Pledged assets can be auctioned by insolvency professionals: NCLT

NCLT Mumbai Bench said the promoters cannot be granted any relaxation under the IBC

A recent National Company Law Tribunal (NCLT) order has sent corporate lawyers and promoters into a tizzy. The NCLT’s Mumbai Bench has asked for the personal properties of promoters to be auctioned off even when the process of insolvency is pending before the insolvency professional.

The petition was filed by Schweitzer Systemtek India, invoking the Insolvency and Bankruptcy Code (IBC) with the NCLT, after it defaulted on a loan of Rs 4.5 crore given by Dhanlaxmi Bank. The suit was initiated by the promoter himself against the asset reconstruction company (ARC) after Dhanlaxmi Bank sold the loan to Phoenix ARC.