Insolvency Plea Against Personal Guarantor Rejected as Guarantee Found Uninvoked and Liability Time‑Barred: NCLT Dismisses UCO Bank’s Petition [Read Order]

The National Company Law Tribunal (NCLT), Guwahati Bench, has dismissed an insolvency petition filed by UCO Bank against, holding that the personal guarantee was never invoked and the claim was barred by limitation.

The petition was filed under Section 95 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking initiation of insolvency proceedings against Mallika  Barooah, who had once guaranteed loans extended to Berial Engineers Pvt. Ltd., the corporate debtor. The bank claimed an outstanding debt of ₹148.67 crore as of January 2025.

Master Tax Audit & E-Filing for AY 2026–27 with Practical Reporting Insights | Click Here

Petitioner UCO Bank argued that Mallika  Barooah had executed a Letter of Guarantee in 2008 for a ₹145 lakh cash‑credit facility and continued to be liable even after subsequent loan enhancements. The bank relied on proceedings before the Debt Recovery Tribunal (DRT), which had issued a recovery certificate in 2018 following a compromise settlement.

The Resolution Professional (RP) appointed under Section 97 of the IBC reported that. Barooah had signed only the 2008 guarantee and was not a party to later sanction letters or settlements. The RP noted that no invocation of guarantee had been made before filing the insolvency petition and recommended rejection of the application.

Also Read:Amendment of GST Registration Post Tax Payment: Orissa HC directs petitioner to Deposit arrear Taxes [Read Order]

The respondent, Mallika Barooah, contended that she resigned as Director in March 2009 and was not involved in subsequent loan renewals or compromise proposals. She pointed out that the demand notice under the SARFAESI Act (12 Nov 2011) was not addressed to her, proving that the bank itself did not treat her as a guarantor. She further argued that the claim was time‑barred, as the recovery certificate dated 11 Apr 2018 had expired in 2021.

The Bench, comprising a Judicial member, Rammurti Kushawaha and technical member Yogendra Kumar Singh, found that the only guarantee executed by the respondent was dated 20 May 2008. Also noted that the demand notice of 2025 under Rule 7(1) of the Personal Guarantor Rules was merely procedural and did not amount to the invocation of the guarantee.

Citing the NCLAT ruling in State Bank of India v. Deepak Kr. Singhania, the Tribunal reiterated that a Rule 7(1) notice cannot substitute for a contractual invocation of guarantee.

The bench observed that “In view of the foregoing discussions and findings, this Tribunal is not satisfied that the requirements of Section 95 of the Insolvency and Bankruptcy Code, 2016 have been fulfilled so as to warrant initiation of Insolvency Resolution Process against the Respondent/Personal Guarantor. Consequently, in this context no default can be said to have arisen qua the Personal Guarantor and the application is not maintainable”.

Accordingly, the application filed by the Financial Creditor was rejected and disposed of.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates