NCLT Kochi Says Part III IBC Process Cannot Move Forward Without Guarantor’s Repayment Proposal
Introduction
The Kochi Bench of the National Company Law Tribunal held that in personal guarantor insolvency proceedings, the Resolution Professional cannot convene a creditors’ meeting in the absence of a repayment plan and must instead file a report recording such non-submission. Judicial Member Vinay Goel, by order dated 13 April 2026, held that where the debtor fails to submit a repayment plan despite opportunity, the statutory process under Section 114 of the Insolvency and Bankruptcy Code, 2016 cannot progress to the stage of creditor deliberation. The Tribunal treated such non-submission as effectively amounting to rejection of the repayment plan framework itself, discharged the Resolution Professional, closed the insolvency resolution process, and granted liberty to creditors to initiate bankruptcy proceedings against the personal guarantor.
Factual Background
The proceedings were initiated by State Bank of India against Sanam Basheer, the personal guarantor of Furnace Fabrica (India) Ltd. The insolvency resolution process commenced on 15 December 2025, following which the Resolution Professional issued a communication dated 22 January 2026 calling upon the guarantor to furnish a repayment plan along with financial particulars and supporting disclosures regarding assets and liabilities. Despite this communication, the personal guarantor failed to submit the required repayment proposal or relevant financial details. Meanwhile, State Bank of India and Exim Bank filed their claims, which were admitted by the Resolution Professional. In the Committee of Creditors meeting held on 4 March 2026, the creditors recorded the guarantor’s continued non-cooperation and specifically directed the Resolution Professional to place a report before the Tribunal concerning the non-submission of the repayment plan.
Procedural Background
The matter came before the Kochi Bench in the course of Part III IBC proceedings against a personal guarantor, after the Resolution Professional reported that no repayment plan had been submitted despite repeated opportunity. The Tribunal was therefore required to determine the procedural consequence of such failure, and specifically whether the statutory process could lawfully proceed to convening a creditors’ meeting under Section 114, or whether the insolvency resolution process itself had to be brought to a close.
Issues
1. Whether the Resolution Professional can convene a creditors’ meeting in the absence of a repayment plan submitted by the personal guarantor?
2. Whether failure to submit a repayment plan effectively amounts to rejection of the repayment plan mechanism under the Code?
3. Whether the Resolution Professional must instead file a report under the proviso to Section 114 of the IBC?
4. Whether creditors should be granted liberty to initiate bankruptcy proceedings against the personal guarantor after closure of the insolvency resolution process?
Contentions of Parties
The admitted creditors, including State Bank of India and Exim Bank, highlighted the continued non-cooperation of the personal guarantor, pointing out that despite formal notice and sufficient opportunity, no repayment plan or financial disclosure had been submitted. It was therefore submitted that the Resolution Professional was justified in approaching the Tribunal for directions. The Resolution Professional, in turn, submitted that in the absence of any repayment proposal, there was no statutory basis to convene a creditors’ meeting, since the purpose of such a meeting is to consider and vote upon the debtor’s repayment plan.
Reasoning and Analysis
The Tribunal examined the statutory scheme of Part III of the IBC governing insolvency resolution of personal guarantors, and held that the repayment plan is the foundational document around which the creditors’ meeting is convened. In the absence of such a plan, the statutory purpose of the meeting itself ceases to exist. The Bench observed that Section 114 contemplates a creditors’ meeting only for considering the repayment plan, and where no such plan is on record, the Resolution Professional has no option but to refrain from summoning the meeting. Instead, the correct course is to file a report stating that no repayment plan has been submitted and therefore no justification exists for convening the meeting.
The Tribunal further reasoned that the continued failure to submit a repayment plan effectively causes the collapse of the insolvency resolution stage itself, since the process cannot lawfully advance without the debtor’s proposal. Such non-submission was therefore treated as the practical equivalent of rejection of a repayment plan under the Code. Once this stage was reached, the Bench held that the only legally sustainable consequence was to close the insolvency resolution process and leave creditors at liberty to invoke the bankruptcy route, which remains the next statutory remedy available under the IBC framework.
Decision
The NCLT Kochi held that in the absence of a repayment plan, the Resolution Professional cannot convene a creditors’ meeting and must instead file a report under the proviso to Section 114 of the IBC. The Tribunal accordingly discharged the Resolution Professional, closed the personal guarantor insolvency resolution process, and granted liberty to creditors to initiate bankruptcy proceedings against Sanam Basheer.