Congress MLC Naseer Ahmed faces disqualification as legislator as NCLT declares him ‘bankrupt’

The National Company Law Tribunal (NCLT), Bengaluru Bench, has declared Naseer Ahmed, a Congress member of the Karnataka Legislative Council, a “bankrupt” under the Insolvency and Bankruptcy Code (IBC) for failing to repay the ₹1,454 crore outstanding loan amount of his former company M/s, Bengal Garments is now liquidating.

Mr. Naseer’s declaration as a “bankrupt” now leads to his disqualification from the post of MLC under Section 140 of the IBC and Article 191(1)(a). (c) of the Constitution of India, which excludes an MLA or MLC if he is an “undischarged insolvent”.

Incidentally, Mr. Naseer was removed as Political Secretary (of the then Chief Minister Siddaramaiah) on charges of anti-party activities during the Davangere South Assembly poll.

Wife and son too

Meanwhile, the NCLT also declared his wife Nuzhat Aisha Naseer and son Awaiz Ahmed “insolvent” as they were also personal guarantors for the loan as former directors of the company of which Mr Naseer was the managing director before it was wound up following liquidation proceedings initiated in 2019.

A Bengaluru bench of the NCLT comprising Sunil Kumar Aggarwal (Judicial Member) and Radhakrishna Sreepadu (Technical Member) gave its approval on June 8 on a petition filed by State Bank of India, Canara Bank and IDBI Bank under IBC-2016.

The NCLT has appointed an insolvency professional, Ravindra Beleyur, as a receiver (BT) under Section 125 of the IBC to take over all the assets/properties of Mr. Naseer, his wife and son for recovery of debts owed to creditors.

Disqualification

From the date of commencement of bankruptcy, Section 140 of the IBC states that bankrupts are disqualified from being appointed or holding office as a public servant in addition to being disqualified under existing laws; to be appointed or act as a trustee or representative of any trust, estate or arrangement, to be elected to any public office or to be elected, sit or vote as a member of a local authority.

The declaration of bankruptcy imposes restrictions on Mr Naseer and others, such as preventing them from acting as any director of the company or participating in its promotion, formation or management. They cannot create charges or incur debt without sanction from BT. They must inform partners, must declare bankruptcy before specific transactions, cannot take legal action regarding debts without the approval of a judicial authority, and cannot travel abroad without permission.

Case background

Banks provided various credit facilities to the company for which Mr. Naseer, his wife and son stood as personal guarantors. After the company’s loan account was classified as a non-performing asset (NPA) in 2018, lenders initiated recovery proceedings. The personal guarantor insolvency resolution process was initially allowed by the NCLT in June 2022.

Although the NCLT gave adequate opportunities to Mr. Naseer and others to submit a resolution/repayment plan, they did not submit any plan on the basis of which the consortium of banks decided to treat the absence of a repayment plan as a “repayment plan” of “nil” value and proceeded with bankruptcy.

Meanwhile, the guarantors challenged the bankruptcy proceedings before the NCLT arguing that there was no privity agreement between them and the banks as they had not signed any guarantee deed in favor of the banks. The trio also claimed that the guarantee deed was signed in favor of the securities trustee, SBICAP Trustee Company, and not directly in favor of the banks.

The NCLT, however, rejected this contention pointing out that the creditor-guarantor relationship between the bank and them had already been established before it in 2022 and that status had acquired legal force. The NCLT also clarified that pending recovery proceedings before the Debt Recovery Tribunal do not preclude proceedings under the IBC as the remedies are independent and concurrent.

Published – 11 Jun 2026 20:47 IST