The National Company Law Appellate Tribunal, in an order dated 23 January 2025, held that an application under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 for initiation of insolvency proceedings against a personal guarantor is maintainable before the NCLT even in the absence of any pending Corporate Insolvency Resolution Process or liquidation proceedings against the corporate debtor. The NCLAT Principal Bench dismissed the appellant's jurisdictional challenge, reinforcing the independent nature of personal guarantor insolvency provisions.
Background
Vistra ITCL (India) Ltd., acting as a trustee for debenture holders, filed an application under Section 95 of the IBC against Anita Goyal, a personal guarantor of Nivaya ASL Pvt. Ltd. (the principal borrower). At the time of filing, no CIRP or liquidation proceedings were pending or had been initiated against Nivaya ASL before any NCLT bench.
The appellant contended that in the absence of any proceedings against the corporate debtor before the NCLT, the application against the personal guarantor should have been filed before the Debt Recovery Tribunal (DRT), not the NCLT. This argument was based on a reading of Section 60(1) of the IBC, which provides that the NCLT shall be the adjudicating authority for insolvency of personal guarantors "where a CIRP or liquidation proceeding of a corporate debtor is pending."
The question before the NCLAT was whether the NCLT's jurisdiction over personal guarantor insolvency applications is contingent upon the existence of pending proceedings against the corporate debtor.
Key Holdings
The NCLAT ruled as follows:
NCLT jurisdiction not contingent on pending CIRP: Applications under Section 95(1) against personal guarantors are maintainable before the NCLT even where no CIRP or liquidation proceedings against the corporate debtor are pending, initiated, or concluded. The NCLT's jurisdiction to entertain such applications exists independently.
Earlier contrary decisions rejected: The NCLAT explicitly rejected earlier decisions of certain NCLT benches — including a Kolkata Bench decision — that had held otherwise, characterising those rulings as "illusionary and without any basis" in law.
Section 60(1) read purposively: The Tribunal interpreted Section 60(1) of the IBC to mean that where CIRP or liquidation of the corporate debtor is pending, the NCLT hearing that matter shall also adjudicate the personal guarantor's insolvency. However, this does not mean that the absence of such proceedings divests the NCLT of jurisdiction over the personal guarantor.
Consistency with prior NCLAT decisions: The ruling followed the reasoning in earlier NCLAT decisions including State Bank of India v. Mahendra Kumar Jajodia and Mahendra Kumar Agarwal v. PTC India Financial Services Ltd., consolidating the appellate tribunal's position on this jurisdictional question.
Implications for Practitioners
This decision provides important clarity for financial creditors and resolution professionals dealing with personal guarantor insolvency. Creditors can now file Section 95 applications against personal guarantors directly before the NCLT without the prerequisite of initiating CIRP against the corporate debtor, saving time and procedural complexity.
For personal guarantors and their counsel, the jurisdictional challenge route is now effectively foreclosed at the NCLAT level. Defence strategies must focus on substantive grounds — such as the validity of the guarantee, the quantum of debt, or the fulfilment of pre-conditions for invoking the guarantee — rather than forum objections.
Practitioners should also note that where CIRP proceedings against the corporate debtor are subsequently initiated, the personal guarantor's insolvency proceedings may need to be transferred to the same NCLT bench for coordinated adjudication.