Karnataka Congress MLC Naseer Ahmed declared bankrupt by NCLT over ₹1,454 crore default
Synopsis
A sitting Karnataka MLC now faces the loss of his legislative seat after the NCLT declared him bankrupt over a ₹1,454.71 crore loan default — a constitutional tripwire that could disqualify him as an 'undischarged insolvent'. The ruling compounds an already turbulent political chapter for Naseer Ahmed, who was stripped of his role as Political Secretary just weeks ago for allegedly working against his own party.
Key Takeaways
The NCLT Bengaluru Bench declared Congress MLC Naseer Ahmed bankrupt on 12 June 2025 over a ₹1,454.71 crore loan default by M/s Scotts Garments Limited .
The bankruptcy order was sought by SBI , Canara Bank , and IDBI Bank under the Insolvency and Bankruptcy Code, 2016 .
Ahmed's membership in the Karnataka Legislative Council is at risk under Article 191(1)(c) of the Constitution, which disqualifies 'undischarged insolvents'.
The NCLT has appointed a bankruptcy trustee ; the next hearing is scheduled for 6 August .
Ahmed was removed as Political Secretary to CM Siddaramaiah on 13 April 2026 after allegedly working against the Congress candidate in the Davanagere South bypoll .
The National Company Law Tribunal (NCLT), Bengaluru Bench, has declared Congress MLC Naseer Ahmed bankrupt in connection with a loan default of ₹1,454.71 crore owed by Bengaluru-based M/s Scotts Garments Limited, for which Ahmed had stood as a personal guarantor. The order, passed on Friday, 12 June, has cast a serious disqualification cloud over his membership in the Karnataka Legislative Council.
What the NCLT Order Says
The tribunal passed the bankruptcy order while hearing a petition filed jointly by State Bank of India (SBI), Canara Bank, and IDBI Bank under the Insolvency and Bankruptcy Code (IBC), 2016. The lenders had approached the NCLT under Section 121(b) of the IBC, read with Rule 7 of the Insolvency and Bankruptcy Rules, 2019, seeking initiation of bankruptcy proceedings against Ahmed in his capacity as personal guarantor to the corporate debtor.
The banks claimed a total default of ₹1,454,71,57,019 — approximately ₹1,454.71 crore. The loan accounts of Scotts Garments Limited had previously been classified as non-performing assets (NPAs) by all three lenders. Allowing the petition, the tribunal observed that the application met all requirements under the IBC and ordered commencement of bankruptcy proceedings.
'The petition filed by SBI is allowed and disposed of. Accordingly, bankruptcy proceedings are initiated against the personal guarantor,' the order stated.
Disqualification Risk Under the Constitution
Legal experts indicate that the bankruptcy declaration could expose Ahmed to disqualification as an MLC under Article 191(1)(c) of the Constitution of India, which bars an 'undischarged insolvent' from holding membership of a state legislature. Section 140 of the IBC is also cited as a relevant provision. However, experts note the disqualification would be subject to the interpretation and application of these provisions — a determination that could invite legal challenge.
The NCLT has appointed a bankruptcy trustee and listed the matter for further proceedings on 6 August, when the trustee is expected to submit a report. The next hearing will be closely watched by both legal observers and political circles in Karnataka.
Ahmed's Political Troubles Predate the Bankruptcy Order
The NCLT ruling adds to a string of political setbacks for Ahmed. He was earlier removed from his position as Political Secretary to then Chief Minister Siddaramaiah following allegations of anti-party activities during the Davanagere South Assembly by-election.
On 13 April 2026, the Department of Personnel and Administrative Reforms issued a formal notification relieving Ahmed of his duties. The action was taken at the behest of the Congress high command after Ahmed reportedly refused to step down voluntarily. The party alleged that Ahmed, along with other leaders, worked against the official Congress candidate during the 9 April 2026 Davanagere South bypoll.
What Happens Next
The immediate question is whether the Karnataka Legislative Council or the Election Commission of India will initiate disqualification proceedings on the basis of the NCLT order. Legal experts caution that the process is not automatic — a formal petition or reference would likely be required. The bankruptcy trustee's report due on 6 August will be a key milestone in determining the trajectory of both the insolvency proceedings and Ahmed's legislative future.
Point of View
Only the status of 'undischarged insolvent', making disqualification a real and proximate risk rather than a distant legal theory. What makes this politically layered is that Ahmed was already estranged from the Congress high command over the Davanagere bypoll; the bankruptcy order now gives the party institutional cover to accelerate his exit without a messy internal disciplinary process. The broader signal for Karnataka politics: personal guarantees on large corporate loans are a liability that can cross over from the boardroom into the legislative chamber, and this case may prompt scrutiny of other legislator-guarantors across parties.
NationPress
9 Aug 2026
Frequently Asked Questions
Why was Congress MLC Naseer Ahmed declared bankrupt by the NCLT?
The NCLT Bengaluru Bench declared Naseer Ahmed bankrupt because he had stood as a personal guarantor for loans of ₹1,454.71 crore availed by M/s Scotts Garments Limited from SBI, Canara Bank, and IDBI Bank. After the company defaulted and the loans were classified as NPAs, the banks petitioned the NCLT under the Insolvency and Bankruptcy Code, 2016, leading to the bankruptcy order against Ahmed as personal guarantor.
Can Naseer Ahmed be disqualified as an MLC following the bankruptcy order?
Legal experts say the bankruptcy declaration could trigger disqualification under Article 191(1)(c) of the Constitution of India, which bars an 'undischarged insolvent' from holding membership of a state legislature. However, disqualification is not automatic — it would require a formal petition or reference, and the legal provisions are subject to interpretation and potential challenge in court.
What is the next step in the NCLT proceedings against Naseer Ahmed?
The NCLT has appointed a bankruptcy trustee and scheduled the next hearing for 6 August, when the trustee is expected to submit a report. That hearing will be a key milestone in determining the course of the insolvency process and, by extension, Ahmed's legislative future.
What is M/s Scotts Garments Limited and how is it connected to Naseer Ahmed?
M/s Scotts Garments Limited is a Bengaluru-based company that availed loans from a consortium of SBI, Canara Bank, and IDBI Bank. Naseer Ahmed had provided a personal guarantee for those borrowings. When the company failed to repay the dues and the accounts were classified as NPAs, the lenders initiated bankruptcy proceedings against Ahmed in his capacity as personal guarantor.
Why was Naseer Ahmed removed as Political Secretary to Chief Minister Siddaramaiah?
Ahmed was removed from the post of Political Secretary to then Chief Minister Siddaramaiah on 13 April 2026 after the Congress high command alleged he worked against the party's official candidate during the Davanagere South Assembly by-election on 9 April 2026. He reportedly refused to step down voluntarily, prompting the Department of Personnel and Administrative Reforms to issue a formal notification relieving him of his duties.
