The Jaipur Bench of the National Company Law Tribunal (NCLT) has held that proceedings under Section 94 of the Insolvency and Bankruptcy Code, 2016 are maintainable only where the applicant clearly satisfies the statutory character of a “personal guarantor to a corporate debtor.” Mere description of the applicant in loan documents as a “co-borrower” or “co-applicant,” without an independently established contract of guarantee and proof that such guarantee was invoked and remains unpaid, does not meet the legal threshold under Section 94 read with Section 5(22), Rule 3(e) of the 2019 Rules, and the notification bringing Part III into force for personal guarantors.
The Division Bench comprising Reeta Kohli (Judicial Member) and Kavita Bhatnagar (Technical Member) observed that for invoking jurisdiction under Sections 94 and 95 IBC, the debtor must be a personal guarantor to a corporate debtor, and this is a mandatory threshold requirement. The tribunal rejected the argument that co-borrowers and guarantors are merely commercial expressions or are analogous in liability.
The Bench specifically observed that a co-borrower is primarily liable for the debt obligation, whereas a guarantor becomes liable upon default by the borrower/co-borrower, and therefore the cause of action differs in each case. It accepted the core reasoning in the RP’s report that the debtor had failed to provide relevant guarantee deeds and that the material before the RP did not establish that he was unequivocally a personal guarantor within the meaning of the Code and the 2019 Rules.
The Tribunal found that no case had been made out for initiation of insolvency resolution process against Ankit Baldwa, took the Section 99 report on record, rejected the debtor’s objections to the report, and dismissed the Section 94 petition. It also held that the interim moratorium that had commenced on 27.05.2025 ceased from the date of the order.
Briefly, Ankit Baldwa had filed the Section 94 petition seeking initiation of insolvency resolution process on the basis that he was a personal guarantor to M/s Khushboo Marbles Private Limited, and that guarantee obligations had been invoked by creditors including Ugro Capital Limited, Axis Finance Limited and certain unsecured creditors. The debtor’s case is that Ugro Capital had issued recall notices in respect of two loan accounts and later issued notices under Section 138 of the Negotiable Instruments Act and e-auction sale notices under the Security Interest (Enforcement) Rules, 2002.
Axis Finance had issued recall notices, a SARFAESI Section 13(2) notice, a symbolic possession notice and a Rule 8(6) sale notice in relation to the relevant loan accounts. The debtor asserted a total default amount of Rs. 11.63 crores and claimed to fall within Rule 3(e) of the 2019 Rules because the guarantees had allegedly been invoked and remained unpaid.
The Resolution Professional sought information from the debtor and creditors, including guarantee deeds, invocation material and proof that the applicant was a personal guarantor within the meaning of the Code and Rules. The RP stated that although the debtor furnished certain loan agreements and sanction letters, no response was received to later emails specifically requiring submission of personal guarantee deeds, documentary evidence of status as personal guarantor, proof of invocation and a CIBIL report.
From creditor responses, Ugro Capital stated that Ankit Baldwa was not a guarantor and that no guarantee deed had been executed with him. SMFG stated that Ankit Baldwa and Prem Baldwa stood as co-borrowers, and that the facilities were unsecured. IDFC First Bank stated it had no relationship linked to the details mentioned by the RP.
The RP recommended rejection on the basis that Section 94 applies only to a “personal guarantor to corporate debtor”; no conclusive documentary evidence of any independently executed guarantee deed had been furnished; the documents referred to the applicant as “co-borrower” or “co-applicant”; and no substantiated invocation of a valid personal guarantee was shown. Axis Finance also filed a reply challenging maintainability on the ground that the debtor was a co-borrower and not a guarantor.
Appearances:
Advocate Nitesh Shrivastava, for Resolution Professional
Advocate Anurag Kalavatiya, Parul Singhal and Aayushi Jain, for Personal Guarantor
Advocates Param Agarwal, Vineet Sharma, Abhishek Bansal, Alok Garg, Ankit Sareen and Aman Yadav, for Creditors
