Pranav B Prem

The National Company Law Tribunal (NCLT), Kochi Bench, comprising Justice Vinay Goel (Member-Judicial) and Madhu Sinha (Member-Technical), has held that any private or unregistered agreement between shareholders, corporate debtors, and guarantors has no binding effect on financial institutions unless the latter are parties to such agreements and have explicitly consented to them. The Tribunal clarified that shareholders and guarantors cannot seek intervention in a Corporate Insolvency Resolution Process (CIRP) based on such private documents, as doing so would undermine the statutory scheme of the Insolvency and Bankruptcy Code, 2016 (IBC).

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In the case at hand, the CIRP of Furnace Fabrica (India) Limited was in progress when certain shareholders and guarantors filed intervention applications claiming ownership over some assets of the corporate debtor. Their claim was based on a Memorandum of Understanding (MoU) and addendums executed privately between the parties, which purportedly required the transfer of the Kandla SEZ business to the applicants. The applicants alleged that despite obtaining all regulatory approvals, the respondents delayed the transfer, which led to financial liabilities unjustly being imposed on them. They contended that assets belonging to their subsidiaries were wrongly included in the liquidation estate and sought to exclude such properties from the CIRP proceedings.

The applicants argued that the MoU constituted a binding and enforceable agreement and that the assets in question were rightfully theirs. They submitted that the inclusion of such properties in the CIRP estate violated Sections 18 and 36(4) of the IBC, which outline the duties of the resolution professional in taking control of only the corporate debtor’s assets. It was also argued that the failure to issue notices to the subsidiaries amounted to a violation of Regulation 9A of the CIRP Regulations and breached the principles of natural justice. The applicants therefore sought exclusion of these assets and requested the Tribunal to intervene in the resolution process to ensure that their ownership rights were protected.

The Resolution Professional (RP), however, opposed the applications, asserting that the applicants lacked locus standi as they were neither creditors nor participants in the CIRP. It was further submitted that the MoU and its addendums were private, unregistered documents, not backed by any board resolutions, statutory disclosures, or regulatory compliances. The RP argued that the applicants were attempting to obstruct and delay the resolution process by relying on unenforceable and time-barred agreements. He also clarified that the properties in question formed part of the corporate debtor’s balance sheet and were duly mortgaged to financial institutions; therefore, any claim based on the private MoU could not override the rights of secured creditors recognized under the IBC.

After hearing both sides, the Tribunal observed that the applicants had no locus standi to intervene in the CIRP since they were not creditors, financial or operational, nor did they hold any recognized stake in the ongoing proceedings. It emphasized that the MoU and addendums were neither registered under the Registration Act, nor executed pursuant to any board resolutions, nor supported by proof of stamp duty or tax compliance. The documents were never disclosed to statutory authorities or filed with the Registrar of Companies, and hence lacked any legal force.

The Bench further noted that the applicants’ reliance on the MoU was misplaced because such private contracts cannot supersede statutory rights of creditors under the IBC. The Tribunal remarked that the CIRP process operates within a well-defined statutory framework that gives primacy to the claims of financial creditors and the powers of the Committee of Creditors (CoC). Allowing private, unregistered agreements to interfere with this process would defeat the purpose of insolvency resolution and open the door for frivolous interventions.

In its detailed findings, the Bench stated, “Any private arrangement between corporate debtors, borrowers, and guarantors will not bind financial institutions unless such institutions are parties to the arrangement and have expressly consented to it.” The Tribunal also held that even if the applicants were guarantors, the financial creditors were free to proceed against them separately under the IBC and other applicable laws. The CIRP, it said, cannot be stalled or modified to accommodate such external agreements.

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Ultimately, the NCLT Kochi Bench dismissed both IA(IBC)/93/KOB/2024 and Intervention Petition (IBC)/1/KOB/2025, holding that the applicants’ claims were devoid of merit and unsupported by law. The MoU and its addendums, being private and unregistered, were deemed unenforceable. The Tribunal concluded that the applicants lacked locus standi to intervene in the CIRP of the corporate debtor and that private agreements cannot override or interfere with the statutory insolvency proceedings. Accordingly, the applications were dismissed, and the Tribunal directed the Registry to communicate the order to all concerned parties, thereby reaffirming that the sanctity of the CIRP process cannot be compromised by unregistered and extraneous private arrangements.

Appearance

For the Applicant: Ld. Sr. Counsel Mr. Aravind Pandian & Mr. Akhil Suresh

For R1/RP: Mr. Pulkitesh Dutt Tiwari

For R2 to R5: Mr. Rohan Kumar

Cause Title: Dr. Badri Prasad and Ors. Vs. Alok Kumar Agarwal, RP of Furnace Fabrica (India) Ltd. and Ors.

Case No: IA(IBC)/93/KOB/2024 IN CP(IBC)/14/KOB/2023

Coram: Justice Vinay Goel (Member-Judicial), Madhu Sinha (Member-Technical)