NCLT Chandigarh Allows Insolvency Proceedings Against Personal Guarantors; Moratorium Does Not Protect Them

March 18, 2026 : The National Company Law Tribunal (NCLT), Chandigarh Bench, has clarified that the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code (IBC) applies only to the corporate debtor and does not extend protection to personal guarantors. The Tribunal consequently allowed insolvency proceedings to be initiated against personal guarantors even while the corporate insolvency resolution process (CIRP) against the borrower is ongoing.

In a common order dated 18 March 2026, the Bench of Judicial Member Khetrabasi Biswal and Technical Member Shishir Agarwal admitted petitions filed by State Bank of India under Section 95 of the Code against personal guarantors Jitendra Singh and Gurmeet Sodhi.

The case arose out of credit facilities extended to Kudos Chemie Ltd., for which the respondents had executed personal guarantees in 2014. The bank claimed a default of over ₹348 crore as of May 2021.

Moratorium Not Applicable to Personal Guarantors

A central issue before the Tribunal was whether the moratorium under Section 14—triggered when CIRP was initiated against the corporate debtor in July 2019—barred proceedings against the guarantors.

Rejecting the guarantors’ objections, the Bench relied on Section 14(3)(b) of the IBC, which explicitly excludes sureties from the scope of moratorium. It held that:

the statutory protection of moratorium is confined to the corporate debtor and does not bar proceedings against personal guarantors.

The Tribunal further clarified that creditors are legally entitled to pursue remedies against guarantors independently, even during the pendency of CIRP.

Recovery Certificate Gives Fresh Cause of Action

On limitation, the respondents argued that the claim was time-barred since the account had been classified as a non-performing asset (NPA) years earlier.

The Tribunal rejected this contention, holding that the Recovery Certificate issued by the Debts Recovery Tribunal on 6 January 2020 created a fresh cause of action. Relying on the Supreme Court’s ruling in Dena Bank v. C. Shivakumar Reddy, it found that the petitions filed in August 2021 were well within the three-year limitation period.

The Bench also noted that acknowledgments of debt in the corporate debtor’s balance sheets, coupled with the co-extensive liability of guarantors under contract law, further supported the conclusion that the petitions were not time-barred.

SARFAESI Notice Validly Invoked Guarantee

The guarantors also contended that the personal guarantees had not been properly invoked. The Tribunal disagreed, holding that the demand notice issued under Section 13(2) of the SARFAESI Act in November 2016 constituted valid invocation.

Referring to the terms of the guarantee deed, the Bench observed that no specific format was required—only a clear demand for payment. Since the notice called upon the guarantors to discharge the dues, it satisfied the contractual requirement for invocation.

Insolvency Proceedings Initiated

Having found that the petitions were within limitation and that the guarantees were validly invoked, the Tribunal admitted the applications under Section 95.

It initiated insolvency resolution proceedings against the personal guarantors and imposed a separate moratorium in relation to their debts for 180 days. The Resolution Professional was directed to issue a public notice inviting claims and proceed in accordance with the provisions governing personal insolvency.

Case Details

Case Title: State Bank of India v. Jitendra Singh & Anr.
Case Numbers: CP (IB) No. 205/CHD/CHD/2021 & CP (IB) No. 214/CHD/HRY/2021
Coram: Khetrabasi Biswal (Judicial Member), Shishir Agarwal (Technical Member)