Top Stories Insolvency Application against Personal Guarantor is Maintainable u/s 60(1) of IBC even in Absence of Pending CIRP against CD: NCLAT [Read Order] The tribunal noted that even in cases where the corporate debtor is not facing insolvency or liquidation proceedings before the NCLT, an application under section 95 may be made against the personal guarantor By Yogitha S. Yogesh – On January 26, 2025 1:59 pm – 3 mins read The National Company Law Appellate Tribunal ( NCLAT ) bench in New Delhi has ruled that, even in cases where the National Company Law Tribunal ( NCLT ) has not yet started or is in the process of liquidating a corporate debtor, an application under section 95 of the Insolvency and Bankruptcy Code (Code) against the personal guarantor may be maintained before the NCLT under section 60(1) of the code. The appellant, Anita Goyal, appealed a decision made by the adjudicating body that granted an application under section 95 and instructed the RP to proceed under the law.

The appellants argued that section 97(3) of the law did not apply to the RP’s appointment. According to section 97(3), the adjudicating authority had to instruct the IBBI to designate the RP for the insolvency resolution procedure. The NCLT should not consider an application to start an insolvency process against the personal guarantor. Expert-Led PF & ESIC Course – Enroll Now & Get Certified It was further contended that under section 60(1) of the Code, an insolvency application against the personal guarantor may be submitted to the NCLT even in the absence of any bankruptcy or liquidation proceedings against the corporate debtor. In contrast, the respondents argued that the appellant could not make issues in the current appeal since they had not been brought before the adjudicating authority regarding the NCLT’s jurisdiction. Additionally, it was maintained that the RP chosen by the adjudicating authority was qualified and eligible, and that there are currently no disciplinary actions against the RP. Referencing Rule 8 of the Personal Guarantors Rules, 2019, the tribunal noted right away that the AA had not erred in selecting the RP because, according to Form C, which was submitted by IRP, the RP had expressly consented and attested that no disciplinary actions were pending against him; thus, section 97(3) of the code had not been broken.

The tribunal’s next question was whether, in the absence of an ongoing bankruptcy or liquidation procedure against the corporate debtor, an application against the personal guarantor might be maintained before the NCLT under section 60 of the code. Expert-Led PF & ESIC Course – Enroll Now & Get Certified The tribunal held that the applicability of section 60(1) of the code cannot be ruled out which means that the Adjudicating Authority for the purpose of entertaining the application against the personal guarantor shall be the NCLT even if under section 60(2) of the code it is stated that when an insolvency or liquidation proceedings against the corporate debtor before the NCLT then application against the personal guarantor of the CD should also be filed before the NCLT.

The tribunal noted that the aforementioned completely addresses the current situation, meaning that even in cases where the corporate debtor is not facing insolvency or liquidation proceedings before the NCLT, an application under section 95 may be made against the personal guarantor. A two member bench of Justice Ashok Bhushan (Judicial Member) and Mr. Arun Baroka (Technical Member) concluded that “from the above it is clear that with regard to maintainability of Application under Section 95 by a Financial Creditor against a Personal Guarantor, even if no insolvency resolution process or liquidation proceedings of a Corporate Debtor is pending, has been held to be maintainable and the view taken by this Appellate Tribunal in Mahendra Kumar Jajodia has also received the approval of the Hon’ble Supreme Court.”