NCLAT affirms personal insolvency proceedings against guarantors despite ongoing CIRP of corporate debtor

The National Company Law Appellate Tribunal (NCLAT), New Delhi, in Neeta Saha Vs Assets Care & Reconstruction Enterprise Ltd., has upheld the initiation of personal insolvency resolution proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) against personal guarantors of a corporate debtor.

Multiple appeals filed by the personal guarantors were dismissed, and the common order dated 07.01.2025 passed by the National Company Law Tribunal, New Delhi Bench–II (Adjudicating Authority) was affirmed. That order had admitted Section 95 applications and commenced the individual insolvency resolution process against the guarantors.

Background of the loan and guarantees

Sanction and disbursement of term loan

  • The corporate debtor, M/s. Saha Infratech Pvt. Ltd., obtained a term loan facility of ₹90 crore from ECL Finance Ltd.
  • Disbursements were made over a period from 07.11.2017 to 24.10.2019.
  • The loan carried interest at 18.75% per annum, payable quarterly.

Execution of guarantees

  • The appellants, including Neeta Saha, executed irrevocable and unconditional corporate and personal guarantees on 22.09.2017.
  • Clause 3 of the Guarantee Agreement stipulated that upon any default by the borrower, the guarantor would be obliged, on demand and without demur, to pay all sums due under the facility agreement.

Default and initiation of CIRP

  • The financial creditor issued default notices to the corporate debtor on 02.04.2019 and 26.09.2019, recording failure to service the loan.
  • On an application filed by homebuyers under Section 7 of the IBC – “Indu Kumar & Ors. Vs Saha Infratech Pvt. Ltd.” – Corporate Insolvency Resolution Process (CIRP) against the corporate debtor was admitted on 28.02.2020.
  • Consequent to the admission of CIRP, the statutory moratorium under Section 14 came into effect for the corporate debtor.

Assignment of debt and claim in CIRP

  • A loan recall notice dated 23.03.2020 was subsequently issued by ECL Finance Ltd.
  • Under an Assignment Agreement dated 27.03.2020, ECL Finance Ltd. assigned the debt, along with all associated security and guarantees, to Assets Care & Reconstruction Enterprise Ltd. (ACRE).
  • In the CIRP of the corporate debtor, the assignee financial creditor filed a claim of ₹14,36,85,0,028/- (including interest as on 28.02.2020).
  • The Resolution Professional (RP) for the corporate debtor admitted ₹55,06,45,056/- out of this claim.
  • Dissatisfied with the rejection of the majority portion, the financial creditor filed I.A. No. 2275/2021 before the Adjudicating Authority, which is still pending adjudication.

Invocation of personal guarantees and Section 95 proceedings

Invocation of personal guarantees

  • On 14.03.2022, the financial creditor invoked the personal guarantees furnished by the appellants.
  • A demand of ₹189,44,24,774/- as on 28.02.2022 was raised from the personal guarantors, directing payment within 7 days of receipt of notice.
  • No payment was made by the guarantors pursuant to this invocation.

Statutory demand notice and filing under Section 95

  • A demand notice in Form B dated 17.11.2022 was served on the personal guarantors, claiming ₹229,61,30,615/- as on 03.09.2022.
  • As the debt remained unpaid, the financial creditor filed applications under Section 95 of the IBC on 02.01.2023, initiating proceedings against:
    • IB 78/ND/2023
    • IB 79/ND/2023
    • IB 82/ND/2023

Appointment of Resolution Professional and earlier appeal

  1. On 10.04.2023, the Adjudicating Authority appointed a Resolution Professional (RP) as Interim Resolution Professional (IRP) in the Section 95 proceedings.
  2. The personal guarantor Neeta Saha challenged this order in Comp. App. (AT) (Ins.) No. 692/2023 – “M/s. Neeta Saha Vs Assets Care & Reconstruction Enterprise Ltd.”
  3. By order dated 30.05.2023, NCLAT:
    • Allowed the appellant to file objections before the NCLT on or before 14.06.2023.
    • Directed that the IRP should not submit any report until the objections were considered.
  4. The appellant filed detailed objections on 13.06.2023.
  5. Subsequently:
    • The RP moved an application before NCLAT on 20.07.2024 seeking clarification of the order dated 30.05.2023.
    • NCLAT clarified that the RP could file a report under Section 99.
    • The appellants filed further objections on 14.10.2024.
    • The RP submitted a report dated 15.10.2024 under Section 99, recommending admission of the Section 95 applications.