Simultaneous Insolvency Against Borrower and Guarantor Permissible: NCLT Admits Axis Bank’s ₹5.7 Crore Plea Against IMOST Academy [Read Order]

The National Company LawTribunal (NCLT), Kochi Bench, has held that insolvency proceedings can be initiated simultaneously against both borrower and guarantor, while admitting Axis Bank Ltd’s petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against IMOST Academy (India) Private Limited over a ₹5.7 crore loan default.

IMOST Academy, a privately owned educational institution in Ernakulam, Kerala, had availed multiple credit facilities from Axis Bank between 2019 and 2022. These included a ₹6.5 crore term loan and ₹75 lakh working‑capital facility under the SME Plus Scheme, followed by additional loans under the government’s Emergency Credit Line Guarantee Scheme (ECLGS) totalling over ₹1.8 crore.

After the academy admitted its inability to repay in June 2024, Axis Bank classified the account as a Non‑Performing Asset (NPA) and issued recall notices demanding repayment. As of February 2026, the outstanding debt stood at ₹5.70 crore, exceeding the ₹1 crore threshold under the IBC.

The petitioner argued that IMOST Academy had defaulted on its repayment obligations and failed to respond to recall notices. It sought the initiation of CIRP to resolve the insolvency, proposing AAA Insolvency Professionals LLP as the Interim Resolution Professional (IRP).

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The respondent academy contended that Axis Bank had already initiated insolvency proceedings against its guarantor, Euro Tech Maritime Academy Pvt Ltd, for the same debt, and that a second petition was impermissible. It alleged suppression of material facts and argued that simultaneous proceedings would unfairly prejudice the borrower.

After hearing the submission, the bench Vinay Goel (Judicial Member ) rejected the debtor’s objections, holding that the liability of borrower and guarantor is joint, several, and co‑extensive.

Citing the Supreme Court’s ruling in Laxmi Pat Surana v. Union Bank of India and BRS Ventures Investments Ltd v. SREI Infrastructure Finance Ltd, the tribunal observed that the IBC permits simultaneous insolvency proceedings against both borrower and guarantor for the same debt.

The Bench clarified that insolvency proceedings are not recovery actions but resolution mechanisms, and once debt and default are established, reputational or business concerns cannot be grounds to reject the petition.

The tribunal found that Axis Bank had proved the existence of debt and default, the tribunal admitted the petition and ordered initiation of CIRP against IMOST Academy. It declared a moratorium under Section 14 of IBC, suspended the management of the company, and appointed AAA Insolvency Professionals LLP as the IRP.

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The bench observed that “this Adjudicating Authority is satisfied that a financial debt exists, and the Corporate Debtor has committed default in repayment, and finds no legal impediment to initiate the process under section 7 of IBC,2016 against the Respondent on the default reported by the Petitioner against the Respondent based on the material available on record “

Accordingly, the tribunal ordered the Petitioner/Financial Creditor to deposit ₹2 lakh toward initial CIRP expenses, and the IRP was instructed to make a public announcement inviting creditor claims and submit progress reports to the tribunal.

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