The National Company Law Appellate Tribunal, New Delhi, in early April 2025, settled a contentious jurisdictional question by holding that an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 is maintainable against an order passed by the NCLT under Section 100 initiating the insolvency resolution process against personal guarantors. The Tribunal clarified the appellate structure applicable to personal guarantor insolvency proceedings under Part III of the Code.
Background
The appeals arose from proceedings initiated by the State Bank of India against the personal guarantors of M/s. Bhushan Power and Steel Limited. SBI filed applications under Section 95 of the IBC before the NCLT Principal Bench, New Delhi, seeking to initiate the insolvency resolution process against the personal guarantors. The NCLT admitted the applications under Section 100, triggering the insolvency process.
The personal guarantors challenged the admission order before the NCLAT. A preliminary jurisdictional objection was raised as to whether Section 61 -- which textually applies to orders under Part II (corporate insolvency) -- could be invoked against orders under Part III (personal insolvency). The IBC's appellate framework for personal guarantor insolvency had remained ambiguous, creating uncertainty for litigants.
Key Holdings
The NCLAT addressed the jurisdictional issue with the following observations:
Section 60(1) as the connecting provision: The Tribunal noted that Section 60(1) expressly designates the NCLT as the Adjudicating Authority for personal guarantors to corporate debtors. This provision procedurally aligns personal guarantor insolvency with the corporate insolvency framework under Part II.
Appellate structure follows adjudicatory structure: The NCLAT held that the jurisdiction conferred upon the NCLT under Section 60 is not merely procedural but carries appellate consequences. Since the NCLT exercises jurisdiction in these matters as part of the integrated framework under Section 60, appeals against such orders lie before the NCLAT under Section 61.
No appellate vacuum: The Tribunal observed that interpreting the statute to deny appellate recourse against Section 100 orders would create an unacceptable lacuna, depriving personal guarantors of any meaningful right of appeal against a significant order affecting their property and liberty.
The NCLAT, while establishing this jurisdictional principle, ultimately dismissed the appeals on merits.
Implications for Practitioners
This ruling resolves a practical difficulty that personal guarantors and their counsel have faced since Part III provisions were operationalised. The absence of a clear appellate pathway had resulted in conflicting approaches across NCLT benches, with some personal guarantors resorting to writ petitions before High Courts as an alternative remedy.
Practitioners representing personal guarantors should note that the 30-day limitation period under Section 61 now clearly applies from the date of the NCLT order under Section 100. Guarantors who have been proceeding under writ jurisdiction may wish to reconsider their strategy in light of this clarification.
For financial creditors initiating personal guarantor proceedings, this ruling means that admission orders under Section 100 are now appellable, potentially introducing an additional layer of challenge at the NCLAT stage before the insolvency process advances. Resolution professionals appointed in personal guarantor matters should factor this appellate timeline into their process management.