In a recent decision, the National Company Law Appellate Tribunal (NCLAT) bench ruled that the moratorium under Section 14 and the suspension introduced by Section 10A do not bar the Corporate Insolvency Resolution Process(CIRP) against personal guarantors.

The Tribunal stated that merely because the company is going through this process, it does not mean that the personal guarantors are protected. The personal guarantors can still be held responsible for paying back the debts.

Neeta Saha, the petitioner, along with other guarantors, challenged the order passed by the NCLT, New Delhi Bench, on 7 January 2025, in which the Tribunal admitted Section 95 applications filed by Assets Care & Reconstruction Enterprise Ltd, the respondent, against them.

CIRP against the corporate debtor commenced on 28 February 2020, and the debt was later assigned to Assets Care in March 2020.

The petitioner’s counsel argued that the loan recall notice issued in March 2020 was invalid since the corporate debtor was already under the moratorium imposed by Section 14 of the Insolvency and Bankruptcy Code.

He further submitted that the alleged default date of 31 March 2020 fell within the suspension period under Section 10A and therefore could not be relied upon.

Section 10A of the Insolvency and Bankruptcy Code was introduced as a temporary COVID relief, and it says that even with Sections 7, 9, and 10, one cannot apply to start the insolvency resolution process for any company that defaults on a payment on or after 25th March 2020. This rule will be in place for six months. Maybe a bit longer, up to one year, depending on what is decided later.

The respondent’s counsel argued that defaults had occurred before CIRP, and that Section 10A suspension applied only to corporate debtors, not guarantors.

Counsel submitted that the invocation of guarantees in 2022 was valid and independent, and that the debt quantum exceeded ₹1 crore, satisfying the statutory threshold. Counsel also maintained that payments by co-guarantors had been applied in proportion, leaving substantial dues outstanding.

The Division Bench of Justice Ashok Bhushan(Chairperson)and Barun Mitra( Technical Member) observed that the Section 14 moratorium does not extend to personal guarantors, and that the Section 10A suspension was intended only for corporate debtors.

The court held that the NCLT had rightly admitted the Section 95 applications and dismissed the appeals filed by the guarantors. It clarified that the exact debt calculation could be determined during the repayment plan stage, but the threshold for admission was satisfied. The appeals were accordingly dismissed.