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NCLT admits personal insolvency application against Kishore Biyani

Mumbai: Mumbai’s bankruptcy court on Friday admitted Axis Trustee Services’ application to initiate a personal insolvency process against Future Group promoter, Kishore Biyani, said people aware of the development.

The admission of the application by the National Company Law Tribunal (NCLT) ensures moratorium on transactions of personal assets of the guarantor. But it does not give the resolution professional (RP) the right to take control of the personal assets of the guarantor.

Following the ruling, the RP will invite claims from lenders and also validate them.

After perusing the RP’s report, the tribunal will decide whether to admit or reject Axis Trustee’s application to proceed against Biyani.

Axis Trustee Services had on July 11 moved the tribunal through Vikram Trivedi, managing partner of law firm Manilal Kher Ambalal & Co., to recover about ₹600 crore under the personal guarantee clause of the bankruptcy law.

The division bench of judicial member Kishore Vemulapalli and technical member Anu Jagmohan Singh admitted Axis Trustee Services’ application in an oral order. A detailed order was not uploaded till the time of filing the story.”Apart from Axis Trustee Services, other lenders, including Catalyst Trusteeship, had also moved to the court with a similar petition; however, now all other petitions will become infructuous,” said a person involved in the case.The trustee company had argued that Biyani had personally guaranteed loans taken by some of the group companies, currently undergoing insolvency proceedings, which now the trustee company is trying to recover on behalf of lenders.

Future Retail, Future Enterprises, Future Supply Chain Solutions, and Future Lifestyle Fashions are among the key companies promoted by Biyani that are undergoing a corporate insolvency process.

“Any creditor or debtor himself can approach the NCLT for initiation of personal insolvency resolution process. If a creditor files, then either it can file it on its own or through a resolution professional. On filing of the application, the interim moratorium starts which puts a restriction on continuation of legal action and creditors cannot initiate any legal action against the corporate debtor,” said Ashish Pyasi, partner at Aendri Legal.

“After filing of the application, in the first stage, the NCLT appoints IRP for submitting his report recommending for approval or rejection of the petition. Second stage is admission or rejection of the petition based on recommendation of the IRP.”

Even as the provision of IBC permits lenders to recover dues from promoters by invoking personal guarantees, there is negligible recovery so far.

This is primarily because most promoters have moved the Supreme Court challenging the constitutional validity of the law. The matter is pending before the apex court.

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