NCLAT rejects appeals by Yes Bank co-founder Rana Kapoor’s wife against insolvency of four firms

The National Company Law Appellate Tribunal (NCLAT) recently dismissed four appeals filed by Yes Bank co-founder Rana Kapoor’s wife Bindu Kapoor against the initiation of insolvency proceedings against four companies where she was a director before suspension [Bindu Kapoor Vs Mamta Binani]

A bench of Officiating Chairperson Justice Yogesh Khanna and Technical Members Barun Mitra and Ajai Das Mehrotra upheld the National Company Law Tribunal (NCLT), New Delhi’s April 7 order admitting insolvency petitions against Imagine Estate Private Limited, Imagine Home Private Limited, Imagine Residence Private Limited and Imagine Habitat Private Limited.

“The impugned order suffers from no illegality and thus all above appeals are dismissed,” the NCLAT held in its November 6 judgment.

The insolvency petitions were filed by JC Flowers Asset Reconstruction Private Limited, which had acquired the lender’s rights under the loan and security documents.

The principal dispute concerned whether the four companies had merely provided assets as security for a ₹105 crore loan extended to Bliss House Private Limited or had also undertaken obligations as corporate guarantors.

This distinction determined whether the NCLT at New Delhi could hear the petitions despite the companies having their registered offices in Mumbai.

Kapoor argued that the companies were only hypothecators and had not executed corporate guarantees. She maintained that the insolvency petitions should have been filed in Mumbai.

However, Section 60(2) of the Insolvency and Bankruptcy Code (IBC) requires proceedings against a corporate guarantor to be brought before the NCLT where insolvency or liquidation proceedings against the principal corporate debtor are pending.

Bliss House was already undergoing insolvency proceedings before the NCLT, New Delhi. Its admission into insolvency has been upheld up to the Supreme Court, the appellate tribunal recorded.

Taking Imagine Estate’s case as the lead matter, the NCLAT examined the loan agreement and hypothecation deed together. It found that the documents imposed repayment obligations extending beyond the assets provided as security.

The loan agreement included hypothecators within the definition of “obligors”, made them jointly and severally liable for the dues, and required them to meet any shortfall from any source, the tribunal found.

“The Corporate Debtor’s liability is, therefore, not limited to the hypothecated assets, Clause 2.2.4 obliges the Obligors to make good any shortfall from any source,” it thus held.

Relying on the Supreme Court’s decision in China Development Bank v. Doha Bank QPSC, the NCLAT said the substance of the contractual obligations was decisive, irrespective of the terminology used.

It rejected Kapoor’s argument that the absence of the principal borrower’s signature on the hypothecation deed defeated the guarantee.

“It is settled law that a contract of guarantee can be recorded in multiple agreements, so long as the intent to stand as guarantor is clearly discernible,” the bench said.

Read together, the loan agreement and hypothecation deed established an arrangement between the borrower, creditor and surety, it held.

The tribunal further noted that Kapoor herself had executed the loan agreement on behalf of Bliss House and the hypothecation deed on behalf of the corporate debtor.

“As a common director of both companies under RAB Enterprises, the Appellant cannot now raise such contentions,” it observed.

Having upheld the companies’ status as corporate guarantors, the NCLAT ruled that the proceedings were maintainable before the NCLT's New Delhi bench.

Senior Advocate Krishnendu Datta with advocates Abhay Chattopadhyay, Udipto Koushik Sarmah, Kumar Shubham and Harsh Gurbani represented Kapoor.

Senior Advocate Abhijeet Sinha and advocates Ritesh Kumar, Sidhant Kumar Marwah, Jasmeet Singh, Shivam Sharan, Pushpendra Kumar, Naman Gowda, Siddhant Ahirwal, Lahar Jain and Ekssha Kashyap represented JC Flowers.

Advocates Sandeep Bajaj, Aakanksha Nehra, Shubham Jaiswal and Sanya Mann represented insolvency professional Mamta Binani, who also appeared in person.

[Read Judgment]