NCLAT issues rulings on insolvency moratoriums and board control

The National Company Law Appellate Tribunal (NCLAT) has issued two significant rulings regarding the application of the Insolvency and Bankruptcy Code (IBC) in India.

In the first case, the NCLAT ruled that a financial bank guarantee can be encashed even during a corporate insolvency moratorium. The tribunal set aside an order that had prevented Bharat Aluminium Company Limited from invoking a ₹1.60 crore guarantee issued by a bank for the obligations of J. P. Engineers Private Limited. The NCLAT emphasized that a surety’s assets are distinct from those of the corporate debtor and that statutory amendments exclude such sureties from the Section 14(1) moratorium.

In a separate matter, the NCLAT set aside an insolvency admission against Polycab India Limited, restoring board-led operations. The tribunal reversed a decision by the NCLT Ahmedabad Bench regarding a petition filed by Asier Metals Private Limited for approximately ₹27.87 million related to aluminum ingot supplies. The NCLAT found that a payment dispute existed prior to the statutory demand notice, thereby ending the corporate insolvency resolution process against Polycab.