NCLT) at Chennai has recently observed that merely filing an insolvency petition after the initiation of proceedings under the SARFAESI Act does not, by itself, indicate an attempt to delay or obstruct recovery proceedings.
A coram of Judicial Member Sanjiv Jain and Technical Member Venkataraman Subramanian was hearing a petition filed by a personal guarantor seeking initiation of personal insolvency resolution proceedings under Section 94 of the Insolvency and Bankruptcy Code, 2016.
Rejecting the creditor's argument that it was intended to stall the debt recovery proceedings, the court observed, “Mere filing of petition subsequent to the initiation of proceedings under the SARFAESI Act, by itself, cannot lead to the conclusion that the present petition is intended as a tool for obstruction, particularly when the Petitioner otherwise satisfies the requirements for initiation of the insolvency process under the Code.” It observed.
The case related to SKS Hotel and Holding Private Limited, who had availed credit facilities from Indian Bank. To secure the loan, the personal guarantors executed an agreement of guarantee in November 2022.
The company failed to repay the loan. As a result, the bank declared the account as a non-performing asset and issued a demand notice to the guarantors in May 2025.
After the bank issued a possession notice under the SARFAESI Act in July 2025, one of the guarantors, Krithika Subramanian, filed an application before NCLT Chennai under Section 94 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of insolvency resolution proceedings against herself as a personal guarantor. The total outstanding debt was Rs.8.67 crores.
The NCLT appointed an Interim Resolution Professional, who later confirmed the existence of the debt and recommended admission of the petition.
Indian Bank opposed the petition alleging that it was filed only to delay the recovery proceedings initiated by the Bank.
Rejecting the plea of the bank, the tribunal observed that filing an insolvency petition after the initiation of proceedings under the SARFAESI Act does not mean that it was filed to stall the recovery proceedings.
The tribunal also noted that the personal guarantor had admitted her liability by signing the guarantee agreement. Though the Bank had initiated SARFAESI proceedings and taken possession of the secured assets, the assets had not yet been auctioned. That being the position the Tribunal held, the petition filed under Section 94 of IBC was maintainable.
Accordingly, the tribunal admitted the petition, appointed Ramela Rangasamy as the Interim Resolution Professional, and initiated insolvency resolution proceedings against Krithika Subramanian.
Case Title: Krithika Subramanian v. Indian Bank
Case Number: CP(IB)/257(CHE)/2025
Citation: 2026 LLBiz NCLT (CHE) 53
For Petitioner: A.S. Sathish Kumar, PCS
For IRP: Advocate M. Arjun
For Respondent: Advocate Pravin Kumar