Insolvency & NCLTNational Company Law Tribunal, New Delhi
Personal Guarantor Insolvency under the IBC
Manuja Law Partners acts for promoters and directors who are personal guarantors of company loans, and for creditors proceeding against them, in insolvency applications under Part III of the Insolvency and Bankruptcy Code before the NCLT.
In short
A lender can start insolvency proceedings against a promoter or director who stood as personal guarantor for a company's loan by filing an application under Section 95 of the Insolvency and Bankruptcy Code, 2016 before the NCLT that has jurisdiction over the company, once the guarantor fails to pay after a demand. The NCLT first appoints a resolution professional, who examines the claim and reports under Section 99; only then does the tribunal decide, under Section 100, whether to admit or reject the application, after hearing the guarantor. The Supreme Court upheld this scheme in Dilip B. Jiwrajka v. Union of India (2023). Since the Insolvency and Bankruptcy Code (Amendment) Act, 2026, the interim moratorium under Section 96 no longer applies to a personal guarantor of a corporate debtor.
Why promoters end up before the NCLT personally
Indian lenders almost always ask promoters and directors to stand as personal guarantors for a company’s borrowing. When the company defaults, the lender can pursue the guarantor through a civil suit, the Debt Recovery Tribunal or SARFAESI action against any property mortgaged by the guarantor, and, since 1 December 2019, through insolvency under Part III of the Insolvency and Bankruptcy Code. The Supreme Court upheld the notification bringing personal guarantors of companies within the Code in Lalit Kumar Jain v. Union of India (2021).
The insolvency route is attractive to lenders because it puts the guarantor’s whole financial position under scrutiny and, if it ends in bankruptcy, carries serious personal consequences. For the guarantor, it is the most consequential of the creditor’s options.
How a Section 95 application runs
- Demand. The creditor demands payment from the guarantor, usually after recalling the company’s loan.
- Application. On non-payment, the creditor applies to the NCLT under Section 95, through a resolution professional or asking the tribunal to appoint one.
- Appointment. Under Section 97, the tribunal appoints the resolution professional. Dilip B. Jiwrajka (2023) held that this is an administrative step without adjudication.
- Examination. Under Section 99, the professional examines the application, may ask the guarantor to prove repayment, and reports to the tribunal recommending admission or rejection.
- Decision. Under Section 100, the tribunal decides, after hearing the guarantor, whether to admit the application.
- After admission. Creditors are invited to file claims, the guarantor may propose a repayment plan under Section 105, and the plan goes to a creditors’ meeting.
What changed in 2026
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 added Section 96(4), so that the interim moratorium that used to arise when an application was filed does not apply to a personal guarantor of a corporate debtor. Before the amendment, filing a Section 95 or Section 94 application froze legal actions against the guarantor’s debts; guarantors sometimes filed their own Section 94 applications for that protection. That shield is gone, and recovery proceedings against the guarantor can continue while the insolvency application is pending. Guarantors who relied on a pending application to hold off a lender should take advice on where they now stand.
Defending as a guarantor
The guarantor’s best opportunity is the Section 99 examination and the Section 100 hearing. Points we commonly test:
- The surety document. Its terms, any cap on the amount, whether it was continuing, and whether it covers the facility that is now in default.
- Discharge. Under the Indian Contract Act, a surety can be discharged by a variance in the terms of the contract without their consent (Section 133) or by the creditor’s release of the principal debtor (Section 134). Restructurings and fresh sanctions sometimes have this effect.
- Limitation. Whether the application is within three years of the right to apply accruing, taking account of any acknowledgments.
- The amount. Credits for recoveries from the company, from the company’s own insolvency, or from sale of security.
Acting for creditors
For lenders, the application should be supported by the surety document, the loan record, the demand on the guarantor and proof of non-payment, and should be filed with the company’s own case in mind. Coordination with the company’s NCLT proceedings matters, because distributions there reduce the claim against the guarantor.
Repayment plans
Where the claim is sound, a repayment plan under Section 105 can let the guarantor pay over time, keep some assets, and avoid bankruptcy. The plan needs more than three-fourths in value of the creditors present and voting under Section 111, and the tribunal’s approval. Realistic figures, verified by the resolution professional, are what get a plan through. Our corporate team helps where the plan involves sale of shares or restructuring of the guarantor’s other companies.
Speaking to us
Send the surety document, the loan and sanction letters, any demand or recall notice, and papers from the company’s insolvency or recovery cases. We tell you where the claim is vulnerable and whether a defence or a plan is the better course. Call or WhatsApp 99115 44811, or email manujalawyers@gmail.com.
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Why instruct this chamber
Acting for you in Delhi
Both sides of the table
We act for guarantors facing Section 95 applications and for creditors bringing them, which means we know where these cases are usually won or lost: in the resolution professional's report.
The company case and the guarantor case together
A guarantor's position depends on what happens to the company. We follow the company's insolvency, any resolution plan and any settlement, so the guarantor's strategy changes when the company's does.
Repayment plans that can be approved
Where a guarantor cannot defeat the claim, a repayment plan under Section 105 is often the better route. We prepare plans with figures the creditors can test.
Honest exposure
We tell a guarantor early what the claim is likely to be and what personal assets are at risk. No lawyer can promise that an application will be rejected, and we do not.
Common questions
NCLT questions — Delhi
Which tribunal hears insolvency of a personal guarantor of a company?
The NCLT, not the Debt Recovery Tribunal. Under Section 60(1) and (2) of the Code, the NCLT that has territorial jurisdiction over the place where the company's registered office is located also hears the insolvency or bankruptcy of its personal guarantors. For a company registered in Delhi, that is the NCLT at New Delhi.
Does approval of the company's resolution plan release the personal guarantor?
No. In Lalit Kumar Jain v. Union of India (2021) the Supreme Court held that approval of a resolution plan for the corporate debtor does not by itself discharge the personal guarantor's liability. The creditor can pursue the balance from the guarantor, subject to the terms of the plan.
Does the NCLT hear the guarantor before appointing a resolution professional?
No. Dilip B. Jiwrajka (2023) held that the tribunal's role at Section 97 is administrative: it appoints a resolution professional without deciding whether there is a debt. The guarantor is heard by the resolution professional during the Section 99 examination and by the tribunal before it decides under Section 100.
Is there still an interim moratorium when a guarantor's insolvency application is filed?
Not for a personal guarantor of a corporate debtor. The 2026 amendment added Section 96(4), under which the interim moratorium does not apply in that case, and courts have applied it to applications pending when it came into force. Recovery suits and SARFAESI action against the guarantor can therefore continue while the application is pending.
How long does the resolution professional have to report?
Ten days from appointment, under Section 99(1). In that period the professional examines the application, can call for evidence of repayment from the guarantor, and recommends admission or rejection. In practice the tribunal often allows more time, but the guarantor should respond to the professional's requests at once.
Can a guarantor file their own insolvency application?
Yes. A debtor, including a personal guarantor, can apply under Section 94 for an insolvency resolution process, either alone or through a resolution professional. This is sometimes done to bring all of the guarantor's creditors into one repayment plan.
What is a repayment plan in personal guarantor insolvency?
A proposal by the guarantor, prepared with the resolution professional under Section 105, for paying creditors over time or restructuring the debts. It is put to a meeting of creditors and needs the approval of a majority of more than three-fourths in value of the creditors present and voting under Section 111, and then the tribunal's approval.
What happens if the repayment plan is rejected?
The guarantor or a creditor can apply for a bankruptcy order under Part III, and a bankruptcy trustee then takes control of the guarantor's estate for distribution. Bankruptcy carries restrictions on the bankrupt, which is why a workable repayment plan is usually worth the effort.
Is there a limitation period for a Section 95 application?
Yes; the Limitation Act applies to proceedings under the Code through Section 238A. The period is generally treated as three years from when the right to apply accrues, which for a guarantor is usually when the creditor demands payment and the guarantor fails to pay. Acknowledgments of the debt can extend it.
Can the creditor proceed against both the company and the guarantor at once?
Yes. A surety's liability is co-extensive with that of the principal debtor under Section 128 of the Indian Contract Act, 1872, unless the contract provides otherwise, so a creditor need not exhaust remedies against the company first. Separate proceedings against both before the NCLT are common.
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- Telephone99115 44811
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