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Legal Case Shots

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Legal Case Shots is a searchable database of Supreme Court of India judgments, each broken down into the case type, the court's key holding, and a practical lesson learnt, with the full judgment available as a PDF for citation or deeper reading.

Company & Insolvency LawSupreme Court of India

Bank of Baroda & Anr. vs. MBL Infrastructures Limited & Ors.

Civil AppealDecided 18 Jan 2022
Civil Appeal No. 8411 of 2019
Sanjay Kishan Kaul · M.M. Sundresh

Background

MBL Infrastructures Limited defaulted on loans from a consortium of banks, and its promoter, Anjanee Kumar Lakhotiya, had furnished personal guarantees that some banks invoked before insolvency proceedings began. After RBL Bank triggered corporate insolvency resolution under Section 7 of the IBC, the promoter submitted a resolution plan that was eventually approved by the Committee of Creditors, even after Section 29A (which disqualifies certain persons, including guarantors whose guarantees have been invoked, from submitting resolution plans) was introduced and later amended. The National Company Law Tribunal and the National Company Law Appellate Tribunal had held the promoter was not disqualified because his guarantee liability had not "crystallised," prompting Bank of Baroda (a dissenting creditor) to appeal to the Supreme Court on the scope of Section 29A(h).

Decision Breakdown

The Supreme Court held that Section 29A(h) is triggered by the mere existence of an enforceable personal guarantee that has been invoked by any creditor once an insolvency application is admitted. It need not be invoked specifically by the creditor who filed the application, since insolvency proceedings are proceedings "in rem" benefiting the class of creditors as a whole. Applying this, the Court found the promoter's guarantees had indeed been invoked by three financial creditors before the resolution plan was submitted, so his plan should not have been entertained, and the lower forums were wrong to treat the issue as barred by the earlier withdrawal of a related appeal (since no adjudication on merits had occurred then). However, on the specific facts: the plan having already secured the required creditor majority, remained operational since April 2018 with fresh capital infused, and safeguarding the interests of over 23,000 shareholders and thousands of employees. The Court declined to unwind the resolution plan, noting dissenting creditors' interests remained protected through liquidation-value payouts. The appeal was disposed of without disturbing the ongoing resolution plan, even though the promoter was technically ineligible under Section 29A(h).

Lesson Learnt

A person who has given a personal guarantee that any creditor has invoked becomes ineligible under Section 29A(h) of the IBC to submit a resolution plan for the defaulting company, but courts may still decline to unwind an already-implemented, broadly-approved resolution plan where doing so would harm employees, shareholders and an ongoing business, showing that legal ineligibility and practical relief can diverge once a plan is far along.

Bank of Baroda & Anr. vs. MBL Infrastructures Limited & Ors. – Legal Case Shots | LegalAware