Non‑Invocation of Personal Guarantee Amounting to Absence of Default: NCLT Dismisses Insolvency Petition Against Guarantor u/s 95–99 of IBC [Read Order]
The NCLT clarified that a guarantor cannot be subjected to insolvency proceedings unless the guarantee is formally invoked. A statutory insolvency notice alone is insufficient to establish default.
![Non‑Invocation of Personal Guarantee Amounting to Absence of Default: NCLT Dismisses Insolvency Petition Against Guarantor u/s 95–99 of IBC [Read Order]](https://images.taxscan.in/h-upload/2026/06/11/2139953-noninvocation-personal-guarantee-amounting-nclt-mumbai-insolvency-petition-guarantor-taxscan.webp "Non‑Invocation of Personal Guarantee Amounting to Absence of Default: NCLT Dismisses Insolvency Petition Against Guarantor u/s 95–99 of IBC [Read Order]")
In a recent ruling, the National Company Law Tribunal (NCLT), Mumbai Bench, dismissed an insolvency petition filed by Think Hard India Private Limited against the personal guarantor of Seya Industries Ltd., holding that failure to invoke the personal guarantee meant no default had occurred under the Insolvency and Bankruptcy Code (IBC). In January 2020, corporate...
In a recent ruling, the National Company Law Tribunal (NCLT), Mumbai Bench, dismissed an insolvency petition filed by Think Hard India Private Limited against the personal guarantor of Seya Industries Ltd., holding that failure to invoke the personal guarantee meant no default had occurred under the Insolvency and Bankruptcy Code (IBC).
In January 2020, corporate debtor Seya Industries Ltd. obtained a secured business loan of ₹152 crore from Think Hard India Pvt. Ltd.. To safeguard repayment, Mr. Narendra Rajani executed a personal guarantee in July 2020. When Seya defaulted, the creditor claimed an outstanding debt of ₹412.55 crore as of September 2022.
A statutory demand notice in Form B was issued under Rule 7(1) of the IBC Rules, but it was addressed to Ms. Pooja Rajani instead of the guarantor. With no repayment forthcoming, the creditor filed an insolvency petition under Sections 95–99 of the Insolvency and Bankruptcy Code (IBC) against Mr. Rajani.
The financial creditor, Think Hard India Private Limited, argued that the corporate debtor had defaulted and that Mr. Rajani, as guarantor, was liable to pay. They relied on the statutory demand notice and his failure to respond as evidence of default. The Resolution Professional (RP), appointed by the Tribunal, also recommended admission of the petition, noting that the guarantor had not repaid the debt and had failed to provide proof of repayment.
The respondent, Narendra Rajani, countered that the guarantee was never properly invoked. He emphasized that the Form B notice was addressed to another person and lacked proof of service. He argued that without a formal invocation of the guarantee, his liability never crystallized, and therefore, no default could be attributed to him under the IBC.
The Tribunal examined the terms of the guarantee deed and found it to be an on‑demand guarantee. This meant the guarantor’s liability would arise only upon a specific written demand invoking the guarantee. The statutory Form B notice, being a procedural requirement for insolvency proceedings, did not amount to the invocation of the guarantee.
The bench comprising Ashish Kalia and technical member Charanjeet Singh Gulati also noted the absence of proof of service and that the notice was misaddressed. Relying on the NCLAT’s 2025 ruling in Deepak Kumar Singhania v. SBI, the Bench reiterated that a guarantor becomes a debtor only when the guarantee is invoked.
Since the guarantee was not separately invoked, no debt was legally due from the respondent. Without invocation, there was no default under the IBC. The Tribunal therefore held that the petition was not maintainable and dismissed it on 5 June 2026.Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
