Key Facts
The National Company Law Tribunal (NCLT), Bengaluru Bench, has declared Congress MLC Naseer Ahmed as bankrupt under the Insolvency and Bankruptcy Code (IBC) for failing to repay an outstanding loan of ₹1,454 crore. The loan was taken by his erstwhile company M/s Scotts Garments Limited, which has since been liquidated.
The order was passed on June 8 by a bench comprising Sunil Kumar Aggarwal (Judicial Member) and Radhakrishna Sreepada (Technical Member). The application was filed by State Bank of India, Canara Bank, and IDBI Bank.
Details of the Case
The banks had extended credit facilities to Scotts Garments, with Naseer Ahmed, his wife Nuzhat Aisha Naseer, and son Awaiz Ahmed acting as personal guarantors. After the loan account was classified as a Non-Performing Asset (NPA) in 2018, recovery proceedings began. The insolvency resolution process against the personal guarantors was admitted in June 2022.
Despite multiple opportunities, the guarantors failed to submit any repayment plan. The consortium of banks then treated the absence of a plan as a 'deemed repayment plan' with nil value and sought bankruptcy declaration.
Impact on Naseer Ahmed's Political Career
The bankruptcy declaration leads to his disqualification from the Karnataka Legislative Council under Section 140 of the IBC and Article 191(1)(c) of the Constitution, which disqualifies an undischarged insolvent from being an MLA or MLC. Notably, he was earlier removed as political secretary to the then Chief Minister Siddaramaiah amid allegations of anti-party activity during the Davangere South Assembly bypoll.
Restrictions Imposed
From the bankruptcy commencement date, Naseer Ahmed and his family members face several restrictions:
- Cannot be appointed or act as a public servant
- Cannot be elected to any public office
- Cannot act as a company director or participate in management
- Cannot create charges or incur debt without the Bankruptcy Trustee's sanction
- Cannot travel abroad without permission
The NCLT has appointed Ravindra Beleyur as Bankruptcy Trustee to take custody of their assets for recovering dues.
Legal Arguments Rejected
The guarantors argued that there was no direct contract with the banks as the guarantee deed was executed in favor of SBICAP Trustee Company. However, the NCLT rejected this, noting that the creditor-guarantor relationship was already established in 2022 and had attained finality. The tribunal also clarified that pending recovery proceedings before the Debts Recovery Tribunal do not bar IBC proceedings.
FAQ
Why was Naseer Ahmed declared bankrupt?
He failed to repay ₹1,454 crore loan of his company M/s Scotts Garments Limited, leading to bankruptcy declaration by NCLT.
What are the consequences of being declared bankrupt?
He is disqualified from being an MLC under Section 140 of IBC and Article 191(1)(c) of the Constitution. He also faces restrictions on holding public office, managing companies, and traveling abroad.
Who else was declared bankrupt along with Naseer Ahmed?
His wife Nuzhat Aisha Naseer and son Awaiz Ahmed were also declared bankrupt as personal guarantors.