Mumbai: The National Company Law Tribunal (NCLT) in Mumbai has initiated an Insolvency Resolution Process against Jitendra Kikavat, the personal guarantor for a substantial bank loan given by Bank of Baroda. This action follows a petition filed under the Insolvency and Bankruptcy Code by the Bank of Baroda against Kikavat.
Kikavat had provided a personal guarantee for a bank loan amounting to Rs. 66,35,16,757.11, which was extended to M/s Mahavir Roads and Infrastructure Private Limited.
Kikavat, however, has opposed the insolvency proceedings against him, arguing that the Guarantee Letter was insufficiently stamped according to the Maharashtra Stamp Act, 1958. Kikavat's arguments also claim that the initiation of the Corporate Insolvency Resolution Process (CIRP) and the petition are impacting ongoing settlement negotiations with the Bank of India. Additionally, he contends that the amount claimed by the Bank of Baroda is unjustly inflated.
The NCLT rejected Kikavat's argument, citing the Supreme Court’s judgment in N.N. Global Mercantile vs. Indo Unique Flame & Ors. The Supreme Court clarified that under Section 35 of the Stamp Act, an instrument with insufficient stamp duty is not void but inadmissible in evidence. The NCLT noted that the non-payment of stamp duty is considered a curable defect as the Stamp Act provides a procedure for curing such defects, making it clear that the issue does not invalidate the guarantee but rather requires correction according to the established procedure.
The Tribunal, while rejecting Kikavat’s argument, stated, “The proceedings under the Insolvency and Bankruptcy Code (IBC) are not intended to enforce the guarantee but are meant for the resolution of the insolvency of the personal guarantor. Accordingly, we do not find any merit in this argument.”
The Bank of Baroda, in its application, stated that it had provided documents including a sanction letter, a deed of guarantee, and a demand notice invoking the guarantee concerning the unpaid debt owed by the corporate debtor, M/s Mahavir Roads and Infrastructure Private Limited. According to the guarantee deed, Kikavat is liable to pay Rs. 30,00,00,000 plus interest at a rate of 14.25% and other costs. A demand notice was issued by the petitioner requesting payment of Rs. 66,35,16,757.11, which includes unapplied interest and relevant charges. The respondent, Kikavat, did not respond to or make any payments following this notice.The bank thus had approached the NCLT in 2022, seeking relief in then case.
